WARRANT AGREEMENT
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THIS WARRANT AGREEMENT (this "Agreement"), dated as of December 31, 1999,
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by and among POINTE COMMUNICATIONS CORPORATION, a Nevada corporation (the
"Company"), TSG CAPITAL FUND III, L.P., a Delaware limited partnership and its
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Affiliates ("TSG"), Opportunity Capital Partners II, L.P., a Delaware limited
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partnership and its Affiliates ("OCP II") and Opportunity Capital Partners III,
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L.P., a Delaware limited partnership and its Affiliates ("OCP III")
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(collectively TSG, OCP II and OCP III shall be referred to as "Investors").
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R E C I T A L S:
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WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company is issuing shares of Class B Convertible Senior Preferred Stock and
Warrants of the Company in the amount and for the aggregate purchase price as
set forth on Schedule 1 attached hereto (being referred to herein as the
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"Warrants"), such Warrants initially entitling the holders thereof to purchase
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9,000,000 shares of common stock of the Company, par value $0.00001 per share
(the "Common Stock"), subject to adjustment as hereinafter provided and as
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provided in the Securities Purchase Agreement (as defined herein) (the Common
Stock and, pursuant to Article 7 hereof, such other securities as may be
issuable upon exercise of the Warrants being referred to herein as the "Warrant
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Shares"); and
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WHEREAS, the Company wishes to define the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company and
the holders of the Warrants (the "Warrantholders");
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NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Definitions. As used in this Agreement, the
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following terms have the meanings specified below:
"Amended Articles" means the Amended Articles of Incorporation of the
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Company as amended to include the Certificate of Designations setting forth the
rights, preferences and privileges of the Class B Preferred Stock (as defined).
"Board of Directors" means the Board of Directors of the Company.
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"Business Day" means any day other than Saturday, Sunday or any other day
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on which banking institutions in the City of New York, New York are permitted or
required to close.
"Class B Preferred Stock" means the Class B Convertible Senior Preferred
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Stock, par value $0.01 per share, of the Company issued to the Investors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
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the rules and regulations promulgated thereunder.
"GAAP" means United States generally accepted accounting principles set
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forth in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of the determination.
"Pensat Transaction" shall mean the transactions contemplated by that
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certain letter of intent and term sheet between the Company and Pensat
International Communications, Inc. ("Pensat"), dated July 26, 1999, including,
but not limited to, the purchase by Pensat or affiliates thereof, or other
parties, of Class C Preferred Sock for an aggregate purchase price of at least
$20,000,000.
"Person" means an individual, partnership, corporation (including a
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business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity.
"SEC" means the Securities and Exchange Commission or any successor
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thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
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rules and regulations promulgated thereunder.
"Securities Purchase Agreement" means that certain Securities Purchase
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Agreement by and among the Company and the Investors dated as of September 1,
1999.
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ARTICLE 2
ISSUANCE, FORM AND EXECUTION OF WARRANT CERTIFICATES
SECTION 2.1 Issuance of Warrants. The Warrants shall be originally
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issued by the Company in connection with the issuance of Class B Preferred Stock
pursuant to the Securities Purchase Agreement. The Warrants shall be evidenced
by Warrant Certificates (as defined herein), and each Warrant Certificate shall
represent the right, subject to the provisions contained herein and therein, to
purchase from the Company (and the Company shall issue and sell to the
registered holder of such Warrants) the number of shares of Common Stock (as may
be adjusted pursuant to Article 7 hereof) issuable to such Warrantholder upon
exercise of such Warrants, at the price specified herein and therein.
SECTION 2.2 Form of Warrant Certificates. The certificates evidencing
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the Warrants (the "Warrant Certificates") shall be in registered form only and
shall be substantially in the form set forth in Exhibit A attached hereto, shall
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be dated the date on which signed by the Company and may have such letters,
numbers or other marks of identification or designation printed, lithographed,
engraved or otherwise affixed thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement or the Securities
Purchase Agreement, or as may be required to comply with any law or with any
rule or regulation made pursuant thereto.
SECTION 2.3 Execution of Warrant Certificates. Warrant Certificates
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shall be executed on behalf of the Company by the president, any vice president
or the treasurer of the Company and signed by the secretary or any assistant
secretary of the Company and have affixed thereon the seal of the Company. Each
such signature and seal may be manual or facsimile.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before countersignature and delivery
by the Company, such Warrant Certificates, nevertheless, may be countersigned,
issued and delivered with the same force and effect as though such person had
not ceased to be such officer; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Agreement
such person was not such an officer of the Company. Upon countersignature on
behalf of the Company and delivery, the Warrant Certificate shall be valid and
binding upon the Company, and the Warrantholder thereof shall be entitled to all
of the benefits of this Agreement.
