EXHIBIT 4.2
WARRANT AGREEMENT dated as of May __, 2003 between Redline
Performance Products, Inc. a Minnesota corporation (the "Company") and GunnAllen
Financial, Inc., a Florida corporation ("GunnAllen," also sometimes referred to
herein as the "Underwriter").
W I T N E S S E T H:
WHEREAS, the GunnAllen has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Company and GunnAllen, to act as the underwriter in connection with the
Company's proposed public offering (the "Public Offering") of 2,000,000 shares
of common stock of the Company, par value $.01 per share (the "Common Stock") at
an initial public offering price of $5.00 per share of Common Stock, plus up to
an additional 300,000 shares of Common Stock pursuant to the Underwriter's
over-allotment option; and
WHEREAS, the Company proposes to issue to GunnAllen warrants
(the "Warrants") to purchase up to an aggregate of ten percent (10%) of the
shares of common stock offered to the Public through the Public Offering,
including any over-allotments; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to GunnAllen or to GunnAllen's designees (limited to
officers and partners of GunnAllen, members of the selling group and/or their
officers or partners, collectively, "Designees") in consideration for, and as
part of GunnAllen's compensation in connection with, GunnAllen acting as the
Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises,
the payment by GunnAllen to the Company of an aggregate of One Hundred Dollars
($100.00), 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. GunnAllen, and/or its Designees, are hereby granted
the right to purchase, at any time from May __, 2004 until 5:00 P.M., New York
City time, on May ___, 2008 (the "Warrant Exercise Term"), up to an aggregate of
ten percent (10%) of the shares of Common Stock offered to the public through
the Public Offering (the "Shares"), including any over-allotments, at an initial
exercise price (subject to adjustment as provided in Section 8 hereof) of 165%
of the Public Offering price per share of Common Stock (the "Initial Exercise
Price") subject to the terms and conditions of this Agreement. Except as set
forth herein, the Shares issuable upon exercise of the Warrants are in all
respects identical to the shares of Common Stock being purchased by the
Underwriter for resale to the public pursuant to the terms and provisions of the
Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth as Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions and other
variations as required or permitted by this Agreement. This Warrant shall not
entitle its
Holder to any rights as a stockholder of the Company prior to the exercise
of this Warrant.
3. Exercise of Warrants.
3.1 Cash Exercise. The Warrants initially are exercisable
at the Initial Exercise Price, payable in cash or by check to the order of the
Company, or any combination of cash or check, subject to adjustment as provided
in Section 8 hereof. Upon surrender of the Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Shares purchased, at the
Company's principal offices, currently located at 0000 Xxxxxxxxxx Xxx, Xxxxx
Xxxxxxxxxx 00000, the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
Shares 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 of the Common Stock underlying the Warrants). In the
case of the purchase of less than all the Shares 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 purchasable thereunder.
3.2 Cashless Exercise. At any time during the Warrant
Exercise Term, the Holder may, at its option, exchange this Warrant, in whole or
in part (a "Warrant Exchange"), into the number of Shares determined in
accordance with this Section 3.2, by surrendering this Warrant 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 five (5) business days following the Exchange
Date. In connection with any Warrant Exchange, this Warrant 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 (as hereinafter defined) by (B) the current market value
of a share of Common Stock. For purposes of this Section 3.2, the term "current
market value" shall mean the (i) last reported sale price on the last trading
day or, in case no such reported sale takes place on such day, the average last
reported sale price for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or by the Nasdaq National Market or
SmallCap Market (referred to hereinafter as "NASDAQ") if the Common Stock is not
listed or admitted to trading on any national securities exchange but is listed
or quoted upon NASDAQ, or (ii) if the Common Stock is not traded on a national
securities exchange or NASDAQ, the closing bid price on the last trading day,
or, in case no such reported bid takes place on such day, the average closing
bid price for the last three (3) trading days, as furnished by NASDAQ or similar
organization if NASDAQ is no longer reporting such information, or (iii) if the
Common Stock is not listed upon a principal exchange or quoted on NASDAQ, but
quotes for the Common Stock are
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available in the OTC Bulletin Board, or any successor organization, or "pink
sheets" the closing bid price on the last trading day, or, in case no such bid
takes place on such day, the average closing bid price for the last three (3)
trading days as furnished on the OTC Bulletin Board or any successor
organization or (iv) in the event the Common Stock is not traded upon a
principal exchange and not listed on NASDAQ and quotes are not available on the
OTC Bulletin Board or any successor organization, the price as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to it. Pursuant to Section 3.2, the number of Shares
the Holder may purchase under this Warrant shall not exceed the number of Shares
into which this Warrant, by its terms, may be exercised.
