Document:

Exhibit 10.1

 

FIFTH AMENDMENT TO CREDIT AGREEMENT

 

FIFTH AMENDMENT TO CREDIT AGREEMENT (this “Fifth Amendment”), dated as of December 15, 2011, among MICHAELS STORES, INC., a Delaware corporation (the “Borrower”), the Lenders party to the Credit Agreement referred to below (the “Lenders”), and DEUTSCHE BANK AG NEW YORK BRANCH, as administrative agent (in such capacity, the “Administrative Agent”).  Unless otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement are used herein as therein defined.

 

W  I  T  N  E  S  S  E  T  H :

 

WHEREAS, the Borrower, the Lenders, the Administrative Agent, the Syndication Agent and the Co-Documentation Agents have entered into a Credit Agreement, dated as of October 31, 2006 (as amended, supplemented and/or otherwise modified to, but not including, the date hereof, the “Credit Agreement”); and

 

WHEREAS, pursuant to Sections 2.16 and 10.01 of the Credit Agreement, the parties hereto wish to amend certain provisions of the Credit Agreement as provided herein, subject to the terms and conditions set forth below.

 

NOW, THEREFORE, it is agreed;

 

A.                                   Amendments to the Credit Agreement

 

1.             Section 1.01 of the Credit Agreement is hereby amended by (i) deleting the definitions of “Applicable Rate”, “Class”, “Commitment”, “Extended Term Loans”, “Extension Amendment”, “Loan” and “Repricing Transaction” appearing in said Section in their entirety and (ii) inserting in appropriate alphabetical order the following new definitions:

 

“Applicable Rate” means a percentage per annum equal to (A) with respect to B-1 Term Loans, (i) in the case of Eurocurrency Rate Loans, 2.25% and (ii) in the case of Base Rate Loans, 1.25%, (B) with respect to B-2 Term Loans, (i) in the case of Eurocurrency Rate Loans, 4.50% and (ii) in the case of Base Rate Loans, 3.50% and (C) with respect to B-3 Term Loans, (i) in the case of Eurocurrency Rate Loans, 4.50% and (ii) in the case of Base Rate Loans, 3.50%, less, in each case under each of the preceding clauses (A), (B) and (C), if (but only if) the Moody’s Applicable Corporate Rating then most recently published is B1 or higher (with at least a stable outlook), 0.25%.  Any increase or decrease in the Applicable Rate resulting from a change in Moody’s Applicable Corporate Rating shall become effective as of the first Business Day immediately following the date the then most recent Moody’s Applicable Corporate Rating is published; provided that at the option of the Administrative Agent or the Required Lenders, no deduction shall apply (x) as of the first Business Day after the date on which Moody’s ceases to maintain or publish a Moody’s Applicable Corporate Rating (of any level), and shall continue not to apply to and including the date on which a new Moody’s Applicable Corporate Rating is so published (with any deduction as otherwise determined in accordance with this definition to apply thereafter), and (y) as of the first Business Day after an Event of Default under Section 8.01(a), (f) or (g) shall have occurred and be continuing, and shall continue not to apply to but excluding the date on which such Event of Default is cured or waived (with any deduction as otherwise determined in accordance with this definition to apply thereafter). It is understood and agreed that (v) the “Applicable Rate” (as defined herein immediately prior to giving effect to the First Amendment Effective Date) shall apply for all periods prior to the First Amendment Effective Date, (w) the “Applicable Rate” (as defined herein immediately after giving effect to the First Amendment Effective Date and prior to the Second Amendment Effective Date) shall apply for all periods on and after the First Amendment Effective Date and prior to the Second Amendment Effective Date, (x) the “Applicable Rate” (as defined herein immediately after giving effect to the Second Amendment Effective Date and prior to the Fourth Amendment Effective Date) shall apply for all periods on and after the Second Amendment Effective Date and prior to the Fourth Amendment Effective Date, (y) the “Applicable Rate” (as defined herein immediately after giving effect to the Fourth Amendment Effective Date) shall apply for all periods on and after the Fourth Amendment Effective Date and prior to the Fifth Amendment Effective Date and (z) the “Applicable Rate” (as defined herein immediately after giving effect to the Fifth Amendment Effective Date) shall apply for all periods on and after the Fifth Amendment Effective Date.  Notwithstanding the foregoing, (x) the Applicable Rate in respect of Extended Term Loans of any Extension Series or Refinancing Term Loans of any Refinancing Series shall be the applicable percentages per annum provided pursuant to the relevant Extension Amendment or Refinancing Amendment, as the case may be, and (y) the Applicable Rate of certain Loans shall be increased as, and to the extent, necessary to comply with the provisions of Section 2.16.

 

 

“B-3 Term Commitment” means, as to each Lender, its obligation to convert all or a portion of its Existing B-1 Term Loans into a B-3 Term Loan pursuant to Section 2.01(f) on the Fifth Amendment Effective Date in an aggregate principal amount equal to its B-3 Term Loan Extension Amount, as such amount may be adjusted from time to time in accordance with this Agreement.  On the Fifth Amendment Effective Date, the initial aggregate amount of the B-3 Term Commitments is $619,225,853.98.

 

“B-3 Term Lender” means, at any time, any Lender that has a B-3 Term Commitment or B-3 Term Loan at such time.

 

“B-3 Term Loan” has the meaning provided in Section 2.01(f).

 

“B-3 Term Loan Extension Amount” means, as to the Existing B-1 Term Loans of any Extending B-3 Term Lender, the product obtained by multiplying (x) the principal amount of such Lender’s Existing B-1 Term Loans subject to a B-3 Term Loan Extension Election by (y) a fraction, the numerator of which is the aggregate principal amount of all Existing B-1 Term Loans accepted for extension by the Borrower on the Fifth Amendment Effective Date and the denominator of which is the aggregate principal amount of all Existing B-1 Term Loans subject to B-3 Term Loan Extension Elections, as such resulting product may be modified by the Administrative Agent to account for rounding adjustments.  The Administrative Agent shall determine the final B-3 Term Loan Extension Amount of each Lender on the Fifth Amendment Effective Date and shall notify each such Lender of its B-3 Term Loan Extension Amount promptly following the Fifth Amendment Effective Date. All such determinations made by the Administrative Agent shall, absent manifest error, be final, conclusive and binding on the Borrower and the Lenders and the Administrative Agent shall have no liability to any Person with respect to such determination absent gross negligence or willful misconduct.

 

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“B-3 Term Loan Extension Election” means an election by a Lender provided in accordance with the procedures set forth in the Fifth Amendment to have the B-3 Term Loan Extension Amount of its Existing B-1 Term Loan converted into a B-3 Term Loan pursuant to Section 2.01(f).

 

“Class” (a) when used with respect to Lenders, refers to whether such Lenders are B-1 Term Lenders, B-2 Term Lenders, B-3 Term Lenders, Refinancing Term Lenders for a given Refinancing Series of Refinancing Term Commitments or Refinancing Term Loans or Extending Term Lenders for a given Extension Series of Extended Term Commitments or Extended Term Loans, (b) when used with respect to Commitments, refers to whether such Commitments are Replacement Commitments, B-2 Term Commitments, B-3 Term Commitments, Refinancing Term Commitments of a given Refinancing Series or Extended Term Commitments of a given Extension Series and (c) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such Borrowing, are B-1 Term Loans, B-2 Term Loans, B-3 Term Loans, Refinancing Term Loans of a given Refinancing Series or Extended Term Loans of a given Extension Series.