ARTICLE 3
REGISTRATION
SECTION 3.1 Registration. The Company shall number and register the
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Warrant Certificates in a register (the "Warrant Register") maintained at 0000
Xxxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 (the "Office") as they
are issued by the Company (or such other location as the Company may establish
after giving notice thereof to the Warrantholders). The Company shall keep
copies of this Agreement available for inspection by the Warrantholders during
normal business hours at the Office.
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ARTICLE 4
TRANSFER, EXCHANGE OR REPLACEMENT OF WARRANT CERTIFICATES
SECTION 4.1 Registration of Transfers. The Company shall from time to
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time register the transfer of any outstanding Warrant Certificate on the Warrant
Register maintained at the Office, upon surrender thereof accompanied by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Company, duly endorsed by the registered holder thereof or by such
Warrantholder's appointed legal representative or attorney-in-fact, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Company. Upon any such registration or transfer
in such name or names as may be directed in writing by the Warrantholder, the
Company shall execute and deliver (or cause to be delivered) a new Warrant
Certificate(s) without charge to such Warrantholder, or to the Person or Persons
entitled to receive the same, and the surrendered Warrant Certificate shall be
canceled by the Company.
SECTION 4.2 Exchanges of Warrant Certificates. Each Warrant
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Certificate may be exchanged at the option of the Warrantholder without charge
to such Warrantholder when surrendered to the Company at the Office properly
endorsed in the manner described in Section 4.1 hereof for another Warrant
Certificate(s) of like tenor and representing in the aggregate a like number of
shares of Common Stock, as may be adjusted pursuant to Article 7 hereof.
Thereupon, the Company shall execute and deliver to the Person(s) entitled
thereto a new Warrant Certificate(s) as so requested. Warrant Certificates
surrendered for exchange shall be canceled by the Company.
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SECTION 4.3 Mutilated or Missing Warrant Certificates. In the event
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that any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing Warrants for a like amount of
Warrant Shares, but only, in case of a lost, stolen or destroyed Warrant
Certificate, upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction and, upon the Company's request, evidence of indemnity and
bond satisfactory to the Company and the absence of actual notice to the Company
that such Warrant Certificate has been acquired by a bona fide purchaser or
holder in due course. Every substitute Warrant Certificate executed and
delivered pursuant to this Section 4.3 in lieu of any lost, stolen or destroyed
warrant Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
(but shall be subject to all the limitations of rights set forth in) this
Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 4.3 are exclusive with respect to the replacement of mutilated, lost,
stolen or destroyed Warrant Certificates.
ARTICLE 5
EXERCISE OF WARRANTS; EXERCISE PRICE; EXERCISE PERIOD
SECTION 5.1 Exercise of Warrants. Subject to the provisions of this
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Agreement, each Warrantholder shall have the right to purchase from the Company
the number of shares of Common Stock that the Warrantholder may at the time be
entitled to purchase on exercise of the Warrants and payment of the Exercise
Price (as defined below) for such Warrant Shares.
SECTION 5.2 Mechanics of Exercise.
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(a) Subject to the provisions of this Agreement, Warrants may be
exercised by the Warrantholder in whole or in part upon surrender at the Office
to the Company of the Warrant Certificate(s) evidencing the Warrants, together
with the form of election to purchase (the "Election to Purchase"), in the form
set forth as Exhibit B hereto or in the form set forth as Exhibit C hereto (in
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the case of a Warrant Exchange (as defined)), duly completed and signed by such
warrantholder or by such Warrantholder's appointed legal representative or
attorney-in--fact and upon payment in full of the Exercise Price for each
Warrant exercised (except in the case of a Warrant Exchange). Payment of the
aggregate Exercise Price shall be made by certified or official bank check
payable to the order of the Company.
(b) Upon due exercise of the Warrants and surrender of the Warrant
Certificate, duly completed and signed, and payment of' the Exercise Price as
aforesaid, the Company shall cause to be issued to or upon the written order of
the Warrantholder and in such name or names as the Warrantholder may designate
in the Election to Purchase, the Warrant Shares so purchased. In lieu of
delivering physical certificates representing the Warrant Shares, provided the
Company's transfer agent is participating in the Depositary Trust Issuer Fast
Automated Securities Transfer ("FAST") program, upon request of the
Warrantholder, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Warrant Shares issuable upon exercise of
the Warrants to the holder by crediting the account of the Warrantholder's prime
broker with Depositary Trust Company through its Deposit Withdrawal Agent
Commission system (an "Electronic Transfer"). If all of the items referred to
in the first sentence of the preceding paragraph are received by the Company at
or prior to 1:00 p.m., Nevada time, on a Business Day, the exercise of the
Warrants to which such items relate will be effective on such Business Day. If
all of such items are received after 1:00 p.m., Nevada time, on a Business Day,
the exercise of the Warrants to which such items relate will be effective on the
next Business Day.
(c) The number and kind of Warrant Shares for which Warrants may be
exercised shall be subject to adjustment from time to time as set forth in
Article 7 hereof.
