EXECUTION COPY
WARRANT AGREEMENT
Dated as of
April 22, 1999
between
STELLEX TECHNOLOGIES, INC.
and
HSBC BANK USA
as the Warrant Agent
TABLE OF CONTENTS
Page
ARTICLE 1. Defined Terms
SECTION 1.1 Definitions..................................................... 1
SECTION 1.2 Other Definitions............................................... 3
SECTION 1.3 Rules of Construction........................................... 4
ARTICLE 2. Warrant Certificates
SECTION 2.1 Issuance and Dating............................................. 4
SECTION 2.2 Execution and Countersignature.................................. 4
SECTION 2.3 Certificate Register............................................ 5
SECTION 2.4 Transfer and Exchange........................................... 5
SECTION 2.5 Legends......................................................... 6
SECTION 2.6 Replacement Certificates........................................ 7
SECTION 2.7 Temporary Certificates.......................................... 7
SECTION 2.8 Cancellation.................................................... 7
ARTICLE 3. Exercise Terms
SECTION 3.1 Exercise Price.................................................. 8
SECTION 3.2 Exercise Periods................................................ 8
SECTION 3.3 Expiration...................................................... 8
SECTION 3.4 Manner of Exercise.............................................. 8
SECTION 3.5 Issuance of Warrant Shares...................................... 9
SECTION 3.6 Fractional Warrant Shares....................................... 9
SECTION 3.7 Reservation of Warrant Shares................................... 9
SECTION 3.8 Compliance with Law............................................. 10
SECTION 3.9 Taxes........................................................... 10
ARTICLE 4. Release of Warrants
SECTION 4.1 Terms of Release................................................ 10
SECTION 4.2 Holder Put Right................................................ 12
ARTICLE 5. Antidilution Provisions
SECTION 5.1 Changes in Common Stock......................................... 12
SECTION 5.2 Cash Dividends and Other Distributions.......................... 12
SECTION 5.3 Rights Issue.................................................... 13
SECTION 5.4 Reclassification; Combination; Liquidation...................... 14
SECTION 5.5 Tender Offers: Exchange Offers.................................. 14
SECTION 5.6 Issuance of Additional Shares of Common Stock................... 15
SECTION 5.7 Other Events.................................................... 16
SECTION 5.8 Current Market Value............................................ 16
SECTION 5.9 Superseding Adjustment.......................................... 17
SECTION 5.10 Minimum Adjustment............................................. 17
SECTION 5.11 Notice of Adjustment........................................... 17
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SECTION 5.12 Notice of Certain Transactions................................. 18
SECTION 5.13 Adjustment to Warrant Certificate.............................. 18
ARTICLE 6. Rights of Holders
SECTION 6.1 Registration Rights............................................. 19
ARTICLE 7. Warrant Agent
SECTION 7.1 Appointment of Warrant Agent.................................... 19
SECTION 7.2 Rights and Duties of Warrant Agent.............................. 19
SECTION 7.3 Individual Rights of Warrant Agent.............................. 20
SECTION 7.4 Warrant Agent's Disclaimer...................................... 20
SECTION 7.5 Indemnity....................................................... 20
SECTION 7.6 Compensation. . ............................................... 21
SECTION 7.7 Successor Warrant Agent......................................... 21
ARTICLE 8. Miscellaneous
SECTION 8.1 Financial Reports............................................... 22
SECTION 8.2 Persons Benefitting............................................. 22
SECTION 8.3 Rights of Holders............................................... 22
SECTION 8.4 Amendment....................................................... 22
SECTION 8.5 Notices......................................................... 23
SECTION 8.6 Governing Law................................................... 24
SECTION 8.7 Successors...................................................... 24
SECTION 8.8 Counterparts.................................................... 24
SECTION 8.9 Table of Contents............................................... 24
SECTION 8.10 Severability................................................... 24
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Form of Election to Purchase Warrant Certificates
EXHIBIT C - Certificate to be Delivered upon Exchange or Registration of
Transfer of Warrants
EXHIBIT D - Registration Rights
EXHIBIT E - Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and other Special Rights of
the Company's 13% Senior Cumulative Redeemable Preferred Stock
due 2010
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WARRANT AGREEMENT, dated as of April 22, 1999 (this "Warrant
Agreement"), between STELLEX TECHNOLOGIES, INC., a Delaware corporation (the
"Company"), and HSBC BANK USA, a New York banking corporation and trust company,
as Warrant Agent (in such capacity, the "Warrant Agent") for the benefit of the
Holders from time to time of the Warrants and the Warrant Shares.
W I T N E S S E T H :
WHEREAS, the Company has caused Stellex Precision Machining,
Inc. to enter into an Asset Purchase Agreement with Precision Machining, Inc.
("Precision"), BK Metals, Inc., Xxxxx Xxxx Xxxxxxxx and the Xxxxx Xxxx Xxxxxxxx
Trust, pursuant to which the Company will ultimately acquire certain assets of
Precision and related entities upon the terms and subject to the conditions set
forth therein (the "Acquisition");
WHEREAS, in connection with the Acquisition, the Company is to
receive proceeds in the amount of approximately (a) $235,000,000 from borrowings
on the Closing Date (as defined below) under the Senior Credit Facility (as
defined below) and (b) $20 million from the sale by the Company to XX Xxxxx
Securities Corporation (the "Initial Holder") on the Closing Date of its 13%
Senior Cumulative Redeemable Preferred Stock (the "Redeemable Preferred Stock"),
pursuant to a Redeemable Preferred Stock Purchase Agreement dated the date
hereof (the "Redeemable Preferred Stock Purchase Agreement");
WHEREAS, it is a condition to the obligations of the Initial
Holder to enter into the Redeemable Preferred Stock Purchase Agreement and
thereby provide a portion of the funds required to consummate the Acquisition
that the Company execute and deliver this Warrant Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions. All terms defined in the Certificate
of Designation of the Powers, Preferences and Relative, Participating, Optional
and other Special Rights of the Company's 13% Senior Cumulative Redeemable
Preferred Stock due 2010, a copy of which is annexed hereto as Exhibit E, shall
have such defined meanings when used herein unless otherwise defined herein. As
used in this Agreement, the following terms shall have the following meanings:
"Affiliate" means, as to any Person, any other Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with,
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such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Board" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
date of exercise over the Exercise Price per share as of the date of exercise
and the denominator of which is the Current Market Value per share of the Common
Stock on the date of exercise.
"Closing Date" means April 22, 1999, the date upon which the
Initial Holder purchases the Redeemable Preferred Stock.
