UNDERWRITER'S WARRANT AGREEMENT dated as of ______________,
1996 between IFS International, Inc., a Delaware corporation (the "Company"),
and Duke & Co., Inc. (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Underwriter has agreed, pursuant to the
underwriting agreement (the "Underwriting Agreement") dated _______________,
1997 between the Underwriter and the Company, to act as the underwriter in
connection with the Company's proposed public offering (the "Public Offering")
of 1,200,000 shares of preferred stock, par value $.001 per share ("Preferred
Stock"), and 1,700,000 redeemable Preferred Stock purchase warrants ("Redeemable
Warrants"), plus up to an additional 180,000 shares of Preferred Stock and
255,000 Redeemable Warrants pursuant to the Underwriter's over-allotment option,
which securities are included in a registration statement on Form SB-2 (File No.
333-11653) (hereinafter, the "Public Offering Registration Statement); and
WHEREAS, the Company proposes to issue to the Underwriter
warrants, one for the purchase of up to 120,000 shares of Preferred Stock and
the other for the purchase of up to 170,000 Redeemable Warrants; and
WHEREAS, the warrants issued pursuant to this Agreement are
being issued by the Company to the Underwriter or officers and partners of the
Underwriter and members of the selling group
(the "Selling Group") and/or their officers or partners, in consideration for,
and as part of the Underwriter's compensation in connection with, the
Underwriter acting as the underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises,
the payment by the Underwriter to the Company of an aggregate of $290.00, the
receipt of which is hereby acknowledged by the Company, the agreements herein
set forth and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Underwriter, and/or its designees who are
officers or partners of the Underwriter or members of the Selling Group in
connection with the Public Offering, are hereby granted the right to purchase,
at any time from _____________, 1997 until 5:00 P.M., New York City time, on
______________, 2002 (the "Warrant Exercise Term"), up to (i) 120,000 shares of
Preferred Stock (the "Shares") at an initial exercise price (subject to
adjustment as provided in Article 8 hereof) of $_____ per Share and (ii) 170,000
Redeemable Warrants at an initial exercise price of $____ per Redeemable
Warrant. The right to purchase Shares as described in (i) above is hereinafter
referred to as "Warrant No. 1" and the right to purchase Redeemable Warrants as
described in (ii) above is hereinafter referred to as "Warrant No. 2". Warrant
No. 1 and Warrant No. 2 are hereinafter referred to collectively as the
"Warrants". Except as specifically otherwise provided herein, the Shares and the
- 2 -
Redeemable Warrants issued pursuant to Warrant No. 1 and Warrant No. 2,
respectively, shall bear the same terms and conditions as described under the
caption "Description of Securities" in the Public Offering Registration
Statement, and the Redeemable Warrants shall be governed by the terms of the
Warrant Agreement dated as of _______________, 1997, executed in connection with
such Public Offering (the "Public Warrant Agreement"), and except that the
holder shall have registration rights under the Securities Act of 1933, as
amended (the "Act"), with respect to the Warrants, the Shares and the Redeemable
Warrants subject thereto, the shares of Preferred Stock underlying the Warrants
issuable upon exercise of Warrant No. 2 and the shares of Common Stock issuable
upon conversion of the Preferred Stock, which registration rights are more fully
described in paragraph 6 of this Warrant Agreement. In the event of any
reduction of the exercise price of the Redeemable Warrants pursuant to the
Public Warrant Agreement, the same changes to the Redeemable Warrants subject to
Warrant No. 2 shall be simultaneously effected.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") for Warrant No. 1 and Warrant No. 2 to be delivered
pursuant to this Agreement shall be in the forms set forth as Exhibit A and
Exhibit B attached hereto, respectively, and made a part hereof, with such
appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
- 3 -
3. Exercise of Warrants.
3.1 Cash Exercise. The exercise price of the
respective Warrants shall be payable in cash or by check to the order of the
Company, or any combination of cash or check. Upon surrender of the applicable
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the applicable exercise price for the Shares and/or
Redeemable Warrants purchased, at the Company's principal offices, currently
located at Rensselaer Technology Park, 000 Xxxxxx Xxxx, Xxxx, Xxx Xxxx 00000,
the registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the Shares and/or
Redeemable Warrants so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional Shares or fractional Redeemable
Warrants). In the case of the purchase of less than all the Shares or Redeemable
Warrants, as the case may be, purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Shares or Redeemable Warrants, as the case may be, purchasable
thereunder.