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(d) The Warrants shall be exercisable as provided herein at the
election of the Warrantholder in whole or in part. In the event that the holder
of a Warrant Certificate shall exercise Warrants with respect to fewer than all
the Warrant Shares evidenced thereby, a new Warrant Certificate(s) evidencing
the remaining unexercised Warrant Shares shall be issued to such Warrantholder,
and the Company is hereby irrevocably authorized to execute and deliver the
required new Warrant Certificate(s) pursuant to provisions of Article 2 and
Article 3 of this Agreement.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled and disposed of by the Company.
SECTION 5.3 Exercise Price.
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(a) The price at which each of the Warrants shall be exercisable in
exchange for Warrant Shares shall be $1.89 per Warrant Share (as such price may
be adjusted pursuant to Article 7 hereof) (being referred to herein as the
"Exercise Price").
(b) Notwithstanding Section 5.3(a), if the Pensat Transaction is
consumated and the Conversion Price of the Class B Preferred Stock is adjusted
as a consequence of the Pensat Transaction in accordance with the terms of the
second paragraph of Section 4 (d) (iv) of the Certificate of Designations of
Pointe Communications Corporation, the Exercise Price of the Warrants shall
automatically be adjusted to be equal to one hundred eight percent (108%) of the
adjusted Conversion Price of the Class B Preferred Stock as of the date of the
adjustment to such Conversion Price.
SECTION 5.4 Exercise Period. The right to exercise the Warrants shall
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terminate on the date which is the fifth anniversary of the date of issuance of
the Warrants (the "Expiration Date"). A Warrantholder may exercise any Warrant
from the date of issuance up to and including the Expiration Date. The Company
shall record the Expiration Date of each Warrant in the Warrant Register.
SECTION 5.5 Cashless Exercise.
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(a) At any time prior to the Expiration Date of any Warrants, the
Warrantholder may, at its option, exchange such Warrants, in whole or in part (a
"Warrant Exchange"), into the number of fully paid and non-assessable Warrant
Shares determined in accordance with this Section 5.5, by surrendering the
Warrant Certificate relating to such Warrants at the Office, accompanied by a
notice stating such Warrantholder's intent to effect such cashless exchange, the
number of Warrant Shares to be issued upon such Warrant Exchange and the date on
which the Warrantholder requests that such cashless Warrant Exchange occur (the
"Notice of Exchange"). The cashless Warrant Exchange shall take place on the
date specified in the Notice of Exchange, or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
Warrant Shares issuable upon such cashless Warrant Exchange and, if applicable,
a new Warrant Certificate of like tenor evidencing the balance of the Warrant
Shares remaining subject to the Warrantholder's Warrant Certificate, shall be
issued as of the Exchange Date and delivered to the Warrantholder within three
Business Days following the Exchange Date, or by Electronic Transfer. In
connection with any cashless Warrant Exchange, the Warrantholder's Warrant
Certificate shall represent the right to subscribe for and acquire the number of
Warrant Shares (rounded to the next highest integer) equal to (A) the number of
Warrant Shares specified by the Warrantholder in its Notice of Exchange (the
"Total Share Number") less (B) the number of Warrant Shares equal to the
quotient obtained by dividing (i) the product of the Total Share Number and the
existing Exercise Price per Warrant Share by (ii) the Market Price (as hereafter
defined) of a share of Common Stock.
(b) As used in this Section 5.5, the phrase "Market Price" at any date
shall be deemed to be the last reported sale price, or, in case no such reported
sale takes place on such day, the average of the last reported sale prices for
the last three trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq Stock Market National Market ("Nasdaq"), or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted by Nasdaq, the average closing bid price as furnished by the
National Association of Securities Dealers, Inc. ("NASD") through Nasdaq or
similar organization if Nasdaq is no longer reporting such information, or if
the Common Stock is not quoted on Nasdaq, any exchange or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it for the two days
immediately preceding such issuance or sale and the day of such issuance or
sale.
SECTION 5.6 Mandatory Exercise.
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(a) In the event the closing bid price of the Common Stock for twenty
(20) consecutive trading days is equal to at least $5.00 per share (as
appropriately adjusted for stock splits, stock dividends, combinations,
recapitalizations, reclassifications, mergers, consolidations and other similar
events), the Company shall have the right to cause the exercise of the Warrants
at any time thereafter by the Warrantholders by giving written notice to each
Warrantholder of such election (a "Mandatory Exercise Election Notice");
provided that the Warrant Shares issuable upon such exercise shall have been
Registered (as defined) and listed on each securities exchange,
over-the-counter market or on the Nasdaq National Market on which similar
Securities issued by the Company are then listed. "Registered" refers to a
registration effected by preparing and filing with the SEC, a registration
statement in compliance with the Securities Act, as amended, and the declaration
or ordering by the Commission of the effectiveness of such registration
statement.