"Combination" means an event in which the Company consolidates
with, merges with or into, or sells all or substantially all its property and
assets to, another Person other than a sale of assets by the Company to a Wholly
Owned Subsidiary or any merger of the Company with a Wholly Owned Subsidiary
where the Company is the surviving corporation.
"Common Stock" means the Common Stock, without par value, of
the Company together with any other equity securities that may be issued by the
Company in substitution therefor.
"DeMinimus Non-Affiliate Sale" means a Non-Affiliate Sale of
Common Stock which, when added to the aggregate amount of prior Non-Affiliate
Sales, constitutes no more than 10% of the fully-diluted shares of Common Stock
of the Company as of the date of determination.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" means August 31, 2010.
"Holder" means the duly registered holder of a Warrant under
the terms of this Warrant Agreement.
"Initial Holder" means XX Xxxxx Securities Corporation.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Chief Financial Officer or the Treasurer of the Company.
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"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Transfer Restricted Securities" means the Warrants and the
Common Stock which may be issued to Holders upon exercise of the Warrants,
whether or not such exercise has been effected. Each such security shall cease
to be a Transfer Restricted Security when (i) it has been disposed of pursuant
to a registration statement of the Company filed with the SEC and declared
effective by the SEC that covers the disposition of such Transfer Restricted
Security, (ii) it is eligible for resale (without being subject to volume
limitations) pursuant to Rule 144 (or any similar provisions under the
Securities Act then in effect) or (iii) it has otherwise become eligible for
resale without registration under the Securities Act.
"Voting Stock" of a corporation means all classes of capital
stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Warrant Certificates" means the certificates evidencing the
Warrants to be delivered pursuant to this Agreement, substantially in the form
of Exhibit A hereto.
"Warrants" means the Warrants issued hereunder to purchase
from the Company shares of Common Stock.
"Warrant Shares" means the shares of Common Stock of the
Company received, or issued and received, as the case may be, upon exercise of
the Warrants.
SECTION 1.2 Other Definitions.
Defined in
Term Section
---- -------
"Cashless Exercise" . . . . . . . . ................... 3.4
"Certificate Register . . . . . . . ................... 2.3
"Company" . . . . . . . . . . . . . ................... Recitals
"Current Market Value"................................. 5.8
"Exercise Price" . . . . . . . . . . .................. 3.1
"Extension Date" . . . . . . . . . . .................. 4.1
"Fair Value" . . . . . . . . . . ...................... 5.2
"Non-Affiliate Sale" . . . . . . . . .................. 5.8
"Put" . . . . . . . . . ............................... 4.2
"Put Notice" . . . . . . . . . ........................ 4.2
"Redemption" . . . . . . . . . . . . .................. 4.1
"Rule 144A Offering" . . . . . . . . . . . . .......... 4.1
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"Second Extension Date". . . . . . . . . . . .......... 4.1
"Second Warrant Release Date".......................... 4.1
"Successor Company" . . . . . . . ..................... 5.4(a)
"Time of Determination"................................ 5.8
"Transfer Agent"....................................... 3.5
"Warrant Agent"........................................ Recitals
"Warrant Release Date"................................. 4.1
SECTION 1.3 Rules of Construction. Unless the text
otherwise requires.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with United States generally
accepted accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without
limitation; and
(v) words in the singular include the plural and
words in the plural include the singular.
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Issuance and Dating. The Warrants shall be
initially issued on the Closing Date. The Warrant Certificates will be issued in
registered form as definitive Warrant Certificates, substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Agreement. The Warrant Certificates may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Company is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company) and shall bear the legend
required by Section 2.5 if required by the terms of such Section. Each Warrant
shall be dated the date of its countersignature. The terms of the Warrants set
forth in Exhibit A are part of the terms of this Agreement.
SECTION 2.2 Execution and Countersignature. (a) With respect
to the Warrants to be issued on the Closing Date, one or more Warrant
Certificates representing the Warrants shall be executed in blank on behalf of
the Company by manual or facsimile signature by one Officer and attested by its
Secretary or an Assistant Secretary. Upon written order of the Company, the
Warrant Agent shall countersign such Warrant Certificate(s) by manual or
facsimile signature, and such Warrant Certificate(s) shall be delivered pursuant
to such written order.
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(b) With respect to all other Warrants, the Warrant
Certificates therefor shall be executed on behalf of the Company by one Officer
and attested by its Secretary or an Assistant Secretary. Such signature may be
manual or facsimile signature. If an Officer whose signature is on a Warrant
Certificate no longer holds that office at the time the Warrant Agent
countersigns the Warrant Certificate, the Warrant Certificate shall be valid
nevertheless. A Warrant Certificate shall not be valid until an authorized
signatory of the Warrant Agent manually countersigns the Warrant Certificate.
The signature of the Warrant Agent shall be conclusive evidence that the Warrant
Certificate has been countersigned under this Agreement.
(c) The Warrant Agent may appoint an agent reasonably
acceptable to the Company to countersign the Warrant Certificates. Unless
limited by the terms of such appointment, such agent may countersign a Warrant
Certificate whenever the Warrant Agent may do so. Each reference in this
Agreement to countersignature by the Warrant Agent includes by such agent. Such
agent will have the same rights as the Warrant Agent for service of notices and
demands.
SECTION 2.3 Certificate Register. The Warrant Agent shall keep
a register ("Certificate Register") of the Warrant Certificates and of their
transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
evidenced on the face of each of the Warrant Certificates. The Company and the
Warrant Agent may deem and treat the Person in whose name a Warrant Certificate
is registered as the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
notice to the contrary.
SECTION 2.4 Transfer and Exchange. (a) When Warrants are
presented to the Warrant Agent with a request to register the transfer of such
Warrants or to exchange such Warrants for an equal number of Warrants of other
authorized denominations, the Warrant Agent shall register the transfer or make
the exchange as requested if its reasonable requirements for such transaction
are met; provided, however, that the Warrant Certificates representing such
Warrants surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the
Company and the Warrant Agent, duly executed by the Holder thereof or
his attorney duly authorized in writing; and
(ii) in the case of Warrants that are Transfer
Restricted Securities, shall be accompanied by the following additional
information and documents:
(A) a certificate from such Holder in substantially
the form of Exhibit C hereto certifying that:
(1) such securities are being delivered for
registration in the name of such Holder without
transfer;
(2) such securities are being transferred to
the Company;
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(3) such securities are being transferred
pursuant to an effective registration statement under
the Securities Act; or
(4) such securities are being transferred
(w) to a "qualified institutional buyer ("QIB") as
defined in Rule 144A under the Securities Act
pursuant to such Rule 144A, (x) in an offshore
transaction in accordance with Rule 904 under the
Securities Act, (y) in a transaction meeting the
requirements of Rule 144 under the Securities Act
or (z) pursuant to another available exemption from
the registration requirements of the Securities Act;
and
(B) in the case of any transfer described under
clause (a)(ii)(A)(4)(w),(x), (y) and (z) of this Section 2.4,
evidence reasonably satisfactory to the Warrant Agent and the
Company (which may include an opinion of counsel (including
in-house counsel)) as to compliance with the restrictions set
forth in the legend in Section 2.5.
