Warrant to Purchase Common Stock - Autotote Corp. and Ramius Securities LLC
WARRANT TO PURCHASE
CLASS A COMMON STOCK
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED FOR RESALE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES AND SUCH DISPOSITION FILED UNDER THE ACT, OR AN
EXEMPTION FROM REGISTRATION, AND COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS. THE ISSUER MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
HEREOF THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED
WITH.
Void After 5:00 p.m., Eastern Time, on October 1, 2004 No. 1
Warrant to Purchase
250,000 shares of
Class A Common Stock, par value $.01 per share
of
AUTOTOTE CORPORATION
This is to Certify That, FOR VALUE RECEIVED, the receipt and
sufficiency of which is hereby acknowledged, Ramius Securities, LLC (the
"Holder") is entitled to purchase, subject to the provisions of this Warrant,
from Autotote Corporation ("Company"), a Delaware corporation, at any time prior
to 5:00 p.m., Eastern Time, on October 1, 2004, a total of TWO HUNDRED AND FIFTY
THOUSAND shares of Class A Common Stock, par value $.01 per share, of the
Company ("Securities") at an initial purchase price of $3.58 per share. The
number of Securities to be received upon the exercise of this Warrant and the
price to be paid for the Securities may be adjusted from time to time as
hereinafter set forth. The number of Securities to be received upon the exercise
of this Warrant in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Exercise Rate" and the purchase price
per Security in effect at any time and as adjusted from time to time, and
subject to the minimum purchase price set forth in Section 7(l), is hereinafter
sometimes referred to as the "Exercise Price" per Security. The Securities, as
adjusted from time to time, together with any other Securities issuable upon
exercise of this Warrant are hereinafter sometimes referred to as "Warrant
Securities". Certain capitalized terms used in this Warrant are defined in
Section 15 hereof.
(i) Exercise of Warrant. Subject to the provisions of Section
8 hereof, this Warrant may be exercised at the option of the Holder in
whole or in part at any time or from time to time prior to 5:00 p.m.,
Eastern Time on October 1, 2004, or if October 1, 2004 is a Saturday,
Sunday or a day on which banking
1
<PAGE>
institutions in New York, New York are authorized by law to close, then on
the next succeeding day (a "Business Day") which shall not be such a day,
by presentation and surrender hereof to the Company or at the office of
its stock transfer agent, if any, with the Purchase Form annexed hereto
duly executed, and accompanied by payment of the Exercise Price (other
than in the case of the exercise of the Cashless Exercise Option set forth
in Section 8 hereof), for the number of Securities specified in such
Purchase Form, together with all federal and state taxes applicable upon
such exercise. Upon exercise of this Warrant, the Holder shall be deemed
to have represented and warranted to the Company that such Holder (x) is a
"qualified institutional buyer" as defined in Rule 144A under the Act or
an "accredited investor" as defined in Rule 501 under the Act, in either
case with such knowledge and experience in financial and business matters
as is necessary to evaluate the merits and risks of an investment in the
Warrant Securities, and (y) such Holder is not acquiring the Warrant
Securities with a view to any distribution thereof or with any intention
of offering or selling any Warrant Securities in a transaction that would
violate the Act or the securities laws of any state of the United States.
If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Securities purchasable hereunder. Upon receipt by the Company of this
Warrant at the office of the Company or at the office of the Company's
stock transfer agent, in proper form for exercise and accompanied by the
Exercise Price, if and as applicable, the Holder shall be deemed to be the
holder of record of the Securities issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Securities shall not then be
actually delivered to the Holder.
(ii) Reservation of Securities. The Company hereby agrees that
at all times there shall be reserved for issuance and/or delivery upon
exercise of this Warrant such number of shares of Securities as shall be
required for issuance or delivery upon exercise of this Warrant. The
Company covenants and agrees that, upon exercise of this Warrant and
payment of the Exercise Price therefor, if and as applicable, all
Securities and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. As long as this Warrant shall be
outstanding, the Company shall use its best efforts to cause all
Securities issuable upon the exercise of this Warrant to be listed
(subject to official notice of issuance) on all securities exchanges or
quotation systems on which its Class A Common Stock issued may then be
listed and/or quoted.