4. Issuance of Certificates.
4.1 Issuance. Upon the exercise of the Warrants, the
issuanceof certificates for the Shares shall be made forthwith (and in any event
within five (5) business days thereafter) without any charge to the Holder
thereof, and such certificates shall (subject to the provisions of Section 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.
4.2 Form of Certificates. The Warrant Certificates and
certificates representing the Shares shall be executed on behalf of the Company
by the manual or facsimile signature of the then present Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the
Company, attested to by the manual or facsimile signature of the then present
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 whole, certificates representing the Shares 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 its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof, and that the Warrants may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, pursuant
to Corporate Financing Rule 2710 (currently a period of one (1) year from the
date hereof), except to Designees (each of which is hereinafter referred to as a
"Transferee"), in which case such Transferee shall be entitled to receive a
replacement Warrant Certificate in accordance with Section 9 hereof upon
presentment of a properly executed Form of Assignment in the form set forth on
Exhibit A attached hereto and made a part hereof. The Holder of a Warrant
Certificate, by its acceptance thereof,
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further covenants and agrees that this Warrant and the Shares which may be
issued upon exercise hereof are being acquired for investment, that the Holder
has no present intention to resell or otherwise dispose of all or any part of
this Warrant or any Shares, and that the Holder will not offer, sell or
otherwise dispose of all or any part of this Warrant or any Shares except under
circumstances which will not result in a violation of the Act. If the Company
conducts a registered offering to which the Company's obligations in Section 7.3
or Section 7.4 apply, the Holder of the Warrant or any Shares shall not, without
the prior written consent of the Company and the managing underwriter, if any,
in such offering: (i) sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of the Warrant or any of the Shares; (ii) sell,
transfer or otherwise dispose of, or agree to sell, transfer or otherwise
dispose of any right to purchase the Warrant or any of the Shares; or (iii) sell
or grant, or agree to sell or grant, options, rights or warrants with respect to
the Warrant or any of the Shares. Such restrictions shall be effective for a
period of time equal to the period during which the managing underwriter imposes
such transfer restrictions on the Company's officers and directors; provided,
that in no event shall the restricted period applicable to a Holder of this
Warrant or Shares exceed one hundred eighty (180) days after effectiveness of
the Company's registration statement filed with the Commission with respect to
such offering.
In connection with the transfer or exercise of Warrants, the
Transferee and Holder agree to execute any documents which may be reasonably
required by counsel to the Company to comply with the provisions of the Act (as
defined below) and applicable state securities laws.
6. Price.
6.1 Initial and Adjusted Exercise Price. The initial
exercise price of each Warrant shall be the Initial Exercise Price. 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 Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall
mean the Initial Exercise Price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The
Warrants and the Shares have not been registered for purposes of public
distribution under the Act.
7.2 Registrable Securities. As used herein the term
"Registrable Security" means each of the Shares and any shares of Common Stock
issued upon any stock split or stock dividend in respect of such Shares;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under the Act and disposed
of pursuant thereto, (ii) it may be sold during any three (3) month period
pursuant to Rule 144 or may be sold pursuant to Rule 144(k) in either case
without any restrictions on the number of securities intended to be sold in
reliance on Rule 144, (iii) it has ceased to be outstanding. The term
"Registrable Securities" means any and/or all of the securities falling within
the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other
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change in corporate structure affecting the Common Stock, such adjustment shall
be made in the definition of "Registrable Security" as is appropriate in order
to prevent any dilution or enlargement of the rights granted pursuant to this
Section 7.
7.3 Piggyback Registration. If, at any time commencing nine
(9) months after the date hereof and expiring five (5) years following the date
of this Agreement, the Company proposes to prepare and file any registration
statement covering equity or debt securities of the Company, or any such
securities of the Company held by its shareholders (other than in connection
with the Public Offering, a merger pursuant to Form S-4 or pursuant to a Form
S-8 or a successor form) (for purposes of this Section 7, collectively, a
"Registration Statement"), it will give written notice of its intention to do so
by registered mail ("Notice"), at least thirty (30) 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) days after receipt of the Notice, that the Company include any of
the Requesting Holder's Registrable Securities in the proposed Registration
Statement, the Company shall, as to each such Requesting Holder, use its
reasonable 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 or any advisor to the Requesting Holders),
provided that, if such Registration Statement relates to an underwritten public
offering and the managing underwriter advises the Company and the Requesting
Holders in writing that the number of Registrable Securities which can be
included in such offering must be limited, the Requesting Holders will agree to
reduce the number of Registrable Securities included in such Registration
Statement on a pro rata basis with any other selling security holder on whose
behalf other securities of the Company may be included therein for registration.