(b) (i) To permit registrations of transfers and exchanges,
the Company shall execute and the Warrant Agent shall countersign Warrant
Certificates as required pursuant to the provisions of this Section 2.4.
(ii) All Warrant Certificates issued upon any
registration of transfer or exchange of Warrants shall be the valid obligations
of the Company, entitled to the same benefits under this Agreement as the
Warrant Certificates surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent and the Company may deem and treat
the Person in whose name any Warrant is registered as the absolute owner of such
Warrant and neither the Warrant Agent nor the Company shall be affected by
notice to the contrary.
(iv) No service charge shall be made to a Holder
for any registration of transfer or exchange upon surrender of any Warrant
Certificate at the office of the Warrant Agent maintained for that purpose.
However, the Company may require payment by the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Warrant Certificates.
(v) Upon any sale or transfer of Warrants
pursuant to an effective registration statement under the Securities Act,
pursuant to Rule 144 under the Securities Act or pursuant to an opinion of
counsel reasonably satisfactory to the Company that no legend is required, the
Warrant Agent shall permit the Holder thereof to exchange such Warrants for
Warrants represented by Warrant Certificates that do not bear the legend set
forth in Section 2.5 and rescind any restriction on the transfer of such
Warrants.
SECTION 2.5 Legends. Except for Warrant Certificates delivered
pursuant to Section 2.4(b)(v) of this Agreement, each Warrant Certificate
evidencing the Warrants (and all
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Warrant Certificates issued in exchange therefor or substitution thereof) and
each certificate representing the Warrant Shares (unless such Warrant Shares are
not Transfer Restricted Securities) shall bear a legend in substantially the
following form (with any appropriate modification for the Warrant Shares):
"THE WARRANTS AND THE WARRANT SHARES (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER
APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF,
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
UNLESS PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT, ONLY
(A) TO THE COMPANY; (B) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A; (D) PURSUANT TO AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT; OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT."
SECTION 2.6 Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue and the Warrant Agent shall
countersign a replacement Warrant Certificate if the reasonable requirements of
the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of New York are met. If required by the Warrant Agent or the
Company, such Holder shall furnish an indemnity sufficient in the judgment of
the Company and the Warrant Agent to protect the Company and the Warrant Agent
from any loss which either of them may suffer if a Warrant Certificate is
replaced. The Company and the Warrant Agent may charge the Holder for their
expenses in replacing a Warrant Certificate. Every replacement Warrant
Certificate is an additional obligation of the Company.
SECTION 2.7 Temporary Certificates. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare and the Warrant
Agent shall countersign temporary Warrant Certificates. Temporary Warrant
Certificates shall be substantially in the form of definitive Warrant
Certificates but may have variations that the Company considers appropriate
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for temporary Warrant Certificates. Without unreasonable delay, the Company
shall prepare and the Warrant Agent shall countersign definitive Warrant
Certificates and deliver them in exchange for temporary Warrant Certificates.
SECTION 2.8 Cancellation. (a) In the event the Company shall
purchase or otherwise acquire Warrants, the Warrant Certificates in respect
thereof shall thereupon be delivered to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and dispose
of all Warrant Certificates surrendered for registration of transfer, exchange,
replacement, exercise or cancellation in accordance with its customary
procedures unless the Company directs the Warrant Agent to deliver canceled
Warrant Certificates to the Company. The Company may not issue new Warrant
Certificates to replace Warrant Certificates to the extent they evidence
Warrants which have been exercised or Warrants which the Company has purchased
or otherwise acquired.
ARTICLE 3.
Exercise Terms
SECTION 3.1 Exercise Price. Each Warrant shall initially
entitle the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase one share of Common Stock for a per share exercise price
of $0.01 (as the same may be adjusted pursuant to Article 5, the "Exercise
Price").
SECTION 3.2 Exercise Periods. (a) Subject to the terms and
conditions set forth herein, each Warrant shall be exercisable at any time or
from time to time on or after the Closing Date.
(b) No Warrant shall be exercisable after the Expiration Date.
SECTION 3.3 Expiration. A Warrant shall terminate and become
void as of the earlier of (i) the close of business on the Expiration Date or
(ii) the time and date such Warrant is exercised. The Company shall give notice
not less than 90, and not more than 120, days prior to the Expiration Date to
the Holders of all then outstanding Warrants to the effect that the Warrants
will terminate and become void as of the close of business on the Expiration
Date. The Warrants shall terminate and become void after the Expiration Date,
notwithstanding the Company's failure to give such notice.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upon
(i) surrender to the Warrant Agent of the Warrant Certificates, together with
the form of election to purchase Common Stock on the reverse thereof duly filled
in and signed by the Holder thereof and (ii) payment to the Warrant Agent, for
the account of the Company, of the Exercise Price for the number of Warrant
Shares in respect of which such Warrant is then exercised. Such payment shall be
made (i) in cash or by certified or official bank check payable to the order of
the
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Company or by wire transfer of funds to an account designated by the Company for
such purpose or (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any Warrant Certificate
presented in connection with a Cashless Exercise) of a Warrant or Warrants
(represented by one or more relevant Warrant Certificates), and without the
payment of the Exercise Price in cash, in exchange for the issuance of such
number of shares of Common Stock equal to the product of (1) the number of
shares of Common Stock for which such Warrant would otherwise then be nominally
exercised if payment of the Exercise Price as of the date of exercise were being
made in cash and (2) the Cashless Exercise Ratio. An exercise of a Warrant in
accordance with the immediately preceding sentence is herein called a "Cashless
Exercise". All provisions of this Agreement shall be applicable with respect to
an exercise of Warrant Certificates pursuant to a Cashless Exercise for less
than the full number of Warrants represented thereby. If the issuance and sale
of the Warrant Shares by the Company to the Holders of the Warrants upon the
exercise of the Warrants would be exempt from the registration requirements of
the Securities Act if effected with a Cashless Exercise (as set forth in a legal
opinion of outside counsel of the Company delivered to the Holders), the Holders
of the Warrants will be required, if the Company is not then otherwise able to
rely on an exemption from the registration requirements of the Securities Act in
connection with the issuance and sale of the Warrant Shares upon exercise of the
Warrants, to effect the exercise of the Warrants solely pursuant to the Cashless
Exercise option. Subject to Section 3.2, the rights represented by the Warrants
shall be exercisable at the election of the Holders thereof either in full at
any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise in respect of less than all the Warrant
Shares purchasable on such exercise at any time prior to the Expiration Date a
new Warrant Certificate exercisable for the remaining Warrant Shares will be
issued. The Warrant Agent shall countersign and deliver the required new Warrant
Certificates, and the Company, at the Warrant Agent's request, shall supply the
Warrant Agent with Warrant Certificates duly signed on behalf of the Company for
such purpose.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section
2.6, upon the surrender of Warrant Certificates and payment of the per share
Exercise Price, as set forth in Section 3.4, the Company shall issue and cause
the registrar and transfer agent, if any, for the Common Stock ("Transfer
Agent") to countersign and deliver to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.6 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price. The Company may act as
its own Transfer Agent.