(iii) Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the Prior Day Market Value of such
fractional share.
2
<PAGE>
(iv) Exchange, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its
stock transfer agent, if any, for other Warrants of different
denominations entitling the Holder thereof to purchase (under the same
terms and conditions as provided by this Warrant) in the aggregate the
same number of Securities purchasable hereunder. Subject to compliance
with the provisions of Section 10 hereof, this Warrant may be divided or
combined with other Warrants of the same series upon presentation hereof
at the office of the Company or at the office of its stock transfer agent,
if any, issued together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrants" as used in this paragraph includes any
Warrants issued in substitution for or replacement of this Warrant, or
into which this Warrant may be divided or exchanged.
Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not the Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
(v) Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either
at law or equity, and the rights of the Holder are limited to those
expressed in this Warrant and the registration rights agreement referenced
in Section 16 hereof.
(vi) Certain Notices to Warrant Holders. The Company shall
give prompt written notice to the Holder of any determination to make a
distribution to the holders of its Class A Common Stock of any cash
dividends, assets, debt securities, preferred stock, or any rights or
warrants to purchase debt securities, preferred stock, assets or other
securities (other than Class A Common Stock, or rights, options, or
warrants to purchase Class A Common Stock) of the Company, which notice
shall state the nature and amount of such planned dividend or distribution
and the record date therefor, and shall be received by the Holder or sent
to the Holder by reputable overnight courier, in either case to its
address as provided in Section 9, at least 10 days prior to such record
date therefor. The Company shall provide notice to the Holder that any
tender offer is being made for securities of the same class as any Warrant
Securities no later than the first Business Day after the day the Company
becomes aware of any such tender offer. Notwithstanding any notice
provided to the Holder pursuant to this Section 6, the Holder shall be
entitled to any and all applicable adjustments to the Exercise Rate and
the Exercise Price per Security as provided in Section 7 arising out of
any event requiring notice to the Holder in this Section 6.
3
<PAGE>
(vii) Adjustment of Exercise Rate and Exercise Price.
The Exercise Rate and the Exercise Price are subject to adjustment
from time to time upon the occurrence of the events enumerated in this
Section 7. The Exercise Rate shall initially be the number of Securities
for which this Warrant is initially exercisable as set forth in the
introductory paragraph to this Warrant. In the event that this Warrant is
transferred or exercised in part, the initial Exercise Rate of the portion
not exercised or transferred shall be adjusted proportionately as shall
the initial Exercise Rate of any partial transfer of this Warrant. For the
purposes of Sections 7(a) and 7(b), (i) shares of Class A Common Stock
issuable upon the exercise of this Warrant and all other warrants of the
same series as this Warrant shall be deemed to be outstanding and (ii) all
shares of Class A Common Stock that would be deemed to be outstanding as
of the date of determination in respect of Convertible Securities, as
determined in accordance with GAAP, shall be deemed to be outstanding.
Adjustment for Change in Capital Stock. If, after the Issue
Date, the Company:
pays a dividend or makes a distribution on shares of its Class A
Common Stock payable in shares of its Class A Common Stock (except
to the extent any such dividend results in the grant, issuance, sale
or making of Distribution Rights or Distributions (each as defined
in Section 7(c)) to the Holder pursuant to Section 7(c));
subdivides or splits its outstanding shares of Class A Common Stock
into a greater number of shares; or
combines its outstanding shares of Class A Common Stock into a
smaller number of shares;
then (1) the Exercise Rate in effect immediately prior to such action for
this Warrant shall be adjusted by multiplying the Exercise Rate in effect
immediately prior to such action by a fraction (A) the numerator of which
shall be the number of shares of Class A Common Stock outstanding
immediately after such action and (B) the denominator of which shall be
the number of shares of Class A Common Stock outstanding immediately prior
to such action or the record date applicable to such action, if any and
(2) the Exercise Price per Security in effect immediately prior to such
action shall be adjusted by multiplying the Exercise Price per Security in
effect immediately prior to such action by a fraction (A) the numerator of
which is one and (B) the denominator of which shall be the fraction
calculated in clause (1) of the above formula. The adjustments shall
become effective immediately after the record date in the case of a
dividend or distribution and immediately after the effective date in the
case of a subdivision or combination. In the event that such dividend or
distribution is not so paid or made or such subdivision, combination or
reclassification is not effected, the Exercise Rate and the Exercise Price
per Security shall again be adjusted to be the Exercise Rate and the
Exercise Price per Security which would then be in effect if such record
date or effective date had not been so fixed.