3.2 Cashless Exercise for Warrant No. 1. At any time
during the Warrant Exercise Term, the Holder may, at its option, exchange
Warrant No. 1, in whole or in part (a "Warrant Exchange"), into the number of
Shares determined in accordance
- 4 -
with this Section 3.2, by surrendering the Warrant Certificate representing
Warrant No. 1 at the principal office of the Company or at the office of its
transfer agent, accompanied by a notice stating (i) such Holder's intent to
effect such exchange, (ii) the number of Shares to be exchanged and (iii) the
date on which the Holder requests that such Warrant Exchange occur (the "Notice
of Exchange"). The Warrant Exchange shall take place on the date specified in
the Notice of Exchange or, if later, the date the Notice of Exchange is received
by the Company (the "Exchange Date"). Certificates for the Shares issuable upon
such Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the Shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within three (3) business days
following the Exchange Date. In connection with any Warrant Exchange, Warrant
No. 1 shall represent the right to subscribe for and acquire the number of
Shares (rounded to the next highest integer) equal to (i) the number of Shares
specified by the Holder in its Notice of Exchange (the "Total Number") less (ii)
the number of Shares equal to the quotient obtained by dividing (A) the product
of the Total Number and the existing exercise price of Warrant No. 1 by (B) the
current market value of a share of Preferred Stock.
4. Issuance of Certificates.
4.1. Issuance. Upon exercise of the Warrants, the
issuance of certificates for the Shares and/or Redeemable Warrants, as
applicable shall be made forthwith (and in any event
- 5 -
within three (3) business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Article 5 hereof) be issued in the name of, or in such names as may be directed
by, the Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificates in a name other than that
of the Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
4.2. Forms of Certificates. The Warrant Certificates
and certificates representing the Shares and/or Redeemable Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman or Vice Chairman of the Board of Directors or
President or Vice President of the Company under its corporate seal reproduced
thereon, attested to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer. The Warrant Certificates and, upon
exercise of the Warrants, in part or in
- 6 -
whole, certificates representing the Shares and/or Redeemable Warrants shall
bear a legend substantially similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by acceptance thereof,
covenants and agrees that the Warrant is being acquired as an investment and not
with a view to the distribution thereof, and that the Warrant may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one (1) year from the date hereof, except to officers or
partners of the Underwriter or to any member of the Selling Group participating
in the distribution to the public of the Preferred Stock and Redeemable
Warrants, and/or their respective officers or partners.
6. Price.
6.1 Initial and Adjusted Exercise Prices. The initial
exercise price of Warrant No. 1 shall be $5.50 per Share and the initial
exercise price of Warrant No. 2 shall be $.11 per
- 7 -
Redeemable Warrant. The adjusted exercise price shall be the price which shall
result from time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Article 8 hereof.
6.2 Exercise Price. The term "exercise price" herein
shall mean the initial exercise price of Warrant No. 1 or Warrant No. 2, as the
case may be, or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933.
None of the Warrants, the Shares, the Redeemable Warrants, the Preferred Stock
issuable upon exercise of the Redeemable Warrants (the Underlying Shares") or
the shares of Common Stock issuable upon conversion of the Shares or the
Underlying Shares (the "Conversion Shares") have not been registered for
purposes of public distribution under the Securities Act of 1933, as amended
(the "Act").
7.2 Registrable Securities. As used herein the term
"Registrable Securities" means the Warrants, the Shares issuable upon exercise
of Warrant No. 1, the Redeemable Warrants issuable upon exercise of Warrant No.
2, the Underlying Shares, the Conversion Shares and any securities issued upon
any stock split or stock dividend in respect of any of the foregoing; provided,
however, any of such securities shall cease to be Registrable Securities when,
as of the date of determination, (i) it has been effectively registered under
the Act and disposed of
- 8 -
pursuant thereto, (ii) registration under the Act is no longer required for the
immediate public distribution of such securities or (iii) it has ceased to be
outstanding. In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock or Preferred Stock, such adjustment shall be made in the definition of
"Registrable Securities" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Article 7.