SECTION 3.6 Fractional Warrant Shares. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of
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Warrant Shares purchasable pursuant thereto. If any fraction of a Warrant Share
would, except for the provisions of this Section 3.6, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company may, at its
option, pay an amount in cash equal to the Current Market Value for one Warrant
Share on the Business Day immediately preceding the date the Warrant is
exercised, multiplied by such fraction, computed to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. The Company shall
at all times keep reserved out of its authorized shares of Common Stock a number
of shares of Common Stock sufficient to provide for the exercise of all
outstanding Warrants. The Transfer Agent for the Common Stock shall at all times
until the Expiration Date, or the time at which all Warrants have been exercised
or canceled, reserve such number of authorized shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent. All Warrant Shares which may be issued upon exercise of Warrants
shall, upon issue, be fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issue thereof. The Company will supply such Transfer Agent with duly executed
Common Stock certificates for such purpose and will itself provide or otherwise
make available any cash which may be payable as provided in Section 3.6. The
Company will furnish to such Transfer Agent a copy of all notices of adjustments
and certificates related thereto transmitted to each Holder.
Before taking any action which would cause an adjustment
pursuant to Article 5 to reduce the Exercise Price below the then par value (if
any) of the Common Stock, the Company shall take any and all legal action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
the Exercise Price as so adjusted. Notwithstanding the provisions of Article 5,
the Exercise Price shall not be below $.01 per share of Common Stock.
The Company covenants that all shares of Common Stock which
may be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
SECTION 3.8 Compliance with Law. If any shares of Common Stock
required to be reserved for purposes of exercise of Warrants require, under any
other Federal or state law or applicable governing rule or regulation of any
national securities exchange, registration with or approval of any governmental
authority, or listing on any such national securities exchange before such
shares may be issued upon exercise, the Company will cause such shares to be
duly registered or approved by such governmental authority or listed on the
relevant national securities exchange.
SECTION 3.9 Taxes. The Company=s obligation to deliver shares
of Common Stock or other securities or property upon the exercise of the
Warrants or to make any other payment to the Holders under this Agreement shall
be subject to the satisfaction of all applicable Federal, state, local and
foreign tax withholding requirements.
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ARTICLE 4.
Release of Warrants
SECTION 4.1 Terms of Release. In accordance with the
provisions of this Section 4.1, over time, the Holders will become entitled to
receive Warrants. The aggregate number of Warrants to which the Holders will be
entitled will be, as of the Closing Date, equal to 1.0% of the fully diluted
Common Stock as of the Closing Date and, accordingly, the Company will issue to
the Initial Holder on the date hereof Warrants initially exercisable for the
purchase of 10.1 shares of Common Stock.
If on August 31, 1999 (the "Warrant Release Date"), any of the
Redeemable Preferred Stock shall be outstanding, the Company will execute, and
upon the written order of the Company, the Warrant Agent will countersign and
deliver to the Holders, pro rata, additional Warrants such that the total number
of Warrants issued as of the Warrant Release Date (including the Warrants issued
upon the issuance of the Preferred Stock) will represent, in the aggregate, the
right to purchase 3.0% of the fully diluted Common Stock as of August 31, 1999;
provided, however, that if prior to August 31, 1999, the Company (i) has filed a
registration statement with the SEC with respect to an offering by the Company
of securities the proceeds of which are to be used to finance the redemption of
the Redeemable Preferred Stock (the "Redemption") or (ii) certifies in an
Officer's Certificate delivered to the Holders that (x) it is in the process of
preparing an offering memorandum with respect to an unregistered offering,
pursuant to Rule 144A under the Securities Act or otherwise (a "Rule 144A
Offering"), of securities the proceeds of which are to be used to finance the
Redemption and (y) it intends to circulate such offering memorandum to investors
within 30 calendar days of the date of such Officer's Certificate, then the
Warrant Release Date shall be postponed to October 15, 1999 (the "Extension
Date"). If immediately following the Extension Date any of the Redeemable
Preferred Stock shall be outstanding, the Company will execute, and upon the
written order of the Company, the Warrant Agent will countersign and deliver to
the Holders, pro rata, additional Warrants on such day such that the total
number of Warrants issued (including the Warrants issued upon the issuance of
the Preferred Stock) will represent, in the aggregate, the right to purchase
3.0% of the fully diluted Common Stock as of the Extension Date.
If on January 1, 2000 (the "Second Warrant Release Date") any
of the Redeemable Preferred Stock shall be outstanding, the Company will
execute, and upon the written order of the Company, the Warrant Agent will
countersign and deliver to the Holders, pro rata, additional Warrants such that
the total number of Warrants issued as of the Second Warrant Release Date
(including Warrants previously issued on August 31, 1999 or the Extension Date,
as applicable) will represent, in the aggregate, the right to purchase 5.0% of
the fully diluted Common Stock as of January 1, 2000; provided, however, that if
prior to January 1, 2000, the Company (i) has filed a registration statement
with the SEC with respect to an offering by the Company of securities the
proceeds of which are to be used to finance the Redemption or (ii) certifies in
an Officer's Certificate delivered to the Holders that (x) it is in the process
of preparing an offering memorandum with respect to a Rule 144A Offering of
securities the proceeds of which are to be used to finance the Redemption and
(y) it intends to circulate such offering memorandum to investors within 30
calendar days of the date of such Officer's
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Certificate, then the Second Warrant Release Date shall be postponed to March
15, 2000 (the "Second Extension Date"). If immediately following the Second
Extension Date any of the Redeemable Preferred Stock shall be outstanding, the
Company will execute, and upon the written order of the Company, the Warrant
Agent will countersign and deliver to the Holders, pro rata, additional Warrants
on such day such that the total number of Warrants issued (including Warrants
previously issued upon the initial issuance of the Redeemable Preferred Stock
and on August 31, 1999 or the Extension Date, as applicable) will represent, in
the aggregate, the right to purchase 5.0% of the fully diluted Common Stock as
of the Second Extension Date.