Adjustment for Certain Sales of Class A Common Stock Below
Current Market Value. If, after the Issue Date, the Company
(i) grants or sells to any Affiliate of the Company (other
than a wholly owned subsidiary of the Company) or (ii) grants,
sells or offers to grant or sell to all holders of Class A
Common Stock, any shares of Class A Common Stock or
Convertible Securities (other than, in the case of each of
clauses (i) and (ii), (1) pursuant to any Convertible Security
outstanding as of the Issue Date, or (2) upon
4
<PAGE>
the conversion, exchange or exercise of any Convertible
Security as to which upon the issuance thereof an adjustment
pursuant to this Section 7 has been made), at a price below
the then Current Market Value, the Exercise Rate and the
Exercise Price per Security for this Warrant shall be adjusted
in accordance with the formulae:
E^1 = E x (O+N) $^1 = $ x (O + N x P/M)
-------------- ----------------
(O + (N x P/M)) (O + N)
where:
E^1 = the adjusted Exercise Rate for this Warrant;
E = the then current Exercise Rate for this Warrant;
$^1 = the adjusted Exercise Price per Security for this Warrant;
$ = the then current Exercise Price per Security for this Warrant;
O = the number of shares of Class A Common Stock outstanding
immediately prior to the sale of such Class A Common Stock or
issuance of Convertible Securities;
N = the number of shares of Class A Common Stock so sold or the
maximum stated number of shares of Class A Common Stock
issuable upon the conversion, exchange or exercise of any such
Convertible Securities;
P = the proceeds per share of Class A Common Stock received by the
Company, which (i) in the case of shares of Class A Common
Stock is the amount received by the Company in consideration
for the sale and issuance of such shares; and (ii) in the case
of Convertible Securities is the amount received by the Company
in consideration for the sale and issuance of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, other than the surrender of such Convertible
Securities, payable to the Company upon exercise, conversion or
exchange thereof; and
M = the Current Market Value as of the Time of Determination or at
the time of sale, as the case may be, of a share of Class A
Common Stock.
The adjustments shall become effective immediately after the record date
for the determination of shareholders entitled to receive the rights, warrants
or options to which this paragraph (b) applies or upon consummation of the sale
of Class A Common Stock, as the case may be. To the extent that shares of Class
A Common Stock are not delivered after the expiration of such rights, warrants
or options or exercise, conversion or exchange rights in respect to such
Convertible Securities, the Exercise Rate and the Exercise Price per Security
for this Warrant shall be readjusted to the Exercise Rate and the Exercise Price
per Security which would otherwise be in effect had the adjustment made upon the
issuance of such rights, warrants or options or Convertible Securities been made
on the basis of delivery of only the number of shares of Class A Common Stock
5
<PAGE>
actually delivered. In the event that such rights or warrants are not so issued,
the Exercise Rate and the Exercise Price per Security for this Warrant shall
again be adjusted to be the Exercise Rate and the Exercise Price per Security
which would then be in effect if such date fixed for determination of
shareholders entitled to receive such rights, warrants or options had not been
so fixed.
No adjustments shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E^1 that is lower than the value of E.
No adjustments shall be made under this paragraph (b) for any
adjustments which are the subject of paragraphs (a), (c) or (e) of this Section
7.
Anything in this Warrant to the contrary notwithstanding, an event
which would otherwise give rise to adjustments pursuant to this Section 7(b)
shall not give rise to such adjustments if the Company grants, sells or offers
to sell shares of Class A Common Stock or Convertible Securities, in each case
on the same terms as the underlying event, to the Holder on a pro rata basis,
assuming for the purpose of this Section 7(b) that all warrants of the same
series as this Warrant had been exercised.