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(b) Upon receipt of a Mandatory Exercise Election Notice, each
Warrantholder shall have the right to exercise its Warrants on the terms and
conditions herein (including Section 5.5); provided, however, that the
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Expiration Date with respect to such Warrants shall be deemed to be the date
that is fifteen (15) Business Days immediately after the date of the Mandatory
Exercise Election Notice.
ARTICLE 6
RESERVATION OF WARRANT SHARES
SECTION 6.1 Reservation. Subject to the terms of Sections 6.6 and 8 of
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the Securities Purchase Agreement, the Company shall at all times keep reserved,
free from preemptive rights, out of its authorized Common Stock, or other
securities of the Company issuable upon the exercise of the Warrants, a number
of shares of Common Stock, or such other securities, sufficient to provide for
the exercise of' the right of purchase represented by all outstanding and
unexpired Warrants.
SECTION 6.2 Covenant. The Company covenants that any Warrant Shares
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will, upon issuance, be (i) validly issued and upon payment of the exercise
price therefor, fully paid and free from all taxes payable by the Company,
liens, charges and security interests (except any liens, charges or security
interests created or suffered to be created by any of the Warrantholders), and
will not be subject to any restrictions on voting or transfer thereof that are
created by the Company, except for such restrictions on transfer under the
Securities Act or applicable state securities laws; and (ii) Registered and
listed on each securities exchange, over-the-counter market or on the Nasdaq
National Market on which similar securities issued by the Company are then
listed.
ARTICLE 7
ADJUSTMENTS AFFECTING THE EXERCISE OF WARRANTS
SECTION 7.1 Special Definitions. For purposes of this Article 7, the
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following definitions shall apply:
(a) "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued (or, pursuant to Section 7.2 below, deemed to be issued) by the
Company after the Original Issue Date, other than shares of Common Stock issued
or issuable:
(i) upon conversion of shares of the Company's Class A and B
Preferred Stock outstanding on the Original Issue Date;
(ii) upon the exercise of warrants outstanding on the Original
Issue Date or issued under the Securities Purchase Agreement;
(iii) as a dividend or distribution on the Company's Class A and B
Preferred Stock or such Warrants;
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(iv) in connection with an acquisition or other transaction by the
Company (including the Pensat Transaction), in either case approved by the
Investors, unless the Company agrees to include such issuance in the definition
of Additional Shares of Common Stock in connection with obtaining the approval
of the Investors to such acquisition or other transaction;
(v) by reason of a dividend, stock split, split--up or other
distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common Stock by the foregoing clauses (i), (ii), (iii), and
(iv) or this clause (v);
(vi) upon the exercise of options excluded from the definition of
"Option" in Section 7.1(c).
(b) "Convertible Securities" shall mean any evidences of indebtedness,
shares or other securities other than options excluded from the definition of
"Option" in Section 7.1(c) directly or indirectly convertible into or
exchangeable for Common Stock.
(c) "Option" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities, excluding
(i) options granted to employees, officers, directors or issued to consultants
of the Company or rights, convertible securities or warrants which, in each such
case, are outstanding as of the date of this Agreement, (ii) any Warrants
outstanding on the Original Issue Date or issued under this Agreement or as a
direct result of the issuance of Class A or B Preferred Stock, (iii) options
granted to employees, officers, directors or consultants pursuant to stock
option plans existing on the Original Issue Date (as defined) or adopted by the
Board of Directors and approved by the Compensation Committee of the Board of
Directors and by the Investors after the date hereof, or (iv) any Warrants
issued as a direct result of the issuance of Class C Preferred Stock in
connection with the Pensat Transaction.
(d) "Original Issue Date" shall mean the date on which a Warrant was
first issued.
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SECTION 7.2 Issue of Securities Deemed Issue of Additional Shares of
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Common Stock. If the Company at any time or from time to time after the
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Original Issue Date shall issue any Options or Convertible Securities, then the
maximum number of shares of Common Stock (as set forth in the instrument
relating thereto without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities and the exercise of such Options
therefor, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issuance, provided that Additional Shares of Common Stock shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Section 7.4 hereof) of such Additional Shares of Common Stock would
be less than the applicable Exercise Price in effect immediately prior to such
issuance and provided further that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(a) No further adjustment in the Exercise Price shall be made upon the
subsequent issuance of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(b) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Exercise Price
computed upon the original issuance thereof, and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(c) No readjustment pursuant to clause (b) above shall have the effect
of increasing the Exercise Price to an amount which exceeds the Exercise Price
on the original adjustment date; and
(d) In the event of any change in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any Option or Convertible
Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Exercise Price then in effect shall
forthwith be readjusted to such Exercise Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security which have not been exercised oi converted prior to such change in the
number of shares of Common Stock been made upon the basis of such change, but no
further adjustment shall be made for the actual issuance of Common Stock upon
the exercise or conversion of any such option or Convertible Security.