For purposes of this Section 4.1, by way of clarification the
term "fully diluted" shall not give effect to warrants issued to the management
of Stellex Aerospace, Inc. as of December 31, 1998 or options issued or issuable
under the Company's subsidiary stock option plans.
SECTION 4.2 Holder Put Right. If at any time on or after
August 31, 2004 the Common Stock is not registered under Section 12(b) or 12(g)
of the Exchange Act and a Holder continues to hold Warrants issued or issuable
pursuant to this Agreement, such Holder (or his representative) may, but is not
obligated to, elect on not more than one occasion to require the Company to
purchase all or any portion of the Warrants held by such Holder (the "Put") by
delivery of written notice (the "Put Notice") to the Company. The Put Notice
shall set forth the number of Warrants to be acquired from the Holder, the
aggregate consideration to be paid for such Warrants (if known), and the time
and place for the closing of the transaction (which shall not be less than 30
nor more than 60 days after the Put Notice is received by the Company). The
purchase price paid by the Company for Warrants purchased upon exercise of the
Put shall be the then Current Market Value of the Common Stock issuable upon
exercise of such Warrants less the aggregate Exercise Price of such Warrants.
ARTICLE 5.
Antidilution Provisions
SECTION 5.1 Changes in Common Stock. In the event that at any
time or from time to time after the date hereof the Company shall (i) pay a
dividend or make a distribution on its Common Stock in shares of its Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock purchasable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted so that, after giving effect to such adjustment, the Holder of each
Warrant shall be entitled to receive the number of shares of Common Stock upon
exercise that such Holder would have owned or have been entitled to receive had
such Warrants been exercised immediately prior to the happening of the events
described above (or, in the case of a dividend or distribution of Common Stock,
immediately prior to the record date therefor), and the Exercise Price for each
Warrant shall be adjusted in inverse proportion. An adjustment made pursuant to
this Section 5.1 shall become effective immediately after the effective date,
retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock, and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
SECTION 5.2 Cash Dividends and Other Distributions. In case at
any time or from time to time after the date hereof the Company shall distribute
to holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other
properties or securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case set
forth in (i) and (ii), (x) any dividend or distribution described in Section 5.1
or (y) any rights, options, warrants or securities described in Section 5.3)
then the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock purchasable upon the exercise of such Warrant immediately
prior to the record date for any such dividend or distribution by a fraction,
the numerator of which shall be the Current Market Value per share of Common
Stock on the record date for such distribution, and the denominator of which
shall be such Current Market Value per share of Common Stock less the sum of (x)
any cash distributed per share of Common Stock and (y) the fair value (the "Fair
Value") (as determined in good faith by the Board, whose determination shall be
evidenced by a Board resolution filed with the Warrant Agent, a copy of which
will be sent to Holders upon request) of the portion, if any, of the
distribution applicable to one share of Common Stock consisting of evidences of
indebtedness, shares of stock, securities, other property, warrants, options or
subscription of purchase rights (notwithstanding the foregoing, if the Fair
Value per share of Common Stock in the above formula equals or exceeds the
Current Market Value per share of Common Stock in the above formula, then the
Current Market Value per share of Common Stock shall be equal to the Fair Value
per share of the Common Stock on the record date as determined in good faith by
the Board and described in a Board resolution filed with the Warrant Agent); and
the Exercise Price shall be adjusted to a number determined by dividing the
Exercise Price immediately prior to such record date by the above fraction. Such
adjustments shall be made whenever any distribution is made and shall become
effective as of the date of distribution, retroactive to the record date for any
such distribution; provided, however, that the Company is not required to make
an adjustment pursuant to this Section 5.2 if at the time of such distribution
the Company makes the same distribution to Holders of Warrants as it makes to
14
holders of Common Stock pro rata based on the number of shares of Common Stock
for which such Warrants are exercisable (whether or not currently exercisable).
No adjustment shall be made pursuant to this Section 5.2 which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or increasing the Exercise Price.
SECTION 5.3 Rights Issue. In the event that at any time or
from time to time after the date hereof the Company shall issue, sell,
distribute or otherwise grant any rights to subscribe for or to purchase, or any
options or warrants for the purchase of, or any securities convertible or
exchangeable into, Common Stock to all holders of Common Stock, entitling such
holders to subscribe for or purchase shares of Common Stock or stock or
securities convertible into Common Stock, whether or not immediately
exercisable, convertible or exchangeable, as the case may be, and the price per
share of Common Stock issuable upon exercise, conversion or exchange thereof is
lower at the record date for such issuance than the then Current Market Value
per share of Common Stock, the number of shares of Common Stock thereafter
purchasable or issuable upon the exercise of the Warrants shall be determined by
multiplying such number of shares of Common Stock by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities are convertible or exchangeable, and the
denominator of which shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options, warrants or securities plus the
total number of shares of Common Stock which could be purchased at the Current
Market Value with the aggregate consideration received through issuance of such
rights, warrants, options, or convertible securities. In the event of any such
adjustment, the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such date of issuance by the
aforementioned fraction. Such adjustment shall be made whenever such rights,
options or warrants are issued and shall become effective retroactively
immediately after the record date for the determination of stockholders entitled
to receive such rights, options, warrants or securities. No adjustment shall be
made pursuant to this Section 5.3 which shall have the effect of decreasing the
number of shares of Common Stock purchasable upon exercise of each Warrant or of
increasing the Exercise Price.
If the Company at any time shall issue two or more securities
as a share and one or more of such securities shall be rights, options or
warrants for or securities convertible or exchangeable into, Common Stock
subject to this Section 5.3, the consideration allocated to each such security
shall be determined in good faith by the Board of Directors of the Company.