Notwithstanding the foregoing, no adjustment in the Exercise Rate or
the Exercise Price per Security will be required in respect of: (a) the grant of
any stock option or other stock incentive award pursuant to any stock option or
stock incentive plan or arrangement as disclosed in the Company's Proxy
Statement dated February 22, 2000 or pursuant to any other customary
compensatory stock option or stock incentive plan for employees, officers and/or
directors, (b) the grant of any stock option or stock incentive award at an
exercise price at least equal to the then Prior Day Market Value, (c) the
exercise of any stock option or stock incentive or award or (d) any issuance or
conversion of any shares of the Company's Series A Convertible Preferred Stock.
Adjustment upon Certain Distributions.
If at any time after the Issue Date the Company grants,
issues or sells options, any Convertible Security, or
rights to purchase capital stock or other securities
(other than Class A Common Stock) pro rata to the record
holders or series of Class A Common Stock ("Distribution
Rights") or, without duplication, makes any distribution
(other than a distribution pursuant to a plan of
liquidation) other than a Permitted Cash Dividend (a
"Distribution") on shares of Class A Common Stock
(whether in cash, property, evidences of indebtedness,
or otherwise), then the Exercise Rate and the Exercise
Price per Security shall be adjusted in accordance with
the formulae:
E^1 = E x (M/(M-F)) $^1 = $ x ((M-F)/M)
where:
6
<PAGE>
E^1 = the adjusted Exercise Rate;
E = the current Exercise Rate for this Warrant;
$^1 = the adjusted Exercise Price per Security for this Warrant;
$ = the current Exercise Price per Security for this Warrant;
M = the Current Market Value per share of Class A Common Stock at
the Time of Determination;
F = the fair market value at the Time of Determination of such
portion of the options, Convertible Securities, capital stock
or other securities, cash, property or assets distributable
pursuant to such Distribution Rights or Distribution per
share of outstanding Class A Common Stock.
The adjustments shall become effective immediately after the Time of
Determination with respect to the shareholders entitled to receive the options,
Convertible Securities, warrants, cash, property, evidences of indebtedness or
other securities or assets to which this paragraph (c)(i) applies. No
adjustments shall be made under this paragraph (c) if the application of the
formula stated above in this paragraph (c)(i) would result in a value of E1 that
is lower than the value of E. This paragraph (c)(i) does not apply to any
securities which result in adjustments pursuant to paragraphs (a) or (b) of this
Section 7.
Anything in this Warrant to the contrary
notwithstanding, an event which would otherwise give
rise to adjustments pursuant to Section 7(c)(i) shall
not give rise to such adjustments (or to adjustments
pursuant to any other provision of this Section 7) if
the Company grants, issues or sells Distribution Rights
to the Holder or includes the Holder in such
Distribution, in each case on a pro rata basis, assuming
for the purpose of this Section 7(c)(ii) that all
warrants of the same series as this Warrant had been
exercised.
Notwithstanding anything to the contrary set forth in
this Section 7(c), if, at any time, the Company makes
any distribution pursuant to any plan of liquidation (a
"Liquidating Distribution") on shares of Class A Common
Stock (whether in cash, property, evidences of
indebtedness or otherwise), then, subject to applicable
law, the Company shall make to the Holder the aggregate
Liquidating Distribution which the Holder would have
acquired if the Holder had held the maximum number of
shares of Class A Common Stock acquirable upon the
complete exercise of this Warrant immediately before the
Time of Determination of shareholders entitled to
receive Liquidating Distributions.
7
<PAGE>
Notice of Adjustments. Whenever the Exercise Rate and
Exercise Price per Security are adjusted, the Company
shall promptly mail to the Holder a notice of the
adjustments. The Company shall also provide the Holder
with a certificate from the Company's independent public
accountants briefly stating the facts requiring the
adjustments and the manner of computing it. The
certificate shall be conclusive evidence that the
adjustments are correct, absent manifest error.
Reorganization of Company; Fundamental Transaction.