 

“Commitment” means, as to each Lender, its Original Commitment, its New Commitment, its Replacement Commitment, its B-2 Term Commitment, its B-3 Term Commitment, its Refinancing Term Commitment of a given Refinancing Series or its Extended Term Commitment of a given Extension Series, as the context may require.

 

“Corrective Extension Amendment” has the meaning provided in Section 2.16.

 

“Existing B-1 Term Loan” means each B-1 Term Loan outstanding on the Fifth Amendment Effective Date (immediately prior to giving effect thereto).

 

“Extended Term Loans” has the meaning provided in Section 2.16 and, for purposes of the proviso contained in clause (ii) of the second sentence of Section 2.16(a), shall include (for the avoidance of doubt) the B-2 Term Loans and the B-3 Term Loans extended pursuant to the Fourth Amendment and Fifth Amendment, respectively, as existing “Extended Term Loans” outstanding pursuant to separate “Extension Series”.

 

“Extending B-3 Term Lender” mean any Lender that has submitted an executed B-3 Term Loan Extension Election with respect to all or a portion of its Existing B-1 Term Loans in accordance with the instructions provided on the signature page to the Fifth Amendment prior to the deadline specified in the Fifth Amendment.

 

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“Extension Amendment” has the meaning provided in Section 2.16.  The Fifth Amendment constitutes an Extension Amendment for the purposes of this Agreement (including Section 10.24).

 

“Fifth Amendment” means the Fifth Amendment to this Agreement, dated as of December 15, 2011.

 

“Fifth Amendment Effective Date” has the meaning provided in the Fifth Amendment.

 

“Loan” means (a) the making of an Original Loan by a Lender to the Borrower pursuant to Section 2.01(a), (b) the making of an Additional New Loan by a Lender to the Borrower pursuant to Section 2.01(c), (c) the conversion of an Original Loan to a Converted New Loan by a Lender pursuant to Section 2.01(b), (d) the making of a Replacement Loan by a Lender to the Borrower pursuant to Section 2.01(d), (e) the conversion of all or a portion of an Existing Loan into a B-1 Term Loan by a Lender pursuant to Section 2.01(e)(i), (f) the conversion of all or a portion of an Existing Loan into a B-2 Term Loan by a Lender pursuant to Section 2.01(e)(ii), (g) the conversion of all or a portion of an Existing B-1 Term Loan into a B-3 Term Loan by a Lender pursuant to Section 2.01(f), (h) the making of a Refinancing Term Loan of a given Refinancing Series by a Lender or an Additional Lender to the Borrower pursuant to Section 2.15 and the applicable Refinancing Amendment and (i) the making of an Extended Term Loan of a given Extension Series by a Lender to the Borrower pursuant to Section 2.16 and the applicable Extension Amendment.  For the avoidance of doubt, on and after the Fifth Amendment Effective Date, the term “Loan” shall include each B-1 Term Loan, each B-2 Term Loan and each B-3 Term Loan.

 

“Repricing Transaction” means (1) the incurrence by the Borrower of any Indebtedness (including, without limitation, any new or additional term loans under this Agreement, whether incurred directly or by way of the conversion of B-3 Term Loans into a new tranche of replacement term loans under this Agreement) that is broadly marketed or syndicated to banks and other institutional investors in financings similar to the facilities provided for in this Agreement (i) having an Effective Yield for the respective Type of such Indebtedness that is less than the Effective Yield for B-3 Term Loans of the respective Type but excluding Indebtedness incurred in connection with a Change of Control, and (ii) the proceeds of which are used to prepay (or, in the case of a conversion, deemed to prepay or replace), in whole or in part, outstanding principal of B-3 Term Loans or (2) any effective reduction in the Effective Yield for B-3 Term Loans (e.g., by way of amendment, waiver or otherwise).  Any such determination by the Administrative Agent as contemplated by preceding clauses (1) and (2) shall be conclusive and binding on all Lenders holding B-3 Term Loans.

 

2.             The definition of “Maturity Date” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text “and B-3 Term Loans” immediately after each instance of the text “B-2 Term Loans” appearing in said Section.

 

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3.             Section 2.01 of the Credit Agreement is hereby amended by (i) deleting the word “and” appearing immediately before clause (e) of the first sentence of said Section and (ii) inserting the following text at the end of the first sentence of said Section:

 

“, and (f) on the Fifth Amendment Effective Date, a portion of the Existing B-1 Term Loan of each Extending B-3 Term Lender outstanding on such date shall be automatically converted on such date into a new term loan of such Lender hereunder denominated in Dollars in an aggregate principal amount equal to the B-3 Term Commitment of such Extending B-3 Term Lender (each such term loan, a “B-3 Term Loan” and, collectively, the “B-3 Term Loans”)”.

 

4.             Section 2.04 of the Credit Agreement is hereby amended by deleting the heading thereof and inserting the following text in lieu thereof:

 

“Special Provisions Relating to Conversions of Existing Loans into B-1 Term Loans and B-2 Term Loans and Existing B-1 Term Loans into B-3 Term Loans.”.

 

5.             Section 2.04 of the Credit Agreement is hereby further amended by amending subsection (a) thereof by (i) deleting the word “and” appearing at the end of clause (C) of said Section, (ii) deleting the period “(.)” at the end of clause (D) of said Section and inserting a semicolon “(;)” in lieu thereof, and (iii) inserting the following new clauses (E), (F) and (G) at the end of such Section:

 

“(E) on the Fifth Amendment Effective Date, (i) the conversion of Existing B-1 Term Loans into B-3 Term Loans pursuant to Section 2.01(f) shall apply ratably across each Type of “borrowing” of Existing B-1 Term Loans (based on the outstanding principal amount of each such “borrowing”), (ii) B-3 Term Loans shall be deemed made as Eurocurrency Rate Loans in an aggregate amount equal to the principal amount of the Existing B-1 Term Loans converted into B-3 Term Loans pursuant to Section 2.01(f) that were outstanding as Eurocurrency Rate Loans at the time of conversion (with such B-3 Term Loans subject to a given Interest Period to correspond in amount to the principal amount of the Existing B-1 Term Loans of the related Interest Period so converted), (iii) Interest Periods for the B-3 Term Loans described in clause (ii) above shall end on the same dates as the Interest Periods applicable to the corresponding Existing B-1 Loans described in clause (i) above, and the Eurocurrency Rates applicable to such B-3 Term Loans during such Interest Periods shall be the same as those applicable to the Existing B-1 Term Loans so converted, and (iv) B-3 Term Loans shall be deemed made as Base Rate Loans in an aggregate amount equal to the principal amount of Existing B-1 Term Loans converted into B-3 Term Loans pursuant to Section 2.01(f) that were outstanding as Base Rate Loans at the time of conversion (with such B-3 Term Loans subject to a given borrowing of Base Rate Loans to correspond in amount to the Existing B-1 Term Loans of the related borrowing so converted);

 

(F) each B-3 Term Loan shall continue to be entitled to all accrued and unpaid interest with respect to the Existing B-1 Term Loan from which such B-3 Term Loan was converted up to but excluding the Fifth Amendment Effective Date; and 

 

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(G) no conversion of outstanding Existing B-1 Term Loans into B-3 Term Loans pursuant to Section 2.01(f) shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.”.