7.3 Piggyback Registration. If, at any time during
the seven years following the date of this Agreement, the Company proposes to
prepare and file one or more post-effective amendments to the Public Offering
Registration Statement filed in connection with the Public Offering or any new
registration statement or posteffective amendments thereto covering equity or
debt securities of the Company, or any such securities of the Company held by
its shareholders (other than pursuant to a Form S-4 relating to a merger or
acquisition or pursuant to a Form S-8) (for purposes of this Article 7,
collectively, a "Registration Statement"), it will give written notice of its
intention to do so by registered mail ("Notice"), at least thirty (30) business
days prior to the filing of each such Registration Statement, to all holders of
the Registrable Securities. Upon the written request of such a holder (a
"Requesting Holder"), made within twenty (20) business days after receipt of the
Notice, that the Company include any of the Requesting Holder's Registrable
- 9 -
Securities in the proposed Registration Statement, the Company shall, as to each
such Requesting Holder, use its best efforts to effect the registration under
the Act of the Registrable Securities which it has been so requested to register
("Piggyback Registration"), at the Company's sole cost and expense and at no
cost or expense to the Requesting Holders (other than underwriting discounts and
commissions applicable to the sale of such Registrable Securities and the fees
and disbursements, if any, of counsel to the Requesting Holders).
7.4 Demand Registration.
(a) At any time during the Warrant Exercise
Term, any "Demand Holder" (as such term is defined in Section 7.4(d) below) of
the Registrable Securities shall have the right (which right is in addition to
the piggyback registration rights provided for under Section 7.3 hereof),
exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole expense of the
Company, a Registration Statement and such other documents, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Demand Holder), in order to comply with the provisions of
the Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof for nine (9) consecutive months.
- 10 -
(b) The Company covenants and agrees to give
written notice of any Demand Registration Request to all holders of the
Registrable Securities within ten (10) days from the date of the Company's
receipt of any such Demand Registration Request. After receiving notice from the
Company as provided in this Section 7.4(b), holders of Registrable Securities
may request the Company to include their Registrable Securities in the
Registration Statement to be filed pursuant to Section 7.4(a) hereof by
notifying the Company of their decision to have such securities included within
ten (10) days of their receipt of the Company's notice.
(c) In addition to the registration rights
provided for under Section 7.3 hereof and subsection (a) of this Section 7.4, at
any time during the Warrant Exercise Term, any Demand Holder (as defined below
in Section 7.4(d)) of Registrable Securities shall have the right, exercisable
by written request to the Company, to have the Company prepare and file with the
Commission, on one occasion in respect of all holders of Registrable Securities,
a Registration Statement so as to permit a public offering and sale of such
Registrable Securities for nine (9) consecutive months; provided, however, that
all costs incident thereto shall be at the expense of the holders of the
Registrable Securities included in such Registration Statement. If a Demand
Holder shall give notice to the Company at any time of its or their desire to
exercise the registration right granted pursuant to this Section 7.4(c), then
within ten (10) days after
- 11 -
the Company's receipt of such notice, the Company shall give notice to the other
holders of Registrable Securities advising them that the Company is proceeding
with such registration and offering to include therein the Registrable
Securities of such holders, provided they furnish the Company with such
appropriate information in connection therewith as the Company shall reasonably
request in writing.
(d) The term "Demand Holder" as used in this
Section 7.4 shall mean any holder or any combination of holders of Registrable
Securities, if included in such holders' Registrable Securities are that
aggregate number of shares of Preferred Stock (including Shares already issued
and/or Shares issuable pursuant to the exercise of Warrant No. 1 and Underlying
Shares already issued and/or Underlying Shares issuable pursuant to the exercise
of Redeemable Warrants issued or issuable pursuant to exercise of Warrant No. 2
(the "Total Preferred Shares")) as would constitute 50% or more of the aggregate
number of such total Preferred Shares; provided that, for purposes of such
calculation, if any Holder has converted any Shares and/or Underlying Shares
into Conversion Shares prior to the time that any notice requesting registration
pursuant to this Section 7.4 is given, and the Conversion Shares so issued are
still deemed Registrable Securities hereunder, such conversion shall be
disregarded for purposes of such calculation.