If (x) the Company shall reclassify its Class A
Common Stock (other than a change in par value, or
from par value to no par value, or a subdivision
or combination thereof), or (y) the Company, in a
single transaction or through a series of related
transactions, consolidates with or merges with or
into any other person or sells, assigns,
transfers, leases, conveys or otherwise disposes
of all or substantially all of its properties and
assets to another person or group of affiliated
persons or is a party to a merger or binding share
exchange which, in the case of any of the
transactions referred to in this clause (y),
reclassifies or changes its outstanding Class A
Common Stock (each of (x) and (y) above being
referred to as a "Fundamental Transaction"), as a
condition to consummating any such Fundamental
Transaction, the Company, in the case of any such
reclassification referred to in clause (x), or the
person formed by or surviving any such
consolidation or merger if other than the Company
or the person to whom such transfer has been made
in the case of clause (y) above (the "Surviving
Person"), shall enter into a supplemental warrant
agreement. The supplemental warrant agreement
shall provide (a) that the Holder may exercise
this Warrant for the kind and amount of
securities, cash or other assets which the Holder
would have received immediately after the
Fundamental Transaction if the Holder had
exercised this Warrant immediately before the
effective date of the transaction (without giving
effect to the Cashless Exercise Option), assuming
(to the extent applicable) that the Holder (i) was
not a constituent person or an affiliate of a
constituent person to any transaction described in
clause (y) above, (ii) made no election with
respect to any transaction described in clause (y)
above, and (b) in the case of any transaction
described in clause (y) above, that the Surviving
Person shall succeed to and be substituted to
every right and obligation of the Company in
respect of this Warrant. The supplemental warrant
agreement shall provide for
8
<PAGE>
adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for
in this Section 7. The Surviving Person or the
Company, as applicable, shall mail to the Holder a
notice briefly describing the supplemental warrant
agreement. If the issuer of securities deliverable
upon exercise of this Warrant is an affiliate of a
Surviving Person, that issuer shall join in the
supplemental warrant agreement.
Notwithstanding the foregoing, if a Fundamental
Transaction shall occur and, upon consummation of
such Fundamental Transaction, consideration is
payable to holders of shares of Class A Common
Stock which consideration consists solely of cash,
assuming (to the extent applicable) that the
Holder (i) was not a constituent person or an
affiliate of a constituent person to a transaction
described in Section 7(e)(i)(y) above and (ii)
made no election with respect thereto, then the
Holder shall be entitled to receive distributions
upon consummation of such Fundamental Transaction
on an equal basis with holders of Class A Common
Stock as if this Warrant had been exercised
immediately prior to such event, less the
aggregate Exercise Price therefor; provided that
the Company or the Surviving Person, as the case
may be, may require the surrender of this Warrant
to such person prior to making any such
distribution to the Holder. Upon receipt of such
payment, if any, the rights of the Holder shall
terminate and cease and this Warrant shall expire.
If this paragraph (f) applies, it shall supersede
the application of paragraph (a), (b) or (c) of
this Section 7.
9
<PAGE>
Other Events If any event occurs as to which the
provisions of this Section 7 are not strictly applicable
or, if strictly applicable, would not, in the good faith
judgment of the board of directors of the Company,
fairly and adequately protect the rights of the Holder
in accordance with the essential intent and principles
of such provisions, then such board of directors shall
make such adjustments in the application of such
provisions, in accordance with such essential intent and
principles, as shall be reasonably necessary, in the
good faith opinion of such board of directors, to
protect such rights as aforesaid, but in no event shall
any such adjustment have the effect of decreasing the
Exercise Rate or decreasing the number of Securities
issuable upon exercise of this Warrant or increasing the
Exercise Price per Security.
Company Determination Final. Any determination that the
Company or the board of directors of the Company must
make pursuant to this Section 7 shall be conclusive,
absent manifest error.
Specificity of Adjustments. Regardless of any
adjustments in the number or kind of shares purchasable
upon the exercise of this Warrant or the Exercise Price
per Security, this Warrant may continue to express the
same number and kind of Securities initially issuable
pursuant to this Warrant and the initial Exercise Price
per Security as set forth in the first paragraph hereof.