 

6.             Section 2.04 of the Credit Agreement is hereby further amended by adding the following clause (c) at the end of said Section:

 

“(c)  On and after the Fifth Amendment Effective Date, each Lender which holds a Note shall be entitled to surrender such Note to the Borrower against delivery of a new Note completed in conformity with Section 2.11 evidencing the B-3 Term Loans into which the Existing B-1 Term Loans of such Lender were converted on the Fifth Amendment Effective Date; provided that if any such Note is not so surrendered, then from and after the Fifth Amendment Effective Date such Note shall be deemed to evidence the B-3 Term Loans into which the Existing B-1 Term Loans theretofore evidenced by such Note have been converted.”.

 

7.             Section 2.05(a) of the Credit Agreement is hereby amended by (i) deleting the word “and” appearing before the text “(4)” in the proviso to the first sentence of clause (i) of said Section, (ii) inserting the text “and B-3 Term Loans (ratably among such Classes of Term Loans based on the outstanding principal amounts of the respective Classes)” immediately after the reference to “B-2 Term Loans” appearing in said Section and (iii) inserting the following new clause (5) before the period (“.”) at the end of the first sentence of clause (i) of said Section:

 

“; and (5) any prepayment of B-3 Term Loans made prior to the first anniversary date of the Fifth Amendment Effective Date in connection with a Repricing Transaction shall be accompanied by the payment of the fee described in Section 2.09(b).”.

 

8.             Section 2.06 of the Credit Agreement is hereby amended by inserting the following new clause (c) immediately following clause (b) of said Section:

 

                “(c) The B-3 Term Commitment of each B-3 Term Lender shall be automatically and permanently reduced to $0 upon the conversion of all or a portion of such B-3 Term Lender’s Existing B-1 Term Loans into B-3 Term Loans pursuant to Section 2.01(f).”.

 

9.             Section 2.07 of the Credit Agreement is hereby amended by (i) deleting clause (a) of said Section in its entirety and inserting the following new clause (a) in lieu thereof:

 

                “(a) The Borrower shall repay to the Administrative Agent for the ratable account of the B-1 Term Lenders on the date set forth below the aggregate principal amount of B-1 Term Loans as is set forth opposite such date below (as such scheduled amortization amount shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05 or in connection with any Extension as provided in Section 2.16):

 

	
Date
    	
 
    	
Amount
    	
 
    
	
October 31, 2013
    	
 
    	
$
    	
500,774,146.02
    	
 
    
					

 

and (ii) inserting the following new clause (d) at the end of said Section:

 

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                “(d) The Borrower shall repay to the Administrative Agent for the ratable account of the B-3 Term Lenders on the date set forth below the aggregate principal amount of B-3 Term Loans as is set forth opposite such date below (which scheduled amortization amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05 or in connection with any Extension as provided in Section 2.16):

 

	
Date
    	
 
    	
Amount
    	
 
    
	
July 31, 2016
    	
 
    	
$
    	
619,225,853.98
    	
 
    
					

 

provided that, notwithstanding the foregoing, repayments of B-3 Term Loans shall in any event be required to be made on the Maturity Date therefor as provided in Section 2.07(c).”.

 

10.           Section 2.09(b) of the Credit Agreement is hereby amended by deleting said Section in its entirety and inserting the following new Section 2.09(b) in lieu thereof:

 

“(b)         At the time of the effectiveness of any Repricing Transaction that is consummated prior to the first anniversary of the Fifth Amendment Effective Date, the Borrower agrees to pay to the Administrative Agent, for the ratable account of each Lender with outstanding B-3 Term Loans (including each Lender that withholds its consent to such Repricing Transaction and is replaced as a Non-Consenting Lender under Section 3.07), a fee in an amount equal to 1.0% of (x) in the case of a Repricing Transaction of the type described in clause (1) of the definition thereof, the aggregate principal amount of all B-3 Term Loans prepaid (or converted) in connection with such Repricing Transaction and (y) in the case of a Repricing Transaction described in clause (2) of the definition thereof, the aggregate principal amount of all B-3 Term Loans outstanding on such date that are subject to an effective pricing reduction pursuant to such Repricing Transaction.  Such fees shall be due and payable upon the date of the effectiveness of such Repricing Transaction.”.

 

11.           Section 2.16 of the Credit Agreement is hereby amended by (i) deleting the text “with respect any new Extended Term Loans, Extended Term Loans of another Extension Series remain outstanding” appearing in the proviso to subclause (ii) in the second sentence of clause (a) of said Section and inserting the text “with respect to any new Extended Term Loans, Extended Term Loans of another Extension Series remain outstanding (including any B-2 Term Loans and B-3 Term Loans)” in lieu thereof and (ii) inserting the text “(or such shorter period as shall be acceptable to the Administrative Agent in any given case)” after the text “at least five (5) Business Days prior to the date on which Lenders under the Existing Term Tranche are requested to respond” appearing in the first sentence of Section 2.16(b) of the Credit Agreement.

 

12.           The Lenders party hereto hereby waive, with respect to the conversion and extension of Existing B-1 Term Loans into B-3 Term Loans pursuant to Section 2.01(f) of the Credit Agreement (as modified hereby), the requirement contained in Section 2.16(b) of the Credit Agreement for the provision of an Extension Request with respect to the B-1 Term Loans at least five (5) Business Days prior to the date on which the Lenders holding B-1 Term Loans are required to respond to the proposed conversion and extension of Existing B-1 Term Loans into B-3 Term Loans pursuant to the Fifth Amendment.

 

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13.           Section 2.16 of the Credit Agreement is hereby further amended by inserting the following new clause (e) at the end of said Section:

 

                “(e) In the event that the Administrative Agent determines in its sole discretion that (i) the B-3 Term Loan Extension Amount of a given Lender was incorrectly determined as a result of manifest administrative error in the receipt and processing of a B-3 Term Loan Extension Election timely submitted by such Lender in accordance with the procedures set forth in the Fifth Amendment or (ii) the allocation of Extended Term Loans of a given Extension Series to a given Lender was incorrectly determined as a result of manifest administrative error in the receipt and processing of an Extension Election timely submitted by such Lender in accordance with the procedures set forth in the applicable Extension Amendment, then the Administrative Agent, the Borrower and such affected Lender may (and hereby are authorized to), in their sole discretion and without the consent of any other Lender, enter into an amendment to this Agreement and the other Loan Documents (each, a “Corrective Extension Amendment”) within 15 days following the Fifth Amendment Effective Date or the effective date of such Extension Amendment, as the case may be, which Corrective Extension Amendment shall (i) provide for the conversion and extension of B-1 Term Loans or other Term Loans under the applicable Existing Term Loan Tranche, as the case may be, in such amount as is required to cause such Lender to hold B-3 Term Loans or Extended Term Loans of the applicable Extension Series into which such other Term Loans were initially converted, as the case may be, in the amount such Lender would have held had such administrative error not occurred and had such Lender received the minimum allocation of the applicable Loans or Commitments to which it was entitled under the terms of the Fifth Amendment or such Extension Amendment, as the case may be, in the absence of such error, (ii) be subject to the satisfaction of such conditions as the Administrative Agent, the Borrower and such Lender may agree (including conditions of the type required to be satisfied for the effectiveness of an Extension Amendment described in Section 2.16(c)), and (iii) effect such other amendments of the type (with appropriate reference and nomenclature changes) described in clause (i), (ii), (iii) and (iv) of the last sentence of Section 2.16(c).”