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SECTION 7.3 Adjustment of Exercise Price Upon Issuance of Additional
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Shares of Common Stock. In the event the Company Shall at any time after the
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Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 7.2,
but excluding shares issued as a dividend or distribution as provided in Section
7.6 or upon a stock split or combination as provided in Section 7.5), without
consideration or for a consideration per share (determined pursuant to Section
7.4 hereof) less than the applicable Exercise Price in effect immediately prior
to such issuance, then and in such event, such Exercise Price shall be reduced,
concurrently with such issuance, to an Exercise Price equal to the price
determined by dividing (a) the sum of (1) the product derived by multiplying the
Exercise Price in effect immediately prior to such issuance by the number of
shares of Common Stock outstanding immediately prior to such issuance (together
with the number of shares of Common Stock then issuable upon exercise of the
outstanding Warrants and the conversion or exercise of any Convertible
Securities or Options), plus (2) the aggregate consideration received by the
Corporation (as determined pursuant to Section 7.4 below) upon such issuance, by
(b) the number of shares of Common Stock outstanding immediately after such
issuance (together with the number of shares of Common Stock then issuable upon
exercise of the outstanding Warrants and the conversion or exercise of any
Convertible Securities or Options).
SECTION 7.4 Determination of Consideration. For purposes of this
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Section 7, the consideration received by the Company for the issuance of any
Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property. Such consideration shall:
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(i) insofar as it consists of cash, be computed at the aggregate
of cash received by the Company, excluding amounts paid or payable for accrued
interest or accrued dividends;
(ii) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issuance, as
determined in good faith by the Board of Directors; and
(iii) in the event Additional Shares of Common Stock are issued
together with other shares of securities or other assets of the Company for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined in
good faith by the Board of Directors.
(b) Options and Convertible Securities. The consideration per share
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received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 7.2, relating to Options and Convertible
Securities, shall be determined by dividing:
(i) the total amount, if any, received or receivable by the
Company as consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by the maximum number of
shares of Common Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such options or the conversion or
exchange of such Convertible Securities.
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SECTION 7.5 Adjustment for Stock Splits and Combinations. If the
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Company shall at any time or from time to time after the Original Issue Date for
the Warrants effect a subdivision of the outstanding Common Stock, the Exercise
Price of each Warrant then in effect immediately before that subdivision shall
be proportionately decreased and the number of shares of Common Stock issuable
upon exercise of such Warrant shall be proportionately increased. If the
Company shall at any time or from time to time after the Original Issue Date for
the Warrants combine the outstanding shares of Common Stock, the Exercise Price
of each Warrant then in effect immediately before the combination shall be
proportionately increased and the number of shares of Common Stock issuable upon
exercise of such Warrant shall be proportionately decreased. Any adjustment
under this Section 7.5 shall become effective at the close of business on the
date the subdivision or combination becomes effective.
SECTION 7.6 Adjustment for Certain Dividends and Distributions. In the
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event the Company at any time or from time to time after the Original Issue Date
for the Warrants shall make or issue a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Exercise
Price for the Warrants then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Exercise Price for the
Warrants then in effect by a fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution; provided,
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however, if such record date shall have been fixed and such dividend is not
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fully paid or if such distribution is not fully made on the date fixed therefor,
the Exercise Price for the Warrants shall be recomputed accordingly as of the
close of business on such record date and thereafter the Exercise Price for the
Warrants shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.
The number of Warrant Shares issuable upon the exercise of the Warrants
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares issuable upon the
exercise of the Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
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SECTION 7.7 Adjustments for Other Dividends and Distributions. In the
-------------------------------------------------
event the Company at any time or from time to time after the Original Issue Date
for the Warrants shall make or issue a dividend or other distribution payable in
securities of the Company other than shares of Common Stock, then and in each
such event provision shall be made so that the holders of the Warrants shall
receive upon exercise thereof in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Company that they
would have received had their Warrants been exercised on the date of such event
and had thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period giving application to all adjustments called for
during such period, under this paragraph with respect to the rights of the
holders of the Warrants.
SECTION 7.8 Adjustment for Reclassification, Exchange, or Substitution.
--------------------------------------------- ------------
If the Common Stock issuable upon the exercise of the Warrants shall be changed
into the same or a different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of the Warrants shall have the right
thereafter to convert each such share of Common Stock issuable upon the exercise
of the Warrants into the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification, or other
change, by holders of the number of shares of Common Stock for which such
Warrants might have been exercised immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein.
SECTION 7.9 Adjustment for Merger or Reorganization. In case of any
-----------------------------------------
consolidation or merger of the Company with or into another Company, each
Warrant shall thereafter be exercisable for the kind and amount of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of such Warrant world
have been entitled upon such consolidation or merger; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Article 7 set forth
with respect to the rights and interest thereafter of the holders of the
Warrants, to the end that the provisions set forth in this Article 7 (including
provisions with respect to changes in and other adjustments of the Exercise
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the exercise of the Warrants.