Voluntary Adjustment. The Company from time to time may
increase the Exercise Rate and correspondingly decrease
the Exercise Price per Security by any number and for
any period of time; provided, however, that such period
is not less than 20 Business Days. Whenever the Exercise
Rate is so increased and the Exercise Price per Security
is so decreased, the Company shall mail to the Holder a
notice thereof. The Company shall give the notice at
least 10 days before the date the increased Exercise
Rate and decreased Exercise Price per Security takes
effect. The notice shall state the increased Exercise
Rate and decreased Exercise Price per Security and the
period it will be in effect. A voluntary increase in the
Exercise Rate and decrease in the Exercise Price per
Security shall not change or adjust the Exercise Rate or
Exercise Price per Security otherwise in effect as
determined by this Section 7.
Multiple Adjustments. After an adjustment to the
Exercise Rate and Exercise Price per Security for this
Warrant under this Section 7, any subsequent event
requiring an adjustment under this Section 7 shall cause
an adjustment to the Exercise Rate and Exercise Price
per Security for this Warrant as so adjusted.
10
<PAGE>
When De Minimis Adjustment May Be Deferred. No
adjustment in the Exercise Rate or Exercise Price per
Security shall be required unless such adjustment would
require an increase or decrease of at least 1% in the
Exercise Rate; provided, however, that any adjustments
which by reason of the foregoing are not required to be
made shall be carried forward and taken into account in
any subsequent adjustment. All calculations of the
Exercise Rate shall be rounded to the nearest whole
number. All calculations of the Exercise Price per
Security shall be rounded to the nearest ten thousandth
of one cent. No adjustments need be made for a change in
the par value of the Class A Common Stock and no
adjustments shall be deferred beyond the date on which
this Warrant is exercised.
Notwithstanding any adjustment to the Exercise Price
called for by this Section 7, in no event will the
Exercise Price per share of Class A Common Stock be
adjusted to an amount that is less than the par value
per share of the Class A Common Stock at the time of
such adjustment, and if, but for the provisions of this
Section 7(l), an adjustment to the Exercise Price would
be required under this Section 7 that would result in an
Exercise Price per share of Class A Common Stock that is
less than the par value per share of the Class A Common
Stock, then the Exercise Price shall be adjusted such
that the Exercise Price per share of Class A Common
Stock equals the par value of the Class A Common Stock.
Amendments of the Certificate of Incorporation. The
Company shall not amend its Certificate of Incorporation
to increase the par value of any Warrant Security such
that such par value would exceed the Exercise Price per
share of such Warrant Security.
(viii) Cashless Exercise. In lieu of exercising this Warrant
for cash, the Holder shall have the right to exercise this Warrant or any
portion thereof (the "Cashless Exercise Option") into Class A Common Stock
as provided in this Section 8 at any time or from time to time during the
period specified on page one of this Warrant by the surrender of this
Warrant to the Company with a duly executed and completed Exercise Form
marked to reflect cashless exercise. Upon exercise of the Cashless
Exercise Option with respect to a particular number of shares subject to
this Warrant and noted on the Exercise Form (the "Cashless Exercise
Securities"), the Company shall deliver to the Holder (without payment by
the Holder of any Exercise Price or any cash or other consideration) that
number of shares of fully paid and nonassessable shares of Class A Common
Stock equal to the quotient obtained by dividing (X) the value of this
Warrant (or the specified portion hereof) on the Cashless Exercise Date,
which value shall be determined by subtracting (A) the aggregate Exercise
Price of the Cashless Exercise Securities immediately prior to the
exercise of the Cashless Exercise Option from (B) the aggregate Prior Day
Market Value of the Cashless Exercise
11
<PAGE>
Securities issuable upon exercise of this Warrant (or the specified
portion hereof) on the Cashless Exercise Date (as herein defined) by (Y)
the Prior Day Market Value of one share of Class A Common Stock on the
Cashless Exercise Date (as herein defined).