 

14.           Section 10.22 of the Credit Agreement is hereby amended by inserting the following new clause (v) at the end of said Section:

 

                                                                “(v) EACH EXTENDING B-3 TERM LENDER, BY ITS EXECUTION AND DELIVERY OF THE FIFTH AMENDMENT AND ITS B-3 TERM LOAN EXTENSION ELECTION, HEREBY (I) CONFIRMS ITS AGREEMENT TO THE FOREGOING PROVISIONS OF THIS SECTION 10.22 AND (II) PURSUANT TO SECTION 5.2(C) OF THE INTERCREDITOR AGREEMENT, AGREES TO BE BOUND BY THE TERMS OF THE INTERCREDITOR AGREEMENT AS A “TERM SECURED PARTY.”.

 

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B.                                     Miscellaneous Provisions

 

1.             In order to induce the Lenders to enter into this Fifth Amendment, the Borrower, on behalf of itself and the other Loan Parties, hereby represents and warrants to each of the Lenders that, as of the Fifth Amendment Effective Date (as defined below):

 

(i)            the execution, delivery and performance by each Loan Party of this Fifth Amendment and the performance of the Credit Agreement (as amended hereby) have been duly authorized by all necessary corporate or other organizational action on the part of such Loan Party and do not and will not (a) contravene the terms of any of the certificates of incorporation or by-laws (or equivalent Organization Documents) of such Loan Party, (b) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted under Section 7.01 of the Credit Agreement), or require the payment to be made under (x) (A) any New Notes Documentation and any other indenture, mortgage, deed of trust or loan agreement evidencing Indebtedness in an aggregate principal amount in excess of the Threshold Amount or (B) any other Contractual Obligation to which such Loan Party is a party or affecting such Loan Party or the properties of such Loan Party or any of its Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Loan Party or its property is subject, or (c) violate any material Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (b)(x), to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect;

 

(ii)           this Fifth Amendment has been duly authorized, executed and delivered by each Loan Party and this Fifth Amendment and the Credit Agreement (as amended or otherwise modified hereby) constitute the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with their terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity;

 

(iii)          the representations and warranties set forth in Article V of the Credit Agreement and in the other Loan Documents are, both immediately before and after giving effect to this Fifth Amendment, true and correct in all material respects both on and as of the Fifth Amendment Effective Date with the same effect as though made on and as of the Fifth Amendment Effective Date unless such representations and warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; and

 

(iv)          there exists no Default or Event of Default on the Fifth Amendment Effective Date, both immediately before and after giving effect to this Fifth Amendment.

 

2.             (a) Except as expressly set forth herein, this Fifth Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Agents under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect.  Nothing herein shall be deemed to entitle the Borrower to receive a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

 

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                                (b)           On and after the Fifth Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the Credit Agreement in any other Loan Document shall be deemed a reference to the Credit Agreement as modified hereby.  This Fifth Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

 

3.             This Fifth Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  Delivery by facsimile or other electronic imaging means of an executed counterpart of a signature page to this Fifth Amendment shall be effective as delivery of an original executed counterpart of this Fifth Amendment. A complete set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.

 

4.             THIS FIFTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

5.             (a) This Fifth Amendment shall become effective on the date (the “Fifth Amendment Effective Date”) when:

 

(i)            the Administrative Agent shall have received executed B-3 Term Loan Extension Elections representing an aggregate principal amount of at least $400,000,000 in Existing B-1 Term Loans electing conversion to B-3 Term Loans;

 

(ii)           the Borrower, the Administrative Agent, the Required Lenders and each Extending B-3 Term Lender shall have signed a counterpart hereof (whether the same or different counterparts) and the Borrower, the Required Lenders and each Extending B-3 Term Lender shall have delivered (including by way of facsimile transmission) their signed counterparts to the Administrative Agent;

 

(iii)          the Administrative Agent shall have received a certificate attesting to the Solvency of the Loan Parties (taken as a whole) after giving effect to this Fifth Amendment, from the Chief Financial Officer of the Borrower;

 

(iv)          the Administrative Agent shall have received an opinion from Ropes & Gray LLP, counsel to the Loan Parties, in a form and substance reasonably acceptable to the Administrative Agent;

 

(v)           the Administrative Agent shall have received for the account of each of the Lenders that have requested same not later than 5:00 p.m., New York City time, on December 13, 2011 an appropriate Note executed by the Borrower, in each case in the amount, maturity and otherwise as provided in the Credit Agreement (as modified hereby);

 

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(vi)          the Administrative Agent shall have received (A) copies of resolutions of the board of directors of each Loan Party approving and authorizing the execution, delivery and performance of this Fifth Amendment and the Loan Documents as amended by this Fifth Amendment, certified as of the Fifth Amendment Effective Date by a Responsible Officer, secretary or assistant secretary of each such Loan Party as being in full force and effect without modification or amendment and (B) good standing certificates for each Loan Party from each jurisdiction in which such Loan Party is organized;

 

(vii)         the Administrative Agent shall have received an acknowledgement from the ABL Collateral Agent as contemplated by Section 5.2(c) of the Intercreditor Agreement, in form and substance reasonably acceptable to the Administrative Agent;

 

(viii)        the Administrative Agent shall have received payment from the Borrower, for the ratable account of each Extending B-3 Term Lender, an initial yield payment in an amount equal to 1.00% of its B-3 Term Commitment as in effect on the Fifth Amendment Effective Date (prior to the termination thereof pursuant to Section 2.06(c) of the Credit Agreement), with such payment to be earned by, and payable to, each such Extending B-3 Term Lender on the Fifth Amendment Effective Date (it being understood and agreed that for tax purposes only the initial yield payment shall be treated as a payment described in Treas. Reg. Section 1.1273-2(g)(2)); and

 

(ix)           the Borrower shall have paid all fees and other amounts due and payable pursuant to the Loan Documents and any other fee due and payable to a Lender as may be separately agreed by the Borrower and such Lender in connection with this Fifth Amendment, including, to the extent invoiced, reimbursement or payment of reasonable out-of-pocket expenses in connection with this Fifth Amendment and the transactions contemplated hereby and any other reasonable out-of-pocket expenses of the Administrative Agent required to be paid or reimbursed pursuant to the Credit Agreement, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent.

 

                                (b)           The Administrative Agent shall notify the Borrower and the Lenders of the Fifth Amendment Effective Date.

 

6.             By executing and delivering a copy hereof, each Loan Party hereby (a) consents to the terms of this Fifth Amendment and the Loan Documents (as amended by this Fifth Amendment) and agrees that the terms of this Fifth Amendment shall not affect in any way its obligations and liabilities under any Loan Document (as such Loan Documents are amended or otherwise expressly modified by this Fifth Amendment), all of which obligations and liabilities shall remain in full force and effect and each of which is hereby reaffirmed (as amended or otherwise expressly modified by this Fifth Amendment) and (ii) agrees that all Loans (including, without limitation, all B-1 Term Loans, all B-2 Term Loans and all B-3 Term Loans) shall be fully guaranteed pursuant to the Guaranty to which it is party in accordance with the terms and provisions thereof and shall be fully secured pursuant to the applicable Collateral Documents.

 

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7.             From and after the Fifth Amendment Effective Date, all references in the Credit Agreement and in the other Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby.

 

*         *         *

 

12

 

IN WITNESS WHEREOF, the undersigned have caused this Fifth Amendment to be duly executed and delivered as of the date first above written.

 

	
 
    	
MICHAELS STORES, INC.  
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name: 
    	
Charles M. Sonsteby 
    
	
 
    	
 
    	
Title: 
    	
Chief Administrative Officer and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
DEUTSCHE BANK AG NEW   YORK 
   BRANCH, Individually and as Administrative Agent 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
 
    
	
 
    	
 
    	
Name: 
    
	
 
    	
 
    	
Title: 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Signature page to Michaels Stores Fifth Amendment

 

 

Each of the undersigned Guarantors acknowledges and agrees to the terms of the Fifth Amendment.