Notwithstanding the provisions of this Section 7.3(a), the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.3(a) (irrespective of whether any written request for inclusion of
Registrable Securities shall have already been made) to elect not to file any
such proposed Registration Statement, or to withdraw the same after the filing
but prior to the effective date thereof.
7.4 Demand Registration.
(a) At any time commencing nine (9) months after the
date hereof and expiring five (5) years following the date of this Agreement,
the Holders of the Registrable Securities representing a "Majority" (as
hereinafter defined) of such securities (assuming the exercise of all of the
warrants) not previously sold pursuant to this Section 7 shall have the right
(which right is in addition to the registration rights under Section 7.3
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the "Commission"),
on one occasion, 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 each of the Representatives and the Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale of
their respective Shares for six (6) consecutive months by such Holders and any
other Holders of the Registrable Securities who notify the Company within twenty
(20) days after receiving notice from the Company of such request. For purposes
of this Agreement, the term "Majority," in
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reference to the Holders of Warrants or Warrant Shares, shall mean in excess of
fifty percent (50%) of the then outstanding Warrants or Warrant Shares that (i)
are not held by the Company, an officer, creditor, employee or agent thereof or
any of their respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith or (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under the Act.
The Company shall not be obligated to commence or effect any registration of
Shares pursuant to this Section 7.4 if the aggregate dollar value of the
Registrable Securities requested to be registered for resale, before deducting
underwriter discounts and commissions, is not reasonably expected to exceed
$1,000,000.
(b) The Company covenants and agrees to give written
notice of any registration request under this Section 7.4 by any Holder or
Holders to all other registered Holders of the Registrable Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) No right of the Holders under this Section 7.4
shall be deemed to have been exercised if with respect to such right:
(A) the requisite notice given by Holders pursuant to
this Section 7.4 is withdrawn prior to the date of filing
of a registration statement or if a registration statement
filed by the Company under the Securities Act pursuant to
this Section 7.4 is withdrawn prior to its effective date,
in either case, by written notice to the Company from the
Holders of fifty percent (50%) or more of the Registrable
Securities to be included or which are included in such
registration statement stating that such Holders have
elected not to proceed with the offering contemplated by
such registration statement because (i) a development in
the Company's affairs has occurred or has become known to
such Holders subsequent to the date of the notice by the
Holders to the Company requesting registration of the
Shares which, in the judgment of such Holders or the
managing underwriter of the proposed public offering,
adversely affects the market price of such Shares or (ii) a
registration statement filed by the Company pursuant to
this Section 7.4, in the reasonable opinion of counsel for
such Holders or the managing underwriter of the proposed
public offering, contains an untrue statement of a material
fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which
made (other than any such statement or omission relating to
such Holders and based on information supplied or failed to
be supplied by such Holders) and the Company has not,
promptly after written notice thereof, corrected such
statement or omission in an amendment filed to such
registration statement; or
(B) a registration statement pursuant to this Section
7.4 shall have become effective under the Securities Act
and (i) the underwriters shall not purchase any Shares
because of a failure of condition contained
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in the underwriting agreement (other than a condition to be
performed by or within the control of the Holders) relating
to the offering covered by such registration statement or
(ii) less than 85% of the Shares included therein shall
have been sold as a result of any stop order, injunction or
other order or requirement of the Commission or other
governmental agency or court.
7.5 Covenants of the Company With Respect to Registration.
The Company covenants and agrees as follows:
(a) The Company shall pay all costs, fees and expenses
in connection with all Registration Statements filed pursuant to Section 7.3
hereof (excluding any underwriting discounts and commissions which may be
incurred in connection with the sale of any Registrable Securities, fees and
disbursements of special counsel and accountants for the selling Holders, and
transfer taxes for selling Holders) including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses and
the reasonable fees and expenses (not to exceed $20,000) of one counsel to the
Holders of Registrable Securities.