Expressed as a formula as shown below, such net issuance exercise
shall be computed as follows:
X = B-A
---
Y
where:
X = the number of shares of Class A Common Stock that may be
issued to the Holder
Y = the Prior Day Market Value of one share of Class A Common
Stock as of the Cashless Exercise Date
A = the aggregate Exercise Price (i.e. the product determined by
multiplying the Cashless Exercise Securities by the Exercise
Price per Security)
B = the aggregate Prior Day Market Value (i.e. the product
determined by multiplying the Prior Day Market Value by the
Cashless Exercise Securities).
(ix) Notices. Any notices or certificates by the Company to
the Holder and by the Holder to the Company shall be deemed delivered if
in writing and delivered personally or sent by certified mail or reputable
overnight courier, to the Holder, addressed as set forth in the
Instructions for Registration of Warrant delivered to the Company, which
may be superseded from time to time upon notice to the Company, and, if to
the Company, addressed to Autotote Corporation, 750 Lexington Avenue, 25th
Floor, New York, New York 10022, Attention: General Counsel. The Company
may change its address for notice by written notice to the Holder.
(x) Limitations on Transferability. This Warrant may be
divided or combined, upon request to the Company by the Holder, into a
certificate or certificates evidencing the same aggregate number of
Warrants. This Warrant may not be offered, sold, transferred, pledged or
hypothecated in the absence of an effective registration statement as to
this Warrant and such transaction filed under the Act, or an exception
from the requirement of such registration, and compliance with the
applicable federal and state securities laws. The Company may require an
opinion of counsel satisfactory to the Company that such registration is
not required and that such laws are complied with. The Company may treat
the registered holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit
the Holder or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its
books showing the registered holders of Warrants.
12
<PAGE>
(xi) Transfer to Comply With the Securities Act of 1933. The
Company may cause the following legend, or one similar thereto, to be set
forth on this Warrant and on each certificate representing Warrant
Securities, or any other security issued or issuable upon exercise of this
Warrant, unless (a) the Company has received an opinion of counsel
satisfactory to the Company as to any such certificate that such legend,
or one similar thereto, is unnecessary or (b) a registration statement
with respect to this Warrant and the Warrant Securities has become
effective under the Act.
"THIS SECURITY HAS NOT BEEN REGISTERED FOR RESALE UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITY AND SUCH
DISPOSITION FILED UNDER THE ACT, OR AN EXEMPTION FROM REGISTRATION, AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY REQUIRE
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED WITH."
(xii) Applicable Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York, without
giving effect to conflict of law principles.
(xiii) Amendments. This Warrant may not be amended except in a
writing signed by the Holder and the Company.
(xiv) Severability. If any provisions of this Warrant shall be
held to be invalid or unenforceable, such invalidity or enforceability
shall not affect any other provision of this Warrant.
(xv) Certain Definitions. In addition to the capitalized terms
defined elsewhere in this Warrant, the following capitalized terms shall
have the meanings set forth below.
"Act" shall mean the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Affiliate" of a person shall mean a person who directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such person. The term "control" means the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
"Convertible Security" shall mean any security convertible into or
exchangeable or exercisable for Class A Common Stock, including but not limited
to, rights, options or warrants entitling the holder thereof to acquire Class A
Common Stock or any security convertible into or exchangeable for Class A Common
Stock.
13
<PAGE>
"Current Market Value" per share of Class A Common Stock of the
Company at any date shall mean:
if Class A Common Stock is not then
registered under the Exchange Act and traded
on a national securities exchange or on the
Nasdaq National Market System,
(a) the value of such Class A Common Stock, determined in good
faith by the board of directors of the Company and certified in a
board resolution, taking into account the most recently completed
arms-length transaction between the Company and a person other than
an Affiliate of the Company and the closing of which occurs on such
date or shall have occurred within the six-month period preceding
such date, or
(b) if no such transaction shall have occurred on such date or
within such six-month period, the fair market value of the security
as determined by a nationally recognized investment bank; provided,
however, that, in the case of the calculation of Current Market
Value for determining the cash value of fractional shares, no such
determination by an investment bank shall be required and the good
faith judgment of the board of directors as to such value shall be
conclusive, or
(a) if Class A Common Stock is then registered under the
Exchange Act and traded on a national securities exchange or on the
Nasdaq National Market System, the average of the daily closing
sales prices of such Class A Common Stock for the 20 consecutive
trading days immediately preceding such date, or
(b) if Class A Common Stock has been registered under the
Exchange Act and traded on a national securities exchange or on the
Nasdaq National Market System for less than 20 consecutive trading
days before such date, then the average of the daily closing sales
prices for all of the trading days before such date for which
closing sales prices are available,
in the case of each of (2)(a) and (2)(b), as certified by the Chief
Executive Officer, the President, any Executive Vice President or
the Chief Financial Officer or Treasurer of the Company. The closing
sales price of each such trading day shall be the closing sales
price, regular way, on such day or, if no sale takes place on such
day, the average of the closing bid and asked prices on such day.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect on October 2, 2000.