7.5 Covenants of the Company With Respect to
Registration. The Company covenants and agrees as follows:
- 12 -
(a) In connection with any registration
under Section 7.4 hereof, the Company shall file the Registration Statement as
expeditiously as possible, but in no event later than thirty (30) business days
following receipt of any demand therefor (unless delayed by the failure of a
holder of Registrable Securities to promptly furnish such information necessary
to complete such registration statement), shall use its best efforts to have any
such Registration Statement declared effective at the earliest possible time,
and shall furnish each holder of Registrable Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs, fees
and expenses in connection with all Registration Statements filed pursuant to
Sections 7.3 and 7.4(a) hereof (excluding any underwriting discounts and
commissions which may be incurred in connection with the sale of any Registrable
Securities), including, without limitation, the Company's legal and accounting
fees, printing expenses, and blue sky fees and expenses. The holders of
Registrable Securities included in any Registration Statement filed pursuant to
Section 7.4(c) hereof will pay all costs, fees and expenses in connection with
such Registration Statement, including their own legal fees and expenses, if
any.
(c) The Company will take all reasonably
necessary action which may be required in qualifying or registering the
Registrable Securities included in a Registration Statement for offering and
sale under the securities or blue sky
- 13 -
laws of such states as are reasonably requested by the holders of such
securities, provided that the Company shall not be obligated to execute or file
any general consent to service of process or to qualify as a foreign corporation
to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify any holder
of the Registrable Securities to be sold pursuant to any Registration Statement
and any underwriter or person deemed to be an underwriter under the Act and each
person, if any, who controls such holder or underwriter or person deemed to be
an underwriter within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), against all
loss, claim, damage, expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such Registration Statement to the same extent and with
the same effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriter contained in Section 6 of the Underwriting Agreement
and to provide for just and equitable contribution as set forth in Section 7 of
the Underwriting Agreement.
(e) Any holder of Registrable Securities to
be sold pursuant to a Registration Statement, and its successors
and assigns, shall severally, and not jointly, indemnify, the
- 14 -
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage, expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from information furnished in writing by
or on behalf of such holder, or its successors or assigns, for specific
inclusion in such Registration Statement to the same extent and with the same
effect as the provisions contained in Section 6 of the Underwriting Agreement
pursuant to which the Underwriter has agreed to indemnify the Company and to
provide for just and equitable contribution as set forth in Section 6 of the
Underwriting Agreement.
(f) Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise his Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
(g) If the Company shall fail to materially
comply with the provisions of this Article 7, the Company shall, in addition to
any other equitable or other relief available to the holders of Registrable
Securities, be liable for any or all actual damages (but not punitive or
consequential damages) sustained by the holders of Registrable Securities,
requesting registration of their Registrable Securities.
- 15 -
(h) The Company shall not permit the
inclusion of any securities other than the Registrable Securities to be included
in any Registration Statement filed pursuant to Section 7.4 hereof, or, unless
otherwise required by the terms of a contract existing on the date of this
Agreement, permit any other registration statement to be or remain effective
during the effectiveness of a Registration Statement filed pursuant to Section
7.4 hereof (except for a Form S-4 relating to a merger or acquisition or a Form
S-8 or successor form), without the prior written consent of the Demand Holders,
which consent shall not be unreasonably withheld.
(i) The Company shall deliver promptly to
each holder of Registrable Securities whose securities are included in a
Registration Statement copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the Registration Statement and
permit each holder of Registrable Securities and underwriters to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the Registration Statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"); provided that each such holder
of Registrable Securities agrees not to disclose such information without the
prior consent of the Company. Such investigation shall include access to books,
records and
- 16 -
properties and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at such
reasonable times and as often as any such holder of Registrable Securities or
underwriter shall reasonably request.
(j) If, in connection with a registration
which includes Registrable Securities pursuant to this Article 7, the Company
shall enter into an underwriting agreement with one or more underwriters
selected for such underwriting, such agreement shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the underwriters.