(b) 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 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.
(c) The Company shall indemnify any holder of the
Registrable Securities 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 Underwriters and to provide for just and equitable contribution as set forth
in Section 5 of the Underwriting Agreement, which, to the extent applicable, is
hereby incorporated herein by reference.
(d) 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 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 or 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
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the same extent and with the same effect as the provisions contained in 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
the Underwriting Agreement.
(e) Nothing contained in this Agreement shall be
construed as requiring any Holder to exercise its Warrants prior to the initial
filing of any Registration Statement or the effectiveness thereof.
(f) The Company shall deliver promptly to each holder
of Registrable Securities participating in the offering 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 the 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"). Such investigation shall include access to books,
records and 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. Each Holder agrees that any information
obtained by such Holder pursuant to this Section 7 which is, or would reasonably
be perceived to be, proprietary to the Company or otherwise confidential will
not be disclosed without the prior written consent of the Company. Each Holder
further acknowledges and understands that any information so obtained which may
be considered material non-public information will not be utilized by such
Holder in connection with purchases and/or sales of the Company's securities
except in compliance with applicable state and federal antifraud statutes.
(g) If required by the underwriter in connection with
an underwritten offering which includes Registrable Securities pursuant to
Section 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. If required by the underwriter, 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.
(h) In connection with any Registration Statement filed
pursuant to Section 7.3 hereof, the Company shall furnish, or cause to be
furnished, to each Holder participating in any underwritten offering and to each
underwriter, a signed counterpart, addressed to such Holder or underwriter, of
(i) an opinion of counsel to the Company, dated the effective date of such
Registration Statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the underwriting
agreement), and
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(ii) a "cold comfort" letter, dated the effective date of such Registration
Statement (and, if such registration includes an underwritten public offering, a
letter dated the date of the closing under the underwriting agreement), signed
by the independent public accountants who have issued a report on the Company's
financial statements included in such Registration Statement, in each case
covering substantially the same matters with respect to such Registration
Statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(i) The Company shall promptly notify each Holder of
Registrable Securities covered by such Registration Statement, at any time when
a prospectus relating thereto is required to be delivered under the Act, upon
the Company's discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and upon receipt of such notice each Holder shall not effect any sale of
Shares and shall immediately cease utilizing or distributing such prospectus. At
the request of any such Holder, the Company shall promptly prepare and furnish
to such Holder and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
7.6 Covenants of the Holder With Respect to Registration.
The Holder covenants and agrees as follows:
(a) The Company shall not be obligated to effect a
registration pursuant to Section 7.4 during the period beginning on the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty (180) days after the effective date
of, a Company-initiated registration (other than a registration pursuant to Form
S-4 or Form S-8), provided that (i) if the Holder of Registrable Securities
elects to have all or some of its Registrable Securities included in the
registration pursuant to Section 7.3 hereof, such Registrable Securities are
included in the Company-initiated registration statement and (ii) the Company is
actively employing in good faith all reasonable efforts to cause such
registration to become effective; and provided further that, such registration
statement may include other securities of the Company with respect to which
registration rights have been granted and securities of the Company being sold
for the account of the Company. The Company shall be entitled to delay filing
any registration statement pursuant to Section 7.4 in the event that, in the
reasonable judgment of the Company's Board of Directors, such filing would
interfere with any transaction then contemplated by the Company; PROVIDED,
HOWEVER, that no such delay shall exceed three (3) months.
7.7 Information Provided by Holders. The Holder of
Registrable
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Securities included in any registration shall furnish to the Company such
information as is required by the Act and the rules and regulations promulgated
thereunder, including information regarding such Holder, the Registrable
Securities held by them and the distribution proposed, as the Company may
reasonably request in writing to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referred to in this Agreement.
8. Adjustments of Exercise Price and Number of Shares.
8.1 Computation of Adjusted Price. In case the Company
shall at any time after the date hereof pay a dividend in shares of Common Stock
or make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such dividend or
distribution shall forthwith be reduced to a price determined by dividing:
(a) an amount equal to the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
multiplied by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock
outstanding immediately after such issuance or sale. For the purposes of any
computation to be made in accordance with the provisions of this Section 8.1,
the following provisions shall be applicable: Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the date following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution.