SECTION 7.10 Notice of Adjustment to Exercise Price and Warrant Shares.
-----------------------------------------------------------
(a) Whenever the Exercise Price is required to be adjusted as provided
in this Article 7, simultaneously with the adjustment of the Exercise Price, the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares issuable upon the
exercise of the Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
Page 13
(b) Whenever the Exercise Price is required to be adjusted as provided
in this Article 7, or any other adjustment is required pursuant to this Article
7, the Company shall forthwith compute the adjusted Exercise Price and the
corresponding number of Warrant Shares purchaseable upon the exercise of the
Warrants or any other adjustment made pursuant to this Article 7 and shall
prepare a certificate setting forth such adjusted Exercise Price and the
corresponding number of Warrant Shares purchaseable upon the exercise of the
Warrants or any other adjustment made pursuant to this Article 7 and showing in
reasonable detail the facts upon which such adjustments are based. Whenever the
Exercise Price and the corresponding number of Warrant Shares purchaseable upon
the exercise of the Warrants are adjusted or any other adjustment is made
pursuant to this Article 7, the Company shall promptly mail, or cause to be
mailed, to the Warrantholders a statement setting forth the adjustments and the
reasons for such adjustments.
SECTION 7.11 Form of Warrant Certificate. Irrespective of any
------------------------------
adjustments in the Exercise Price or the kind of Warrant Shares purchasable upon
the exercise of the Warrants, Warrant Certificates evidencing such Warrants
theretofore or thereafter issued may continue to express the same number and
kind of Warrant Shares as are stated in the Warrant Certificates initially
issuable pursuant to this Agreement.
SECTION 7.12 No Impairment. Without limiting the generality of the
--------------
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Warrant Shares to be issued upon the exercise of
the Warrants from time to time outstanding will, when issued, be fully paid and
non-assessable. In addition, without limiting the generality of Section 6.1,
the Company shall take all such action as shall be necessary so that, after any
adjustment to the Exercise Price required hereunder, the total number of shares
of Common Stock or other capital stock of the Company then authorized by the
Amended Articles and available for the purpose of issuance upon such exercise
shall exceed the total number of shares of Common Stock issuable upon the
exercise of all of the outstanding Warrants. The Company will not, by amendment
of its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Article 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrantholders against
impairment.
ARTICLE 8
NOTICES
SECTION 8.1 Notices to Warrantholders.
---------------------------
(a) Notices to holders of Warrants shall be delivered to such holders
at the addresses of such holders as they appear in Section 8.2 hereof or in the
Warrant Register (in the case of transfers). Any such notice shall be
sufficiently given if sent by first-class certified or registered mail, postage
prepaid, facsimile or overnight courier.
Page 14
(b) In the event (i) of any consolidation or merger or binding exchange
of interests to which the Company is a party and for which approval of the
Investors or any holders of equity interests of the Company is required, or of
the conveyance or sale of all or substantially all of the assets of the Company,
or of any change of the Common Stock or other securities issuable upon exercise
of the Warrants; or (ii) the Company shall make any distribution in respect of
the Common Stock; or (iii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; then the Company shall send to each
Warrantholder at least thirty days prior to the applicable date hereinafter
specified, a written notice stating (A) the date for the determination of the
holders of Common Stock (or other Securities issuable upon the exercise of the
Warrants) entitled to receive any such distribution, (B) the initial expiration
date Set forth in any offer for exchange of interests, or (C) the date on which
any such consolidation, merger, exchange of interests, conveyance, transfer,
reclassification, dissolution, liquidation or winding up is expected to become
effective or consummated, and the date as of which it is expected that holders
of record of Common Stock (or other securities issuable upon the exercise of the
Warrants) shall be entitled to exchange such Common Stock for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, exchange of interests, conveyance, transfer, dissolution, liquidation or
winding up.
SECTION 8.2 Notices to Company. Any notice or demand authorized by this
-------------------
Agreement to be given to or on the parties shall be delivered in person or by
facsimile transmission, by courier guaranteeing overnight delivery or mailed by
first-class United States certified or registered mail, postage prepaid, as
follows:
a) if to the Company:
Pointe Communications Corporation
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Gardere & Xxxxx, LLP
3000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: W. Xxxxxx Xxxx Jr.
Facsimile: (000) 000-0000
Page 15
(b) if to TSG:
TSG Capital Fund III, L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
(c) if to OCP II:
Opportunity Capital Partners II, L.P.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxx & Xxxx, L.L.P.
Embarcadero Center West
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
(d) if to OCP III:
Opportunity Capital Partners III, L.P.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
Page 16
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxx & Xxxx, L.L.P.