SECTION 5.4 Reclassification; Combination; Liquidation. (a)
Except as provided in Section 5.4(b), in the event of any reclassification or
change of outstanding shares of Common Stock issuable upon exercise of the
Warrants (other than as set forth in Section 5.1 above and other than a change
in par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or Combination), the Holders shall have
the right to receive upon exercise of the Warrants such number of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive had such Warrant been exercised immediately prior to such
event. Unless paragraph (b) is applicable to a Combination, the Company shall
provide that the surviving or acquiring Person (the "Successor Company") in such
Combination will enter into an agreement with the Warrant Agent
15
confirming the Holders' rights pursuant to this Section 5.4(a) and providing for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 5. The provisions of this Section
5.4(a) shall similarly apply to successive Combinations involving any Successor
Company.
(b) In the event of (i) a Combination where consideration to
Holders of Common Stock in exchange for their shares is payable solely in cash,
or (ii) the dissolution, liquidation or winding-up of the Company, then the
holders of the Warrants will be entitled to receive distributions on an equal
basis with the holders of Common Stock or other securities issuable upon
exercise of the Warrants, as if the Warrants had been exercised immediately
prior to such event, less the Exercise Price.
In case of any Combination described in this Section 5.4(b),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the Holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
shall make payment to the Holders by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.
SECTION 5.5 Tender Offers: Exchange Offers. In the event that
the Company or any subsidiary of the Company shall purchase shares of Common
Stock pursuant to a tender offer or an exchange offer for a price per share of
Common Stock that is greater than the then Current Market Value per share of
Common Stock in effect at the end of the trading day immediately preceding the
day on which such tender offer or exchange offer expires, then the Company, or
such subsidiary of the Company, shall offer to purchase Warrants for comparable
consideration per share of Common Stock based on the number of shares of Common
Stock which the Holders of such Warrants would receive upon exercise of such
Warrants; provided, however, if a tender offer is made for only a portion of the
outstanding shares of Common Stock, then such offer shall be made for Warrants
in the same pro rata proportion.
SECTION 5.6 Issuance of Additional Shares of Common Stock. If
at any time the Company shall issue or sell any additional shares of Common
Stock (other than any issuance or sale pursuant to (x) a DeMinimus Non-Affiliate
Sale or (y) a sale to a third-party equity investor the proceeds of which are
used to redeem all of the outstanding Redeemable Preferred Stock) for
consideration in an amount per additional share of Common Stock less than the
Current Market Value, then the number of shares of Common Stock for which a
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to such issue or sale by a fraction (A) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such issue or sale, and (B) the denominator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, and (2) the number of shares of Common Stock which
could be purchased at the Current Market Value with the aggregate consideration
received from the issuance or sale of the additional shares of Common Stock. For
the purposes of this Section 5.6, the date as of which the Current Market
16
Value per share of Common Stock shall be computed shall be the earlier of (a)
the date on which the Company shall enter into a firm contract for the issuance
of such additional shares of Common Stock or (b) the date of actual issuance of
such additional shares of Common Stock. This Section 5.6 shall not apply to the
following:
(i) any of the transactions described in Section 5.1
or the issuance of shares of Common Stock pursuant to any transaction
described in Sections 5.2 through 5.5;
(ii) the issuance of shares of Common Stock (or
securities convertible or exchangeable into or exercisable for Common
Stock) in connection with acquisitions of assets or businesses other
than to Affiliates of the Company;
(iii) the issuance of shares of Common Stock in
connection with (a) the exercise of Warrants or (b) the conversion,
exercise or exchange of any options, warrants or other securities
convertible into or exchangeable for Common Stock which are issued
after the date hereof and in compliance with all other applicable
provisions of this Agreement;
(iv) the issuance of shares of Common Stock pursuant
to any option, warrant or other convertible or exchangeable security
outstanding on the date hereof;
(v) the issuance of shares of Common Stock in a bona
fide public offering pursuant to a firm commitment underwriting by a
nationally recognized investment banking firm; and
(vi) the issuance of options, or shares of Common
Stock pursuant to any option, under any employee benefit, compensation
or incentive plan approved by a majority of the Board of Directors of
the Company.
SECTION 5.7 Other Events. If any event occurs as to which the
foregoing provisions of this Article 5 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of shares of Common Stock subject to
purchase upon exercise of any Warrant.
SECTION 5.8 Current Market Value. For the purpose of any
computation of Current Market Value under this Section 5, Section 4.2 and
Section 3.6, the "Current Market Value" per share of Common Stock at any date
shall be (x) for purposes of Section 3.6, the closing price on the Business Day
immediately prior to the date of the exercise of the applicable Warrant pursuant
to Section 3 and (y) in all other cases, the average of the daily closing prices
for the shorter of (i) the 20 consecutive trading days ending on the last full
trading day on the
17
exchange or market specified in the second succeeding sentence prior to the Time
of Determination (as defined below) and (ii) the period commencing on the date
next succeeding the first public announcement of the issuance, sale,
distribution or granting in question through such last full trading day prior to
the Time of Determination. The term "Time of Determination" as used herein shall
be the time and date of the earlier to occur of (A) the date as of which the
Current Market Value is to be computed and (B) the last full trading day on such
exchange or market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment required by
this Section 5. The closing price for any day shall be the last reported sale
price regular way or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day, in each
case (1) on the principal national securities exchange on which the shares of
Common Stock are listed or to which such shares are admitted to trading or (2)
if the Common Stock is not listed or admitted to trading on a national
securities exchange, in the over-the-counter market as reported by the Nasdaq
National Market or any comparable system or (3) if the Common Stock is not
listed on the Nasdaq National Market or a comparable system, as furnished by two
members of the NASD selected from time to time in good faith by the Board of
Directors of the Company for that purpose. In the absence of all of the
foregoing, or if for any other reason the Current Market Value per share cannot
be determined pursuant to the foregoing provisions of this Section 5.8, the
Current Market Value per share shall be (A) the fair market value thereof
determined in good faith in the most recently completed arm's-length transaction
between the Company and a Person other than an Affiliate of the Company (a
"Non-Affiliate Sale") and the closing of which occurs on such date or shall have
occurred within the three months preceding such date or (B) if no transaction
shall have occurred on such date or within such three-month period, the fair
market value thereof as determined in good faith by the Board in its good faith
exercise of its fiduciary duties to the equityholders of the Company, including
the Holders, unless the Holders of a majority of the outstanding Warrants
disagree with such determination, in which case the fair market value shall be
determined by an independent investment bank of nationally recognized standing
selected by the Company in good faith. The Company shall pay the fees and
expenses of any investment bank involved in the determination of Current Market
Value.