 

	
 
    	
AARON BROTHERS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
President—Chief Administrative Officer 
    
	
 
    	
 
    	
 
    	
and Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
MICHAELS FINANCE COMPANY, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   
    	
Charles   M. Sonsteby
    
	
 
    	
 
    	
Title:   
    	
President—Chief   Administrative Officer
    
	
 
    	
 
    	
 
    	
and   Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
MICHAELS   STORES PROCUREMENT COMPANY, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   
    	
Charles   M. Sonsteby
    
	
 
    	
 
    	
Title:   
    	
Chief   Administrative Officer
    
	
 
    	
 
    	
 
    	
and   Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
MICHAELS   STORES CARD SERVICES, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   
    	
Charles   M. Sonsteby
    
	
 
    	
 
    	
Title:   
    	
President—Chief   Administrative Officer
    
	
 
    	
 
    	
 
    	
and   Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
ARTISTREE,   INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   
    	
Charles   M. Sonsteby
    
	
 
    	
 
    	
Title:   
    	
Chief   Administrative Officer
    
	
 
    	
 
    	
 
    	
and   Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
MICHAELS   OF CANADA, ULC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   
    	
Charles   M. Sonsteby
    
	
 
    	
 
    	
Title:   
    	
Chief   Administrative Officer
    
	
 
    	
 
    	
 
    	
and   Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    

Signature page to Michaels Stores Fifth Amendment

 

 

SIGNATURE PAGE TO THE FIFTH AMENDMENT, DATED AS OF THE DATE FIRST WRITTEN ABOVE, TO THE CREDIT AGREEMENT, DATED AS OF OCTOBER 31, 2006, AMONG MICHAELS STORES, INC., DEUTSCHE BANK AG NEW YORK BRANCH, AS ADMINISTRATIVE AGENT, JPMORGAN CHASE BANK, N.A., AS SYNDICATION AGENT, BANK OF AMERICA, N.A. AND CREDIT SUISSE, AS CO-DOCUMENTATION AGENTS AND VARIOUS LENDERS PARTY THERETO

 

By executing this signature page:

 

A.                                   as an existing Lender that is an Extending B-3 Term Lender, the undersigned institution agrees (i) to the terms of the Fifth Amendment and the Credit Agreement (as amended by the Fifth Amendment) and (ii) on the terms and subject to the conditions set forth in the Fifth Amendment and the Credit Agreement (as amended by the Fifth Amendment), to extend and convert all or a portion of its Existing B-1 Term Loans in the amount reflected below under the heading “Amount of Existing B-1 Term Loans to be Extended”; and

 

B.                                     as an existing Lender that is not an Extending B-3 Term Lender (any such Lender, a “Non-Extending Term Lender”), the undersigned institution agrees to the terms of the Fifth Amendment and the Credit Agreement (as amended by the Fifth Amendment), but NOT to extend and convert any of its Existing B-1 Term Loans into B-3 Term Loans.

 

 

	
NAME OF   LENDER:
    	
 
    
	
 
    	
 
    
	
Executing as an EXTENDING B-3 TERM LENDER:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
For any Lender requiring a second signature line:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

	
Credit Agreement Reference
    	
 
    	
Principal amount of Existing B-1
   Term Loans held by Extending B-3
   Term Lender
    	
 
    	
Amount of Existing B-1
   Term Loans to be Extended
    	
 
    
	
Deal CUSIP - 594088AC0
    	
 
    	
$
    	
 
    	
 
    	
$
    	
 
    	
 
    
								

 

Signature page to Michaels Stores Fifth Amendment

 

 

	
NAME OF LENDER:
    	
 
    
	
 
    	
 
    
	
Executing as a NON-EXTENDING TERM   LENDER:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
For any Lender requiring a   second signature line:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

Signature page to Michaels Stores Fifth AmendmentExhibit 4.1

 

AMENDED AND RESTATED

 

SYNERGY PHARMACEUTICALS, INC. WARRANT AGENCY AGREEMENT

 

WARRANT AGENCY AGREEMENT made as of December 15, 2011 and effective as of December 6, 2011 (the “Issuance Date”), between Synergy Pharmaceuticals, Inc., a Florida corporation, with offices at 420 Lexington Avenue, Suite 1609, New York, NY 10170 (“Company”), and Broadridge Corporate Issuer Solutions, Inc., with offices at 1717 Arch Street, Suite 1300, Philadelphia, PA 19103 (“Warrant Agent”).

 

WHEREAS, the Company and the Unit Agent are parties to a Warrant Agency Agreement, dated December 6, 2011 (the “Existing Agreement”); and

 

WHEREAS, the Company is engaged in a public offering (the “Offering”) of Units and, in connection therewith, has determined to issue and deliver up to 2,084,375 Warrants (the “Warrants”) to the public investors, with each such Warrant evidencing the right of the holder thereof to purchase one share of common stock, par value $.0001 per share, of the Company’s Common Stock (the “Common Stock”) for $5.50, subject to adjustment as described herein; and

 

WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement, No. 333-163316 on Form S-3 (as the same may be amended from time to time, the “Registration Statement”) for the registration, under the Securities Act of 1933, as amended (the “Act”) of, among other securities, the Warrants and the Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), and such Registration Statement was declared effective on December 10, 2009; and

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants; and

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Warrant Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree that the Existing Agreement is amended and restated in its entirety as follows:

 

1.             Appointment of Warrant Agent.  The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Warrant Agreement.

 

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2.             Warrants.

 

2.1           Form of Warrant.  Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein, and shall be signed by, or bear the facsimile signature of, the Chief Executive Officer, President, Chief Financial Officer or Treasurer, Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s seal. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.  All of the Warrants shall initially be represented by one or more book-entry certificates (each a “Book-Entry Warrant Certificate”).

 

2.2.          Effect of Countersignature.  Unless and until countersigned by the Warrant Agent pursuant to this Warrant Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

 

2.3.          Registration.

 

2.3.1.       Warrant Register.  The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants.  Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.  To the extent the Warrants are DTC eligible as of the Issuance Date, all of the Warrants shall be represented by one or more Book-Entry Warrant Certificates deposited with the Depository Trust Company (the “Depository”) and registered in the name of Cede & Co., a nominee of the Depository. Ownership of beneficial interests in the Book-Entry Warrant Certificates shall be shown on, and the transfer of such ownership shall be effected through, records maintained (i) by the Depository or its nominee for each Book-Entry Warrant Certificate; (ii) by institutions that have accounts with the Depository (such institution, with respect to a Warrant in its account, a “Participant”); or (iii) directly on the book-entry records of the Warrant Agent with respect only to owners of beneficial interests that represent such direct registration.

 

If the Warrants are not DTC Eligible as of the Issuance Date or the Depository subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding making other arrangements for book-entry settlement within ten (10) days after the Depository ceases to make its book-entry settlement available.  In the event that the Company does not make alternative arrangements for book-entry settlement within ten (10) days or the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depository to deliver to the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant Agent to deliver to the Depository definitive Warrant Certificates in physical form evidencing such Warrants.  Such definitive Warrant Certificates shall be in substantially the form annexed hereto as Exhibit A.