The holders of Registrable Securities shall be parties to any underwriting
agreement relating to an underwritten sale of their Registrable Securities and
may, at their option, require that any or all the representations and warranties
of the Company to or for the benefit of such underwriters shall, to the extent
that they may be applicable, also be made to and for the benefit of such holders
of Registrable Securities. Such holders of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such holders of
Registrable Securities and their intended methods of distribution.
- 17 -
8. Adjustments of Exercise Price and Number of Shares.
8.1 Stock Dividend, Split, etc. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares of
Preferred Stock in shares of Preferred Stock, (ii) subdivide or reclassify its
outstanding shares of Preferred Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Preferred Stock into a smaller
number of shares, the exercise price under Warrant No. 1 in effect at the time
of the record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the exercise price by a
fraction, the denominator of which shall be the number of shares or Preferred
Stock outstanding after giving effect to such action, and the numerator of which
shall be the number of shares of Preferred Stock outstanding immediately prior
to such action. Public Agreement, in the event an adjustment to the Exercise
Price is effected pursuant to this Section 8.1.
8.2 Rights or Warrants. In the case the Company shall
fix a record date for the issuance of rights or warrants to all holders of its
Preferred Stock entitling them to subscribe for or purchase shares of Preferred
Stock (or securities convertible into Preferred Stock) as a price (the
"Subscription Price") (or having a conversion price per share) less than the
current market price of the Preferred Stock (as defined in
- 18 -
Section 8.5 below) on such record date, the exercise price shall be adjusted so
that it shall thereafter equal the price determined by multiplying the number of
Shares subject to Warrant No. 1 by the product of (i) the exercise price in
effect immediately prior to the date of such issuance and (ii) a fraction, the
numerator of which shall be the sum of the number of shares of Preferred Stock
outstanding on such record date and the number of additional shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock so offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price per share of
the Preferred Stock, and the denominator of which shall be the sum of the number
of shares of Preferred Stock outstanding on such record date and the number of
additional shares of Preferred Stock offered for subscription or purchase (or
into which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants; and
to the extent that shares of Preferred Stock are not delivered (or securities
convertible into Preferred Stock are not delivered) after the expiration of such
rights or warrants the exercise price shall be readjusted to the exercise price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of
- 19 -
delivery of only the number of shares of Preferred Stock (or securities
convertible into Preferred Stock) actually delivered.
8.3 Evidences of Indebtedness or Assets. In case the
Company shall hereafter distribute to the holders of its Preferred Stock
evidences of its indebtedness or assets (excluding cash dividends or
distributions of securities of the type referred to in Section 8.1 above) or
subscription rights or warrants (excluding those referred to in Section 8.2
above), then in each such case the exercise price of Warrant No. 1 in effect
thereafter shall be determined by multiplying the number of Shares then subject
to Warrant No. 1 by the product of (i) the exercise price in effect immediately
prior thereto and (ii) a fraction, the numerator of which shall be the total
number of shares of Preferred Stock outstanding multiplied by the current market
price per share of Preferred Stock (as defined in Section 8.5 below), less the
fair market value (as determined by the Company's Board of Directors) of said
assets or evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of shares of
Preferred Stock outstanding multiplied by such current market price per share of
Preferred Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effectively immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
- 20 -
8.4 Adjustment of Number of Shares. Whenever the
Exercise Price payable upon exercise of Warrant No. 1 is adjusted pursuant to
Sections 8.1, 8.2 or 8.3 above, the number of Shares purchasable upon exercise
of Warrant No. 1 shall simultaneously be adjusted by multiplying the number of
Shares initially issuable upon exercise of Warrant No. 1 by the exercise price
in effect on the date hereof and dividing the product so obtained by the
exercise price, as adjusted.
8.5 Determination of Current Market Value. For the
purpose of any computation under Sections 8.2 and 8.3 above, the current market
price per share of Preferred Stock at any date shall be deemed to be the average
of the daily closing prices for twenty (20) consecutive business days before
such date. The closing price for each day shall be the last sale price regular
way or, in case no such reported sale takes place on such day, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Preferred Stock is admitted
to trading or listed, or as reported by National Association of Securities
Dealers, Inc. Automatic Quotation System ("NASDAQ") or other similar
organization if NASDAQ is no longer reporting such information, or if not so
available, the fair market price as determined by the Board of Directors.