Embarcadero Center West
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 8.3 Receipt of Notice. Any notice hereunder shall be in writing
------------------
and shall be deemed effectively given and received upon delivery in person, or
two business days after delivery by national overnight courier service or by
telecopier transmission with acknowledgment of transmission receipt, or five
business days after deposit via certified or registered mail, return receipt
requested.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 WAIVER OF JURY TRIAL. THE COMPANY AND EACH INVESTOR DO
-----------------------
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE SUCH RIGHT
ANY PARTY MAY HAVE TO A JURY TRIAL IN EVERY JURISDICTION IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES HERETO OR THEIR
RESPECTIVE AFFILIATES, SUCCESSORS OR ASSIGNS AGAINST ANY OTHER PARTY HERETO OR
THEIR RESPECTIVE AFFILIATES, SUCCESSORS OR ASSIGNS IN RESPECT OF ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENT
EXECUTED AND DELIVERED BY ANY PARTY IN CONNECTION THEREWITH (INCLUDING, WITHOUT
LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIMS OR
DEFENSES ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR OTHERWISE
VOID OR VOIDABLE).
SECTION 9.2 Payment of Taxes. The Company covenants and agrees that
-----------------
it will pay when due and payable all documentary, stamp and other taxes
attributable to the issuance or delivery of the Warrant Certificates or of the
Warrant Shares purchasable upon the exercise of Warrants; provided, however, the
--------
Company shall not be required to pay any tax or taxes that may be payable in
respect of any transfer involving the issue of any Warrant Certificate(s) or any
certificates) for Warrant Shares in a name other than that of the Warrantholder
of such exercised Warrant Certificate (s)
Page 17
SECTION 9.3 Amendment.
---------
(a) The Company may modify this Agreement and the terms of the Warrants
only with the consent of the Warrantholders representing at least sixty-six and
two-thirds percent (66 2/3%) of the Warrant Shares for the purpose of adding any
provision to or changing in any manner or eliminating any of the provisions of
this Agreement or modifying in any manner the rights of the holders of the
outstanding Warrants; provided, however, that no such modification that (i)
-------- -------
materially and adversely affects the exercise rights of the holders of the
Warrants or (ii) reduces the percentage required for modification, may be made
without the consent of the holder of all outstanding warrants.
(b) Any such modification or amendment will be conclusive and binding
on all present and future holders of Warrant Certificates whether or not they
have consented to such modification or amendment or waiver and whether or not
notation of such modification or amendment is made upon such Warrant
Certificates. Any instrument given by or on behalf of any holder of a Warrant
Certificate in connection with any consent to any modification or amendment will
be conclusive and binding on all Subsequent holders of such Warrant Certificate.
SECTION 9.4 Termination. This Agreement shall terminate on or upon (a)
-----------
the repurchase by the Company of all Warrants, (b) the fifteenth day following
the date on which all of the Warrant Shares have been issued upon the exercise
of all Warrants issued pursuant hereto, or (c) the Expiration Date.
SECTION 9.5 Reports to Warrantholders. The Company will cause to be
---------------------------
delivered, by first-class mail, postage prepaid, facsimile or overnight courier,
to each Warrantholder at such Warrantholder's address appearing on the Warrant
Register, a copy of any reports delivered by the Company to any of the holders
of Class B Preferred Stock or to holders of the Common Stock.
SECTION 9.6 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN
-------------
THIS AGREEMENT AND THE WARRANT CERTIFICATES WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
SECTION 9.7 Benefits of this Agreement. Nothing in this Agreement shall
----------------------------
be construed to give to any Person other than the Company, the Warrantholders
and the holders of Warrant Shares any legal or equitable right, remedy or claim
under this Agreement; this Agreement shall be for the sole and exclusive benefit
of the Company, the Warrantholders and the holders of Warrant Shares.
Page 18
SECTION 9.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument. Facsimile transmission of any signed original document
and/or retransmission of any signed facsimile transmission will be deemed the
same as delivery of any original. At the request of any party, the parties will
confirm facsimile transmission by signing a duplicate original document.
SECTION 9.9 Severability of Provisions. Any provision of this Agreement
---------------------------
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.10 Headings. The headings of the sections of this Agreement are
--------
inserted for convenience only and shall not constitute a part of this Agreement.
SECTION 9.11 Access to Company Records. So long as Warrants remain
----------------------------
outstanding, each Investor shall be entitled to review the financial and
corporate books and records of the Company and to meet with the executive
officers and independent accountants of the Company for purposes reasonably
related to the Investor's ownership of the Warrants, which review and/or
meetings shall take place at reasonable times during the normal business hours
of the Company and in such a manner as to not unduly interfere with the conduct
of the Company's business.
Page 19
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed, as of the date first above written.