 

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2.3.2.       Beneficial Owner; Registered Holder.  The term “beneficial owner” shall mean any person in whose name ownership of a beneficial interest in the Warrants evidenced by a Book-Entry Warrant Certificate is recorded in the records maintained by the Depository or its nominee.  Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered upon the Warrant Register (“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

2.4.          Detachability of Warrants.  The securities comprising the units will not be issued separately and will not be separately transferable until the earlier of (i) the exercise in full of the underwriters’ overallotment option in the Offering or (ii) 45 days from the date of the final prospectus supplement filed under the Act in connection with the Offering.

 

2.5           Uncertificated Warrants.  Notwithstanding the foregoing and anything else herein to the contrary, the Warrants may be issued in uncertificated form.

 

3.             Terms and Exercise of Warrants.

 

3.1.          Exercise Price.  Each Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $5.50 per whole share, subject to the subsequent adjustments provided in Section 4 hereof.  The term “Exercise Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised.

 

3.2.          Duration of Warrants.  A Warrant may be exercised only during the period (“Exercise Period”) commencing on the Issuance Date and terminating at 5:00 P.M., New York City time on December 6, 2016 (“Expiration Date”).  Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease at the close of business on the Expiration Date.

 

3.3.          Exercise of Warrants.

 

3.3.1.       Exercise and Payment.  A registered holder may exercise a Warrant by delivering, not later than 5:00 P.M., New York time, on any business day during the Exercise Period (the “Exercise Date”) to the Warrant Agent at its corporate trust department (i) the Warrant Certificate evidencing the Warrants to be exercised, or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised (the “Book-Entry Warrants”) shown on the records of the Depository to an account of the Warrant Agent at the Depository designated for such purpose in writing by the Warrant Agent to the Depository from time to time, (ii) an election to purchase the Warrant Shares underlying the Warrants to be exercised (“Election to Purchase”), properly completed and executed by the registered holder on the reverse of the Warrant Certificate or, in the case

 

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of a Book-Entry Warrant Certificate, properly delivered by the Participant in accordance with the Depository’s procedures, and (iii) the Warrant Price for each Warrant to be exercised in lawful money of the United States of America by certified or official bank check or by bank wire transfer in immediately available funds.

 

If any of (A) the Warrant Certificate or the Book-Entry Warrants, (B) the Election to Purchase, or (C) the Warrant Price therefor, is received by the Warrant Agent after 5:00 P.M., New York time, on the specified Exercise Date, the Warrants will be deemed to be received and exercised on the business day next succeeding the Exercise Date.  If the date specified as the Exercise Date is not a business day, the Warrants will be deemed to be received and exercised on the next succeeding day that is a business day. If the Warrants are received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the registered holder or Participant, as the case may be, as soon as practicable.  In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of Warrants. The validity of any exercise of Warrants will be determined by the Company in its sole discretion and such determination will be final and binding upon the registered holder or Participant, as applicable, and the Warrant Agent.  Neither the Company nor the Warrant Agent shall have any obligation to inform a registered holder or the Participant, as applicable, of the invalidity of any exercise of Warrants.

 

The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in the account of the Company maintained with the Warrant Agent for such purpose and shall advise the Company via telephone at the end of each day on which funds for the exercise of the Warrants are received of the amount so deposited to its account.  The Warrant Agent shall promptly confirm such telephonic advice to the Company in writing.

 

3.3.2.       Issuance of Certificates.  The Warrant Agent shall, by 11:00 A.M. New York Time on the business day following the Exercise Date of any Warrant, advise the Company or the transfer agent and registrar in respect of (a) the Warrant Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this Agreement, (b) the instructions of each registered holder or Participant, as the case may be, with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of definitive Warrant Certificates, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise, (c) in case of a Book-Entry Warrant Certificate, the notation that shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other information as the Company or such transfer agent and registrar shall reasonably require.

 

The Company shall, by 5:00 P.M., New York time, on the third business day next succeeding the Exercise Date of any Warrant and the clearance of the funds in payment of the Warrant Price, execute, issue and deliver to the Warrant Agent, the Warrant Shares to which such registered holder or Participant, as the case may be, is entitled, in fully registered form, registered in such name or names as may be directed by such registered holder or the Participant, as the case may be.  Upon receipt of such

 

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Warrant Shares, the Warrant Agent shall, by 5:00 P.M., New York time, on the third Business Day next succeeding such Exercise Date, transmit such Warrant Shares to or upon the order of the registered holder or Participant, as the case may be.

 

In lieu of delivering physical certificates representing the Warrant Shares issuable upon exercise, provided the Company’s transfer agent is participating in the Depository’s Fast Automated Securities Transfer program, the Company shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon exercise to the Depository by crediting the account of the Depository or of the Participant through its Deposit Withdrawal Agent Commission system.  The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein.

 

3.3.3.       Valid Issuance.  All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and nonassessable.

 

3.3.4.       No Fractional Exercise.  Warrants may be exercised only in whole numbers of Warrant Shares.  No fractional Warrant Shares are to be issued upon the exercise of the Warrant, but rather the number of Warrant Shares to be issued shall be rounded up or down, as applicable, to the nearest whole number. If fewer than all of the Warrants evidenced by a Warrant Certificate are exercised, a new Warrant Certificate for the number of unexercised Warrants remaining shall be executed by the Company and countersigned by the Warrant Agent as provided in Section 2 of this Warrant Agreement, and delivered to the holder of this Warrant Certificate at the address specified on the books of the Warrant Agent or as otherwise specified by such registered holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a notation shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of the Warrants remaining after such exercise.

 

3.3.5        No Transfer Taxes.  The Company shall not be required to pay any stamp or other tax or governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Shares upon the exercise of Warrants; and in the event that any such transfer is involved, the Company shall not be required to issue or deliver any Warrant Shares until such tax or other charge shall have been paid or it has been established to the Company’s satisfaction that no such tax or other charge is due.

 

3.3.6        Date of Issuance.  Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

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3.3.7        Cashless Exercise Under Certain Circumstances.

 

(i)            The Company shall provide to the registered holder prompt written notice of any time that the Company is unable to issue the Warrant Shares via DTC transfer or otherwise (without restrictive legend), because (A) the Commission has issued a stop order with respect to the Registration Statement, (B) the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, (C) the Company has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or (D) otherwise (each a “Restrictive Legend Event”).   To the extent that a Restrictive Legend Event occurs after the registered holder has exercised a Warrant in accordance with the terms of the Warrants but prior to the delivery of the Warrant Shares, the Company shall, at the election of the registered holder to be given within five (5) days of receipt of notice of the Restrictive Legend Event, either (A) rescind the previously submitted Election to Purchase and the Company shall return all consideration paid by registered holder for such shares upon such rescission or (B) treat the attempted exercise as a cashless exercise as described in the next paragraph and refund the cash portion of the exercise price to the registered holder.

 

(ii)                If a Restrictive Legend Event has occurred and no exemption from the registration requirements is available, the Warrant shall only be exercisable on a cashless basis. Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of the Warrant Shares. Upon a “cashless exercise”, the Holder shall be entitled to receive a certificate (or book entry) for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A)= the VWAP on the Business Day immediately preceding the date on which the registered holder elects to exercise the Warrant by means of a “cashless exercise,” as set forth in the applicable Election to Purchase;

 

(B)= the Exercise Price of the Warrant, as it may have been adjusted hereunder; and

 

(X)= the number of Warrant Shares that would be issuable upon exercise of the Warrant in accordance with the terms of the Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

Upon receipt of an Election to Purchase for a cashless exercise, the Warrant Agent will promptly deliver a copy of the Election to Purchase to the Company to confirm the number of Warrant Shares issuable in connection with the cashless exercise. The Company shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this section to calculate, the number of Warrant Shares issuable in connection with the cashless exercise.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (each, a “Trading Market”), the daily volume weighted average price of the Common Stock for such date (or the nearest

 

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preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

3.3.8        Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the registered holder the number of Warrant Shares that are not disputed.