8.6 No Adjustment for De Minimus Adjustment. No
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least ten
- 21 -
cents ($0.10) in such price; provided, however, that any adjustments which by
reason of this Section 8.6 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Article 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be. Anything in
this Article 8 to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the exercise price, in
addition to those required by this Article 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Preferred Stock, or any subdivision, reclassification or combination of
Preferred Stock, hereafter made by the Company shall not result in any Federal
income tax liability to the holders of Preferred Stock or securities convertible
into Preferred Stock (including Redeemable Warrants issuable upon exercise of
Warrant No. 2).
8.7 Notice. Whenever on exercise price is adjusted,
as herein provided, the Company shall promptly, but no later than 10 days after
any request for such an adjustment by the Holder, cause a notice setting forth
the adjusted exercise price and adjusted number of Shares and/or Warrants
issuable upon exercise of the Warrants and, if requested, information describing
the transactions giving rise to such adjustments, to be mailed to the Holder, at
the address set forth herein, and shall cause a certified copy thereof to be
mailed to its transfer
- 22 -
agent, if any. The Company may retain a firm of independent certified public
accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
8.8 Other Securities. In the event that at any time,
as a result of any adjustment made pursuant to this Article 8, the Holder
thereafter shall become entitled to receive any securities of the Company other
than Preferred Stock and Redeemable Warrants, thereafter the number of such
other securities receivable upon exercise of the Warrants shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock and Redeemable
Warrants contained in Sections 8.1 to 8.6, inclusive above.
9. Exchange and Replacement of Warrant Certificates.
9.1 Exchange. Each Warrant Certificate is
exchangeable without expense, upon the surrender hereof by the registered Holder
at the principal executive office of the Company, for a new Warrant Certificate
of like tenor and date representing in the aggregate the right to purchase the
same number of Shares or Redeemable Warrants, as the case may be, in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
- 23 -
9.2 Replacement. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of any Warrants, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Preferred
Stock or Redeemable Warrants and shall not be required to issue scrip or pay
cash in lieu of fractional interests, it being the intent of the parties that
all fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Preferred Stock or Redeemable Warrants, as the
case may be.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of
Preferred Stock, solely for the purpose of issuance upon the exercise of Warrant
No. 1 and the exercise of the Redeemable Warrants subject to Warrant No. 2, such
number of shares of Preferred Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of Warrant No. 1
and payment of the exercise price therefor, all shares of Preferred Stock
issuable upon such exercise shall be
- 24 -
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder, and that, upon exercise of Warrant No. 2
and payment of the exercise price therefor, the Redeemable Warrants will be
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Preferred Stock and
all Redeemable Warrants issuable upon the exercise of the Warrants, as well as
the Underlying Shares and the Conversion Shares, to be listed on or quoted by
NASDAQ or listed on such national securities exchanges as reasonably requested
by the Underwriter.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holder or Holders the right
to vote or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter, or
as having any rights whatsoever as a shareholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of
its shares of Preferred Stock and/or Redeemable Warrants for
the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current
or retained
- 25 -
earnings, as indicated by the accounting treatment of
such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its
Preferred Stock and/or Redeemable Warrants any additional
shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its property,
assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing of the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend or distribution, or
- 26 -
the issuance of any convertible or exchangeable securities or subscription
rights, options or warrants, or any proposed dissolution, liquidation, winding
up or sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to a registered Holder of the xxxxxxx, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to Rensselaer Technology Park,
000 Xxxxxx Xxxx, Xxxx, Xxx Xxxx 00000, Attn: Chairman, or to such other address
as the Company may designate by notice to the Holders.
14. Supplements and Amendments. The Company and the
Underwriter may from time to time supplement or amend this Agreement without the
approval of any Holders of Warrant Certificates in order to cure any ambiguity,
to correct or supplement any provision contained herein which may be defective
or inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Underwriter may deem necessary or desirable and which the Company and the
Underwriter deem not to adversely affect the interests of the Holders of Warrant
Certificates.