SECTION 5.9 Superseding Adjustment. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
the adjustments pursuant to this Article 5, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (A) the only shares of Common Stock issuable
upon exercise of such rights, options, warrants, conversion or exchange
privileges were the shares of Common Stock, if any, actually issued upon the
exercise of such rights, options, warrants or conversion or exchange privileges
and (B) shares of Common Stock actually issued, if any, were issuable for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange privileges whether or not exercised and the Exercise Price shall be
readjusted inversely; provided, however, that no such readjustment shall (except
by reason of an intervening adjustment under Section 5.1) have the effect of
decreasing the number of Warrant Shares purchasable upon the exercise of each
Warrant or increase the Exercise Price by an amount in excess of the amount of
the adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange privileges.
18
SECTION 5.10 Minimum Adjustment. The adjustments required by
the preceding Sections of this Article 5 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the number of shares of Common Stock purchasable upon exercise of
Warrants that would otherwise be required shall be made (except in the case of a
subdivision or combination of shares of Common Stock, as provided for in Section
5.1) unless and until such adjustment either by itself or with other
adjustments not previously made increases or decreases by at least 1% of the
number of shares of Common Stock purchasable upon exercise of Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Article 5 and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence. In computing adjustments
under this Article 5, fractional interests in Common Stock shall be taken into
account to the nearest one-hundredth of a share.
SECTION 5.11 Notice of Adjustment. Whenever the Exercise Price
or the number of shares of Common Stock and other property, if any, purchasable
upon exercise of Warrants is adjusted, as herein provided, the Company shall
deliver to the Warrant Agent a certificate of the Chief Financial Officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company determined the fair
market value of any evidences of indebtedness, other securities or property or
warrants or other subscription or purchase rights), and specifying the Exercise
Price and the number of shares of Common Stock purchasable upon exercise of
Warrants after giving effect to such adjustment. The Company shall promptly
cause the Warrant Agent to mail a copy of such certificate to each Holder in
accordance with Section 8.5. The Warrant Agent shall be entitled to rely on such
certificate and shall be under no duty or responsibility with respect to any
such certificate, except to exhibit the same from time to time to any Holder
desiring an inspection thereof during reasonable business hours. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holder to
determine whether any facts exist which may require any adjustment of the
Exercise Price or the number of shares of Common Stock or other stock or
property, purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment or the validity or value of any shares of
Common Stock.
SECTION 5.12 Notice of Certain Transactions. In the event that
the Company shall propose (a) to pay any dividend payable in securities of any
class to the holders of its Common Stock or to make any other distribution to
the holders of its Common Stock, (b) to offer the holders of its Common Stock
rights to subscribe for or to purchase any securities convertible into shares of
Common Stock or shares of Common Stock or shares of stock of any class or any
other securities, rights or options, (c) to effect any reclassification of its
Common Stock, capital reorganization or Combination or (d) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
or in the event of a tender offer or exchange offer described in Section 5.5,
the Company shall within 5 Business Days send to the Warrant Agent and the
Warrant Agent shall within 5 Business Days send the Holders a notice (in such
form as shall be furnished to the Warrant Agent by the Company) of such proposed
action or offer, such
19
notice to be mailed by the Warrant Agent to the Holders at their addresses as
they appear in the Certificate Register, which shall specify the record date for
the purposes of such dividend, distribution or rights, or the date such issuance
or event is to take place and the date of participation therein by the holders
of Common Stock, if any such date is to be fixed, and shall briefly indicate the
effect of such action on the Common Stock and on the number and kind of any
other shares of stock and on other property, if any, and the number of shares of
Common Stock and other property, if any, purchasable upon exercise of each
Warrant and the Exercise Price after giving effect to any adjustment which will
be required as a result of such action. Such notice shall be given by the
Company as promptly as possible and, in the case of any action covered by clause
(a) or (b) above, at least 5 Business Days prior to the record date for
determining holders of the Common Stock for purposes of such action and, in the
case of any other such action, at least 10 Business Days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
SECTION 5.13 Adjustment to Warrant Certificate. The form of
Warrant Certificate need not be changed because of any adjustment made pursuant
to this Article 5, and Warrant Certificates issued after such adjustment may
state the same Exercise Price and the same number of shares of Common Stock as
are stated in any Warrant Certificates issued prior to the adjustment. The
Company, however, may at any time in its sole discretion make any change in the
form of Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate thereafter issued or countersigned, whether in
exchange or substitution for an outstanding Warrant Certificate or otherwise,
may be in the form as so changed.
ARTICLE 6.
Rights of Holders
SECTION 6.1 Registration Rights. The Holders of the Warrants
and the registered holders of the Warrant Shares shall be entitled to the
registration rights set forth in Exhibit D.
ARTICLE 7.
Warrant Agent
SECTION 7.1 Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
7.2 Rights and Duties of Warrant Agent. (a) In acting under
this Warrant Agreement and in connection with the Warrant Certificates, the
Warrant Agent is acting solely as
20
agent of the Company and does not assume any obligation or relationship or
agency or trust for or with any of the Holders of Warrant Certificates or
beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel
satisfactory to it, and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken or thing suffered by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be
obligated to perform only such duties as are herein and in the Warrant
Certificates specifically set forth and no implied duties or obligations shall
be read into this Agreement or the Warrant Certificates against the Warrant
Agent. The Warrant Agent shall not be under any obligation to take any action
hereunder which may tend to involve it in any expense or liability for which it
does not receive indemnity if such indemnity is reasonably requested. The
Warrant Agent shall not be accountable or under any duty or responsibility for
the use by the Company of any of the Warrant Certificates countersigned by the
Warrant Agent and delivered by it to the Holders or on behalf of the Holders
pursuant to this Agreement or for the application by the Company of the proceeds
of the Warrants. The Warrant Agent shall have no duty or responsibility in case
of any default by the Company in the performance of its covenants or agreements
contained herein or in the Warrant Certificates or in the case of the receipt of
any written demand from a Holder with respect to such default, including any
duty or responsibility to initiate or attempt to initiate any proceedings at law
or otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the number of shares of Common Stock purchasable upon exercise of each Warrant
or the Exercise Price, or with respect to the nature or extent of any adjustment
when made, or with respect to the method employed, or herein or in any
supplemental agreement provided to be employed, in making the same. The Warrant
Agent shall not be accountable with respect to the validity or value of any
shares of Common Stock or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or upon any adjustment
pursuant to Article 5, and it makes no representation with respect thereto. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates upon the surrender of any Warrant Certificate for the purpose
of exercise or upon any adjustment pursuant to Article 5, or to comply with any
of the covenants of the Company contained in Article 5.