8.2 Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.3 Adjustment in Number of Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share, by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
8.4 Reclassification, Consolidation, Merger, etc. In case
the Company after the date hereof (i) shall consolidate with or merge into any
other person or entity and shall not be the continuing or surviving corporation
of such consolidation or merger, or (ii) shall permit any other person or entity
to consolidate with or merge into the Company and the Company shall be the
continuing or surviving person or entity but, in connection with such
consolidation or merger, the Common Stock shall be changed into or exchanged for
stock or other securities of any other person or entity or cash or any other
property, or (iii) shall transfer all or substantially all of its properties or
assets to any other person or entity, or (iv) shall effect a capital
reorganization or reclassification of
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the Common Stock (other than a capital reorganization or reclassification
resulting in the issuance of additional shares of Common Stock for which
adjustment in the Exercise Price is otherwise provided in this Section 8), then,
and in the case of each such transaction, proper provision shall be made so
that, upon the basis and the terms and in the manner provided in this Agreement
and the Warrants, the Holders, upon the exercise thereof at any time after the
consummation of such transaction, shall be entitled to receive (at the aggregate
Exercise Price in effect at the time of such consummation for all Common Stock
issuable upon such exercise immediately prior to such consummation), in lieu of
the Common Stock or other securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or other property to which
such Holders would actually have been entitled as stockholders upon such
consummation if such Holders had exercised the rights represented by the
Warrants immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in this Section 8; provided that if a purchase, tender or exchange offer shall
have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if a Holder so designates in a notice
given to the Company on or before the date immediately preceding the date of the
consummation of such transaction, such Holder shall be entitled to receive the
highest amount of securities, cash or other property to which such Holder would
actually have been entitled as a stockholder if such Holder had exercised his
Warrants prior to the expiration of such purchase, tender or exchange offer and
accepted such offer, subject to adjustments (from and after the consummation of
such purchase, tender or exchange offer) as nearly equivalent as possible to the
adjustments provided for in this Section 8. Notwithstanding anything contained
in the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of this Section 8.4 unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of the Warrants as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Holders, (a) the obligations
of the Company under this Agreement and the Warrants (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Agreement and the Warrants) and (b) the obligation to
deliver to such Holders such shares of stock, securities, cash or property as,
in accordance with the foregoing provisions of this Section 8.4, such Holders
may be entitled to receive, and such person shall have similarly delivered to
such Holders an opinion of counsel for such person, which counsel shall be
reasonably satisfactory to such Holders, stating that this Agreement and the
Warrants shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this Section 8) shall
be applicable to the stock, securities, cash or property which such person may
be required to deliver upon any exercise of the Warrants or the exercise of any
rights pursuant hereto.
8.5 Determination of Outstanding Shares of Common Stock.
The number of shares of Common Stock at any one time outstanding shall include
the aggregate number of shares issued or issuable upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.6 Dividends and Other Distributions with Respect to
Outstanding Securities. In the event that the Company shall at any time prior to
the exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock or a cash
11
dividend or distribution payable out of current or retained earnings) or
otherwise distribute to its shareholders any monies, assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another person or entity, or any other thing
of value, the Holder or Holders of the unexercised Warrants shall thereafter be
entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise thereof, to receive, upon the exercise of such
Warrants, the same monies, property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such dividend or distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Section 8.6.
8.7 Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall at any
time after the date hereof and prior to the exercise of all the Warrants issue
any rights to subscribe for shares of Common Stock or any other securities of
the company or of such affiliate to all the shareholders of the Company, the
Holders of the unexercised Warrants shall be entitled, in addition to the shares
of Common Stock or other securities receivable upon the exercise of the
Warrants, to receive such rights at the time such rights are distributed to the
other shareholders of the Company; provided, however, that in order to exercise
such rights, each Holder must exercise the Warrants before or simultaneously
therewith.
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 in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
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 the 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 Common
Stock 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 Common Stock.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the
12
Warrants and payment of the Exercise Price thereof, all shares of Common Stock
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its reasonable
best efforts to cause all shares of Common Stock issuable upon the exercise of
the Warrants to be listed on or quoted by the exchange upon which the Company's
Common Stock is then listed or quoted.
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 Common Stock 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 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
Common Stock 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
to the Holder(s) of such event at least twenty (20) 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 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, telecopied or mailed by registered or certified mail,
return receipt requested:
(a) If to a Holder, to the address of such Holder as
shown on the
13
books of the Company; or
(b) If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address as the Company may
designate by notice to the Holders.