- 27 -
15. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Holders inure to the
benefit of their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close
of business on ______________, 2004. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date when all Warrants have been
exercised and all the Shares issuable upon exercise of Warrant No. 1 and all the
Redeemable Warrants issuable upon exercise of Warrant No. 2 (or the Underlying
Shares) have been resold to the public; provided, however, that the provisions
of Section 7.5 shall survive such termination until the close of business on
_____________, 2007.
17. Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of said State.
18. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Underwriter and any other registered holder or holders of the Warrant
Certificates, Warrants or the underlying securities any legal or equitable
right, remedy or claim under this Agreement; and this Agreement shall be for the
sole and exclusive benefit of the Company and the Underwriter and any other
holder or holders of the Warrant Certificates, Warrants or the underlying
securities.
- 28 -
19. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
- 29 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
[SEAL] IFS INTERNATIONAL, INC.
By:______________________________
Name:
Title:
Attest:
___________________________
Name:
Title
DUKE & CO., INC.
By:______________________________
Name:
Title:
Attest:
___________________________
Name:
Title
- 30 -
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _____________, 2002
No. W- ___________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________or
registered assigns is the registered holder of ___________Warrants to purchase,
at any time from ______________, 1998 until 5:00 P.M. New York City time on
_____________, 2002 ("Expiration Date"), up to ____________shares ("Shares") of
fully-paid and non-assessable preferred stock, par value $.001 per share
("Preferred Stock"), of IFS International, Inc., a Delaware corporation (the
"Company"), at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $ ________ per Share upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of _____________, 1997 between the Company and Duke & Co.,
Inc. (the "Warrant Agreement"). Payment of the Exercise Price may be made in
cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to
- 31 -
the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to in a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
- 32 -
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: ____________, 1997 IFS INTERNATIONAL, INC.
By:______________________________
Name:
Title:
Attest:
________________________________
Name:
Title
- 33 -
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Shares and herewith tenders
in payment for such Shares cash or a certified or official bank check payable in
New York Clearing House Funds to the order of __________________________ in the
amount of $_________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such Shares be registered in the name of
__________________________________, whose address is
________________________________ and that such Certificate be delivered to whose
address is ___________________________________.
Dated: Signature:_____________________________
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
_____________________________________
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
- 34 -
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells,
assigns and transfers unto _____________________________________________________
(Please print name and address of transferee) this Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ________________________, Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: Signature:________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
___________________________________
___________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
- 35 -
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ______________, 2002
No. W- _______________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________or registered
assigns is the registered holder of __________ Warrants to purchase, at any time
from _____________, 1998 until 5:00 P.M. New York City time on ______________,
2002 ("Expiration Date"), up to _____________redeemable Series A Convertible
Preferred Stock purchase warrants ("Redeemable Warrants"), of IFS International,
Inc., a Delaware corporation (the "Company"), at the initial exercise price,
subject to adjustment in certain events (the "Exercise Price"), of $__________
per Redeemable Warrant upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of
_____________, 1997 between the Company and Duke & Co., Inc. (the "Warrant
Agreement"). Payment of the Exercise Price may be made in cash, or by certified
or official bank check in New York Clearing House funds payable to the order of
the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the
- 36 -
Warrant Agreement, which Warrant Agreement is hereby incorporated by reference
in and made a part of this instrument and is hereby referred to in a description
of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and/or number of the Company's securities issuable
thereupon may, subject to certain conditions, be adjusted. In such event, the
Company will, at the request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Exercise Price and the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair, the rights of the holder as set
forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
- 37 -
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: ____________, 1997 IFS INTERNATIONAL, INC.
By:________________________________
Name:
Title:
Attest:
______________________________
Name:
Title
- 38 -
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Redeemable Warrants and
herewith tenders in payment for such Redeemable Warrants cash or a certified or
official bank check payable in New York Clearing House Funds to the order of
____________________________ in the amount of $ _________________, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such Redeemable Warrants be registered in the name of
___________________________, whose address is _________________________ and that
such Certificate be delivered to whose address is __________________________ .
Dated: Signature:________________________
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
___________________________________
___________________________________
(Insert Social Security or Other
Identifying Number of Holder)
- 39 -
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells,
assigns and transfers unto _____________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature:_______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
__________________________________
__________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
- 40 -