POINTE COMMUNICATIONS CORPORATION
By:______________________________________
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
TSG CAPITAL FUND III, L.P.,
a Delaware limited partnership
By: TSG Associates III, L.L.C.,
Its General Partner
By:_________________________
Name:_______________________
Title:________________________
OPPORTUNITY CAPITAL PARTNERS II, L.P.
a Delaware limited partnership
By: Xxxxxxxx Capital Management, L.P.
Its General Partner
By:_______________________________
Xxxxx X. Xxxx
Partner
Page 20
OPPORTUNITY CAPITAL PARTNERS III, L.P.
a Delaware limited partnership
By: JM Capital Management, L.P.
Its General Partner
By:_______________________________
Xxxxx X. Xxxx
General Partner
Page 21
EXHIBIT A
---------
POINTE COMMUNICATIONS CORPORATION
Common Stock Purchase Warrant
Number _____
Warrant Certificate Evidencing Right to Purchase
I ] Shares of Common Stock
This is to certify that [Investor], [a _________________], or assigns, is
entitled to purchase at any time or from time to time up to the above-referenced
number of shares of Common Stock ("Common Stock"), of Pointe Communications
Corporation, a Nevada corporation (the "Company"), for the Exercise Price for
the Warrants specified in the Warrant Agreement, dated as of_________, 1999,
between the Company and TSG Capital Fund III, L.P. (the "Warrant Agreement"),
pursuant to which this Warrant Certificate is issued. All rights of the holder
of this Warrant Certificate are subject to the terms and provisions of the
Warrant Agreement, copies of which are available for inspection the Company's
office located at1325 Xxxxxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000
(the "Office"). The Expiration Date (as defined in the Warrant Agreement) of
the right to purchase Common Stock pursuant to this Certificate is August _____,
2004.
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES OF
COMMON STOCK THAT MAY BE PURCHASED UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE LAW. SUCH WARRANTS AND SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE ACT AND ANY
APPLICABLE STATE LAW, OR (2) THE AVAILABILITY OF AN EXEMPTION FROM SUCH
REGISTRATION.
Subject to the provisions of the Act, applicable state laws and such
Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable, in whole or in part, at the Office by the holder hereof in person
or by a duly authorized attorney, upon surrender of this Warrant Certificate,
together with the assignment hereof duly endorsed. Until transfer of this
Warrant Certificate on the books of the Company, the Company may treat the
registered holder hereof as the owner hereof for all purposes.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ___ day of_________, 1999 in Atlanta, Georgia by its proper
corporate officers thereunto duly authorized.
POINTE COMMUNICATIONS CORPORATION
a Nevada corporation
By:______________________________________
Name:____________________________________
Title:_____________________________________
Attest:_________________________________
Name:_________________________________
Title:__________________________________
EXHIBIT B
---------
Election to Purchase
(To be executed by the registered holder if
such holder desires to exercise any Warrant Certificate)
The undersigned, the registered holder of the attached Warrant Certificate,
hereby irrevocably elects to exercise Warrants represented by such Warrant
Certificate and acquire an
aggregate of _____ shares of Common Stock of Pointe Communications Corporation,
a Nevada corporation, and herewith tenders payment for such Common Stock in the
amount of $_______ (by certified check or official bank check) in accordance
with the terms hereof. The undersigned requests that the aforementioned Common
Stock be registered in the name of whose address is
_____________________________________________.
Dated:________________________
Name of registered holder of Warrant Certificate:
_____________________________________________________________________________
(please print)
Address of registered
holder:______________________________________________________
Signature:________________________________________
(Note: the signature to the foregoing Election must correspond to the name
as written upon the face of the Warrant Certificate in every particular, without
alteration or any change whatsoever.)
EXHIBIT C
---------
Election to Purchase
(To be executed by the registered holder if such holder
desires to effect cashless exercise any Warrant Certificate)
The undersigned, the registered holder of the attached Warrant Certificate,
hereby irrevocably elects to exchange Warrants represented by such Warrant
Certificate and acquire an
aggregate of _________ shares of Common Stock of Pointe Communications
Corporation, a Nevada corporation on [DATE]. The undersigned requests
-------------
that the aforementioned Common Stock be registered in the name of whose address
is __________________________ ___________________________________________.
Dated:_______________________________
Name of registered holder of Warrant Certificate:
_____________________________________________________________________________
(please print)
Address of registered
holder:______________________________________________________
Signature:______________________________________
(Note: the signature to the foregoing Election must correspond to the name
as written upon the face of the Warrant Certificate in every particular, without
alteration or any change whatsoever)
SCHEDULE 1
----------
Aggregate
Purchase
Number of Price of
Purchaser Warrants* Warrants*
-------------------------------------- --------- ----------
TSG Capital Fund III, L.P. 8,571,429 $ 80,000
Opportunity Capital Partners II, L.P., 385,714 $ 3,600
Opportunity Capital Partners III, L.P. 42,857 $ 400
*Subject to adjustment.