 

4.             Adjustments.

 

4.1           Adjustment upon Subdivision or Combination of Common Stock. If the Company at any time after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company at any time after the Issuance Date combines (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 4.1 shall become effective at the close of business on the date the subdivision or combination becomes effective.  Company shall promptly notify Warrant Agent of any such adjustment and give specific instructions to Warrant Agent with respect to any adjustments to the warrant register.

 

4.2           Adjustment for Other Distributions.  In the event the Company shall fix a record date for the making of a dividend or distribution to all holders of Common Stock of any evidences of indebtedness or assets or subscription rights or warrants (excluding those referred to in Section 4.1 or other dividends paid out of retained earnings), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so

 

7

 

distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the registered holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

4.3. Reclassification, Consolidation, Purchase, Combination, Sale or Conveyance. If, at any time while the Warrants are outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of a Warrant, the registered holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock, if any, of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the registered holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) and for which shareholders received any equity securities of the Successor Entity, to assume in writing all of the obligations of the Company under this Warrant Agreement in accordance with

 

8

 

the provisions of this Section 4.3 pursuant to written agreements and shall, upon the written request of the registered holder of a Warrant, deliver to the registered holder in exchange for this Warrant created by this Agreement a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity), if any, plus any Alternate Consideration, receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which the Warrant is exercisable immediately prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock, if any, plus any Alternate Consideration (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of such Warrant immediately prior to the consummation of such Fundamental Transaction).  Upon the occurrence of any such Fundamental Transaction the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant Agent Agreement and the Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Agreement and the Warrant with the same effect as if such Successor Entity had been named as the Company herein.

 

The Company shall instruct the Warrant Agent to mail by first class mail, postage prepaid, to each registered holder of a Warrant, written notice of the execution of any such amendment, supplement or agreement. Any supplemented or amended agreement entered into by the successor corporation or transferee shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 4. The Warrant Agent shall be under no responsibility to determine the correctness of any provisions contained in such agreement relating either to the kind or amount of securities or other property receivable upon exercise of warrants or with respect to the method employed and provided therein for any adjustments and shall be entitled to rely upon the provisions contained in any such agreement. The provisions of this Section 4.3 shall similarly apply to successive reclassifications, changes, consolidations, mergers, sales and conveyances of the kind described above.

 

4.4           Other Events. If any event occurs of the type contemplated by the provisions of Section 4.1, 4.2 or 4.3 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features to all holders of Common Stock for no consideration), then the Company’s Board of Directors will in good faith make an adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the registered holder.

 

4.5.          Notices of Changes in Warrant.  Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the

 

9

 

number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Upon the occurrence of any event specified in Sections 4.1 or 4.2, then, in any such event, the Company shall give written notice to each registered holder, at the last address set forth for such holder in the warrant register, of the record date or the effective date of the event.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

4.6.          No Fractional Shares.  Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants.  If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up or down, as applicable, to the nearest whole number the number of the shares of Common Stock to be issued to the registered holder.

 

4.7.          Form of Warrant.  The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Warrant Agreement.  However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

5.             Transfer and Exchange of Warrants.

 

5.1.          Registration of Transfer.  The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer.  Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent.  The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

 

5.2.          Procedure for Surrender of Warrants.  Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer reasonably acceptable to Warrant Agent, duly executed by the registered holder thereof, or by a duly authorized attorney, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be transferred only in whole and only to the Depository, to another nominee of the Depository, to a successor depository, or to a nominee of a successor depository; provided further, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may

 

10

 

be made and indicating whether the new Warrants must also bear a restrictive legend.  Upon any such registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver, in the name of the designated transferee a new Warrant Certificate or Warrant Certificates of any authorized denomination evidencing in the aggregate a like number of unexercised Warrants.

 

5.3.          Fractional Warrants.  The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a Warrant Certificate for a fraction of a Warrant.

 

5.4.          Service Charges.  A service charge shall be made for any exchange or registration of transfer of Warrants, as negotiated between Company and Warrant Agent.

 

5.5.          Warrant Execution and Countersignature.  The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Warrant Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

 

6. Limitations on Exercise.  Neither the Warrant Agent nor the Company shall effect any exercise of any Warrant, and a registered holder shall not have the right to exercise any portion of a Warrant, to the extent that after giving effect to the issuance of shares of Common Stock after exercise as set forth on the applicable Election to Purchase, the registered holder (together with such registered holder’s Affiliates (as defined in Rule 405 under The Securities Act of 1933), and any other persons acting as a group together with the registered holder or any of the registered holder’s Affiliates), would beneficially own in excess of 4.99% of the Company’s Common Stock. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the registered holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon exercise of the remaining, nonexercised portion of any Warrant beneficially owned by the registered holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 6, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the registered holder that neither the Warrant Agent nor the Company is representing to the registered holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the registered holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 6 applies, the determination of whether a Warrant is exercisable (in relation to other securities owned by the registered holder together with any Affiliates) and of which portion of a Warrant is exercisable shall be in the sole discretion of the registered holder, and the submission of a Election to Purchase shall be deemed to be the registered holder’s determination of whether such Warrant is exercisable (in relation to other securities owned by the registered holder together with any Affiliates) and of which portion of a Warrant is exercisable, and neither the Warrant Agent nor the Company shall have any obligation to verify or confirm the accuracy of such determination and neither of them

 

11

 

shall have any liability for any error made by the registered holder. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6, in determining the number of outstanding shares of Common Stock, a registered holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. The provisions of this Section 6 shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6 to correct this subsection (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of a Warrant.

 

7.             Other Provisions Relating to Rights of Holders of Warrants.

 

7.1.          No Rights as Stockholder.  Except as otherwise specifically provided herein, a registered holder, solely in its capacity as a holder of a Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant Agreement be construed to confer upon a registered holder, solely in its capacity as the registered holder of a Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the registered holder of the Warrant Shares which it is then entitled to receive upon the due exercise of a Warrant. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder.

 

7.2.          Lost, Stolen, Mutilated, or Destroyed Warrants.  If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity (including obtaining an open penalty bond protecting the Warrant Agent) or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed.  Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

 

7.3.          Reservation of Common Stock.  The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Warrant Agreement.

 

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8.             Concerning the Warrant Agent and Other Matters.

 

8.1           Concerning the Warrant Agent.  The Warrant Agent:

 

a)             shall have no duties or obligations other than those set forth herein and no duties or obligations shall be inferred or implied;

 

b)            may rely on and shall be held harmless by the Company in acting upon any certificate, statement, instrument, opinion, notice, letter, facsimile transmission, telegram or other document, or any security delivered to it, and reasonably believed by it to be genuine and to have been made or signed by the proper party or parties;

 

c)             may rely on and shall be held harmless by the Company in acting upon written or oral instructions or statements from the Company with respect to any matter relating to its acting as Warrant Agent;

 

d)            May consult with counsel satisfactory to it (including counsel for the Company) and shall be held harmless by the Company in relying on the advice or opinion of such counsel in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of such counsel;

 

e)             solely shall make the final determination as to whether or not a Warrant received by Warrant Agent is duly, completely and correctly executed, and Warrant Agent shall be held harmless by the Company in respect of any action taken, suffered or omitted by Warrant Agent hereunder in good faith and in accordance with its determination;

 

f)             shall not be obligated to take any legal or other action hereunder which might, in its judgment subject or expose it to any expense or liability unless it shall have been furnished with an indemnity satisfactory to it; and

 

g)            shall not be liable or responsible for any failure of the Company to comply with any of its obligations relating to the Registration Statement or this Warrant Agreement, including without limitation obligations under applicable regulation or law.