14. Supplements and Amendments. The Company and GunnAllen may
from time to time supplement or amend this Agreement without the approval of any
Holders 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 GunnAllen may deem necessary or
desirable and which the Company and GunnAllen deem not to adversely affect the
interests of the Holders.
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. Neither the
Warrants or the Shares may be sold, transferred, assigned or hypothecated for a
period of one year from the date of this Warrant Agreement, except to
Transferees.
16. Termination. This Agreement shall terminate at the close
of business on May ___, 2008. 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 the Warrants have been resold or no longer meet
the definition of Registrable Securities.
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 Florida with respect to contracts made and to be wholly performed in
said State and for all purposes shall be construed in accordance with the laws
of said State. The Company, the Underwriter and any other registered holder or
holders agree of the Warrant Certificates (a) agree that any legal suit, action
or proceeding arising out of or relating to this Agreement shall be instituted
exclusively in Florida Circuit Court, County of Hillsborough, or in the United
States District Court for the Middle District of Florida, (b) waive any
objection which the they may have now or hereafter to the venue of any such
suit, action or proceeding, and (c) irrevocably consent to the jurisdiction of
the Florida Circuit Court, County of Hillsborough and the United States District
Court for the Middle District of Florida in any such suit, action or procedure.
The Company, the Underwriters and any other registered holder or holders of the
Warrant Certificates, Warrants or the Shares further agree to accept and
acknowledge service of any and all process which may be served in any suit,
action or proceeding in the Florida Circuit Court, County of Hillsboro and the
United States District Court for the Middle District of Florida, and agree that
service of process upon them mailed by certified mail to their respective
addresses shall be deemed in every respect effective service of process upon
them in any such suit, action or proceeding. In the event of litigation between
the parties arising hereunder, the prevailing party shall be entitled to costs
and reasonable attorney's fees.
18. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation, other than the Company
and GunnAllen and any other registered holder or holders of the Warrant
Certificates, Warrants or the Shares, any legal or equitable right,
14
remedy or claim under this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company and GunnAllen and any other holder or
holders of the Warrant Certificates, Warrants or the Shares.
19. Preservation of Rights. The Company will not, by amendment
of its articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Agreement or the Warrants or the rights represented
thereby, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders of the Warrants
against dilution or other impairment.
20. No Limitation on Corporate Action. No provisions of the
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect, or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its articles of incorporation,
reorganize or merge with or into another corporation, or to transfer all or any
part of its property or assets, or the exercise of any other of its corporate
rights and powers, provided such rights or powers as exercised are not
inconsistent with any other provision of this Agreement.
21. 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.
15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
REDLINE PERFORMANCE PRODUCTS, INC.
By:-----------------------------------------
Name: Xxxx X. Xxxxx
Title: President and Chief Financial Officer
Attest:
-----------------------------
Name:
Title:
GUNNALLEN FINANCIAL, INC.
By:
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
16
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, _________ __, 2008
No. W-1 ___,___ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that [GunnAllen Financial,
Inc.] or registered assigns is the registered holder of Warrants to purchase, at
any time from ________, 2003 until 5:00 P.M. New York City time on _________ __,
2008 ("Expiration Date") up to ___,___ shares ("Shares") of fully-paid and
nonassessable common stock, par value $.01 per share ("Common Stock"), of
Redline Performance Products, Inc., a Minnesota 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 ___________, 2003 ("Warrant Agreement") between the Company and GunnAllen
Financial, Inc. 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, or in accordance with
Section 3.2 of the Warrant Agreement.
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 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.
Neither the Warrants or the Shares may be sold, transferred,
assigned or hypothecated pursuant to Corporate Financing Rule 2710 (currently a
period of one year from the date of this Warrant Certificate), except to one or
more Designees.
2
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.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: ________ __, 2003 REDLINE PERFORMANCE PRODUCTS, INC.
[SEAL] By:_________________________________________
Name: Xxxx X. Xxxxx
Title: President and Chief Financial Officer
Attest:
____________________________________
Name:
Title:
3
[FORM OF ELECTION TO PURCHASE]
[ ] The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate in accordance with Section 3.1 of
the Warrant Agreement dated ________, 2003, 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
___________________________.
[ ] The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate in accordance with Section 3.2 of
the Warrant Agreement dated ________, 2003, to purchase _____ Shares 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)
[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 Holder)