14
<PAGE>
"Issue Date" shall mean October 2, 2000.
"Permitted Cash Dividend" shall mean any regular cash dividend in
respect of Class A Common Stock declared after October 2, 2005 that, together
with all such dividends (other than dividends with respect to which an
adjustment has been made pursuant to Section 7(c)(i) or a dividend which was
also paid on a pro rata basis to the Holder as contemplated by Section 7(c)(ii))
declared in respect of Class A Common Stock during the previous twelve months,
on a per share basis, does not exceed 5% of the average closing sales prices per
share of the Class A Common Stock for each trading day during such twelve month
period; provided that no dividend shall be a Permitted Cash Dividend if the
Class A Common Stock is not at the time such dividend is declared registered
under the Exchange Act and traded on a national securities exchange or on the
Nasdaq National Market System.
"Prior Day Market Value" per share of Class A Common Stock of the
Company at any date shall mean:
(1) if Class A Common Stock is not then registered under the
Exchange Act and traded on a national securities exchange or on the Nasdaq
National Market System, the Current Market Value per share of Class A
Common Stock, or
(2) if Class A Common Stock is then registered under the
Exchange Act and traded on a national securities exchange or on the Nasdaq
National Market System, the closing sales price of Class A Common Stock
for the trading day ending immediately prior to the event causing the
Prior Day Market Value to be determined.
"Time of Determination" shall mean (i) in the case of any
distribution of securities or other property to existing shareholders to which
Section 7(b) or (c) applies, the time and date of the determination of
shareholders entitled to receive such securities or property or (ii) in the case
of any other issuance and sale to which Section 7(b) or 7(c) applies, the time
and date of such issuance or sale.
15
<PAGE>
(xvi) Warrant Registration Rights Agreement. The Holder shall
be entitled to the benefits of the Warrant Registration Rights Agreement,
dated as of the Issue Date, by and among the Company and Ramius
Securities, LLC.
AUTOTOTE CORPORATION
By:_________________________________________
Name: Martin E. Schloss
Title: Vice President and General Counsel
Dated: As of October 2, 2000
Attest:
16
<PAGE>
PURCHASE FORM
Dated ____________, 20__
The undersigned hereby irrevocably elects to exercise this Warrant
to the extent of shares of Class A Common Stock (without giving effect to the
Cashless Exercise Option).
The undersigned
|_| has concurrently herewith made payment of $ in payment of the
aggregate Exercise Price.
|_| elects to use the Cashless Exercise Option provided for in this
Warrant (the number of Securities delivered will be net of the
number applied to the aggregate Exercise Price).
If the issuance of the Warrant Securities is not registered under
the Securities Act of 1933, as amended, the undersigned makes the representation
and warranty set forth in Section 1 of this Warrant.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
Signature ______________________________________________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED,_____________________________________________________________
hereby sells, assigns and transfers unto
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
the right to purchase shares of Class A Common Stock as represented by this
Warrant to the extent of shares of Class A Common Stock as to which such right
is exercisable and does hereby irrevocably constitute and appoint,______________
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Signature ______________________________________________________________________
Dated: _______________ 20____
17
<PAGE>
INSTRUCTIONS FOR REGISTRATION OF WARRANT
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
Signature ______________________________________________________________________
18