 

8.2           Payment of Taxes.  The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.  The Warrant Agent shall not register any transfer or issue or deliver any Warrant Certificate(s) or Warrant Shares unless or until the persons requesting the registration or issuance shall have paid to the Warrant Agent for the account of the Company the amount of such tax, if any, or shall have established to the reasonable satisfaction of the Company that such tax, if any, has been paid

 

8.3                                                         Resignation, Consolidation, or Merger of Warrant Agent.

 

8.3.1.       Appointment of Successor Warrant Agent.  The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged

 

13

 

from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company.  If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent.  If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost.  Any successor Warrant Agent (but not including the initial Warrant Agent), whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority.  After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

8.2.2.       Notice of Successor Warrant Agent.  In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

 

8.2.3.       Merger or Consolidation of Warrant Agent.  Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Warrant Agreement without any further act.

 

8.3.          Fees and Expenses of Warrant Agent.

 

8.3.1.       Remuneration.  The Company agrees to pay the Warrant Agent reasonable remuneration in an amount separately agreed to between Company and Warrant Agent for its services as Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.  One half of the total Warrant Agent fees (not including postage) must be paid upon execution of this Warrant Agreement.  The remaining half must be paid within fifteen (15) business days thereafter.  An invoice for any out-of-pocket and/or per item fees incurred will be rendered to and payable by the Company within fifteen (15) days of the date of said invoice.  It is understood and agreed that all services to be performed by Warrant Agent shall cease if full payment for its

 

14

 

services has not been received in accordance with the above schedule, and said services will not commence thereafter until all payment due has been received by Warrant Agent.

 

8.3.2.       Further Assurances.  The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Warrant Agreement.

 

8.4.          Liability of Warrant Agent.

 

8.4.1.       Reliance on Company Statement.  Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President of the Company and delivered to the Warrant Agent.  The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Warrant Agreement.

 

8.4.2.       Indemnity.  The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith.  The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, claims, losses, damages, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement except as a result of the Warrant Agent’s gross negligence, willful misconduct, or bad faith.

 

8.4.3.       Limitation of Liability. The Warrant Agent’s aggregate liability, if any, during the term of this Warrant Agreement with respect to, arising from, or arising in connection with this Warrant Agreement, or from all services provided or omitted to be provided under this Warrant Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid or payable hereunder by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses.

 

8.4.4        Disputes.  In the event any question or dispute arises with respect to the proper interpretation of this Warrant Agreement or the Warrant Agent’s duties hereunder or the rights of the Company or of any holder of a Warrant, the Warrant Agent shall not be required to act and shall not be held liable or responsible for refusing to act until the question or dispute has been judicially settled (and the Warrant Agent may, if it deems it advisable, but shall not be obligated to, file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction, binding on all parties interested in the matter which is no longer subject to review or appeal, or settled by a written document in form and substance satisfactory to the Warrant Agent and executed by the Company and each other interested party.  In addition, the Warrant Agent may require for such purpose, but shall not be obligated to require, the execution of such written settlement by all the Warrant holders, as applicable, and all other parties that may have an interest in the settlement.

 

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8.4.5        Exclusions.  The Warrant Agent shall have no responsibility with respect to the validity of this Warrant Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.

 

8.5.          Acceptance of Agency.  The Warrant Agent hereby accepts the agency established by this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

 

9.             Miscellaneous Provisions.

 

9.1.          Successors.  All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

 

9.2.          Notices.  Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

Synergy Pharmaceuticals, Inc.

 

420 Lexington Avenue, Suite 1609

 

New York, NY 10170
 Attn:       Gary Jacob, Chief Executive Officer

 

Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:

 

Broadridge Corporate Issuer Solutions, Inc.,

 

1717 Arch St, Suite 1300

 

Philadelphia, PA 19103

 

16

 

Attn:  Compliance Department

 

with a copy in each case to:

 

Sichenzia Ross Friedman Ference LLP
 61 Broadway, 32nd Floor
 New York, NY 10006
 Attn:  Jeffrey J. Fessler, Esq.

 

and:

 

Aegis Capital Corp.                                   EarlyBirdCapital, Inc.

 

810 Seventh Avenue, 11th Fl                    275 Maidson Avenue, 27th Fl

 

New York, NY 10019                                  New York, NY 10016

 

Attn:       Compliance Department Attn: Compliance Department

 

and:

 

ReedSmith LLP

 

599 Lexington Avenue

 

New York, NY 10022
 Attn:       Yvan-Claude Pierre, Esq.

 

and;

 

Broadridge Financial Solutions, Inc.

2 Journal Square Plaza

Jersey City, New Jersey 07306

Attention: General Counsel

 

9.3.          Applicable law.  The validity, interpretation, and performance of this Warrant Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction.  The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Warrant Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum.  Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

 

9.4.          Persons Having Rights under this Warrant Agreement.  Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person

 

17

 

or corporation other than the parties hereto and the registered holders of the Warrants and, for purposes of Sections 3.3, 9.3 and 9.8, the Underwriter, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof.  The Underwriters shall be deemed to be an express third-party beneficiary of this Warrant Agreement with respect to Sections 3.3, 9.3 and 9.8 hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and the Underwriters with respect to the Sections 3.3, 9.3 and 9.8 hereof) and their successors and assigns and of the registered holders of the Warrants.

 

9.5.          Examination of the Warrant Agreement.  A copy of this Warrant Agreement shall be available at all reasonable times at the office of the Warrant Agent in the city of Philadelphia, Commonwealth of Pennsylvania, for inspection by the registered holder of any Warrant.  The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

 

9.6.          Counterparts.  This Warrant Agreement may be executed in any number of original or facsimile 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.

 

9.7.          Effect of Headings.  The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

 

9.8           Amendments.  This Warrant Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Warrant Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the registered holders.  All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the Underwriter and the registered holders of a majority of the then outstanding Warrants.

 

9.9           Severability. This Warrant Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

9.10         Force Majeure.  In the event either party is unable to perform its obligations under the terms of this Warrant Agreement because of acts of God, strikes, failure of carrier or utilities, equipment or transmission failure or damage that is reasonably beyond its control, or any other cause that is reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.  Performance under this Warrant

 

18

 

Agreement shall resume when the affected party or parties are able to perform substantially that party’s duties.

 

9.11         Consequential Damages.  Notwithstanding anything in this Warrant Agreement to the contrary, neither party to this Warrant Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provision of this Agreement or for any consequential, indirect, punitive, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.

 

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IN WITNESS WHEREOF, this Amended and Restated Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

	
 
    	
SYNERGY   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
Name:   
    	
Gary   S. Jacob
    
	
 
    	
Title:   
    	
CEO
    
	
 
    	
 
    
	
 
    	
BROADRIDGE   CORPORATE ISSUER
    
	
 
    	
SOLUTIONS, INC.
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
Name:   
    	
 
    
	
 
    	
Title:   
    	
 
    

 

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