(f) Proof of Actions Taken. Whenever in the performance of its
duties under this Warrant Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or
21
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed conclusively to be proved and
established by a certificate signed by an Officer and delivered to the Warrant
Agent; and such certificate shall be full authorization to the Warrant Agent for
any action taken or suffered in good faith by it under the provisions of this
Warrant Agreement in reliance upon such certificate.
SECTION 7.3 Individual Rights of Warrant Agent. The Warrant
Agent and any stockholder, director, officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants or other securities of the Company
or its Affiliates or become pecuniarily interested in transactions in which the
Company or its Affiliates may be interested, or contract with or lend money to
the Company or its Affiliates or otherwise act as fully and freely as though it
were not the Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
SECTION 7.4 Warrant Agent's Disclaimer. The Warrant Agent
shall not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Agreement or the Warrant Certificates
other than its countersignature thereon.
SECTION 7.5 Indemnity. The Company shall indemnify the Warrant
Agent against any loss, liability or expense (including agents' and attorneys'
fees and expenses) incurred by it without gross negligence or bad faith on its
part arising out of or in connection with the acceptance or performance of its
duties under this Agreement. The Warrant Agent shall notify the Company promptly
of any claim for which it may seek indemnity. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Warrant Agent
through wilful misconduct, gross negligence or bad faith. The Company's payment
obligations pursuant to this Section 7.5 shall survive the resignation or
removal of the Warrant Agent and the termination of this Agreement.
SECTION 7.6 Compensation. The Company agrees to pay the
Warrant Agent reasonable compensation for all services rendered by the Warrant
Agent in the performance of its duties under this Warrant Agreement, and to
reimburse the Warrant Agent for all expenses, taxes and governmental charges and
other charges of any kind and nature incurred by the Warrant Agent in the
performance of its duties under this Warrant Agreement.
SECTION 7.7 Successor Warrant Agent. (a) The Company agrees
for the benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 60 days after the date
on which such notice is given unless the Company otherwise agrees.
22
(c) The Company to Appoint Successor. In case at any time the
Warrant Agent shall resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or shall commence a
voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law; or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up of or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be Warrant Agent hereunder; provided, however, that in the
event of the resignation of the Warrant Agent hereunder, such resignation shall
be effective on the earlier of (i) the date specified in the Warrant Agent's
notice of resignation and (ii) the appointment and acceptance of a successor
Warrant Agent hereunder.
(d) Successor To Expressly Assume Duties. Any successor
Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder.
(e) Successor by Merger. Any corporation into which the
Warrant Agent hereunder may be merged or consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, or any corporation to which the Warrant Agent shall sell or otherwise
transfer all or substantially all the corporate agency business of the Warrant
Agent, provided that it shall be qualified as aforesaid, shall be the successor
Warrant Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
ARTICLE 8.
Miscellaneous
23
SECTION 8.1 Financial Reports. Upon request, the Company shall
provide the Warrant Agent and Holders with copies of any annual, quarterly or
current reports filed by the Company under the Exchange Act or, if none, copies
of financial information given to its senior lenders, if any.
SECTION 8.2 Persons Benefitting. This Agreement is for the
benefit of the Initial Holder and any other Holder from time to time of the
Warrants and the Warrant Shares. Nothing in this Agreement is intended or shall
be construed to confer upon any Person other than the Company, the Warrant Agent
and the Holders any right, remedy or claim under or by reason of this agreement
or any part hereof.
SECTION 8.3 Rights of Holders. Except as otherwise
specifically required herein, holders of unexercised Warrants are not entitled
(i) to receive dividends or other distributions, (ii) to receive notice of or
vote at any meeting of the stockholders, (iii) to consent to any action of the
stockholders, (iv) to receive notice of any other proceedings of the Company or
(v) to exercise any other rights as stockholders of the Company.
SECTION 8.4 Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that such action shall not
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has or would have an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the
outstanding Warrants or, if no Warrants are outstanding, the Initial Holder. The
consent of each Holder affected shall be required for any amendment pursuant to
which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided herein). In determining whether the Holders of the required
number of Warrants have concurred in any direction, waiver or consent, Warrants
owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Warrant Agent shall be protected in relying on any such
direction, waiver or consent, only Warrants which the Warrant Agent knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
SECTION 8.5 Notices. Any notice or communication shall be in
writing and delivered in person, mailed by first-class mail or telecopied by
confirmed telecopy addressed as follows:
24
if to the Company: Stellex Technologies, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx
Telecopy: 000-000-0000
Telephone: 000-000-0000
with a copy to: Winston & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
if to the Warrant Agent: HSBC Bank USA
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Administration
Telecopy: 000-000-0000
Telephone: 000-000-0000
if to the Initial Holder: XX Xxxxx Securities Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Telecopy: 212-278-6178/5460
Telephone: 000-000-0000
The Company or the Warrant Agent or the Initial Holder by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the Certificate Register
and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 8.6 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS AGREEMENT AND THE WARRANT CERTIFICATES.
SECTION 8.7 Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in
25
this Agreement shall bind its successors. Any transferee or assignee of Warrants
or Warrant from time to time shall have the same rights as a Holder hereunder to
which the Initial Holder would otherwise be entitled.
SECTION 8.8 Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 8.9 Table of Contents. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 8.10 Severability. The provisions of this Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
26
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
STELLEX TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
HSBC BANK USA, as Warrant Agent
By:
------------------------------
Name:
Title:
TO WARRANT AGREEMENT
EXHIBIT A
FORM OF FACE OF WARRANT CERTIFICATE
THE WARRANTS AND THE WARRANT SHARES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO
COMPLIANCE WITH OTHER APPLICABLE LAWS. THE HOLDER HEREOF, BY ITS ACCEPTANCE
HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, UNLESS
PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY; (B)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE); (C) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A; (D) PURSUANT TO AN OFFSHORE TRANSACTION COMPLYING WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT: OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. __ Certificate for ___ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
STELLEX TECHNOLOGIES, INC.
THIS CERTIFIES THAT, ____________, or its registered assigns,
is the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the registered holder thereof (the "Holder"),
at its option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from Stellex Technologies, Inc., a
Delaware corporation (the "Company"), one share of common stock of the Company
(the "Common Stock") at the per share exercise price of $0.01 (the "Exercise
Price"), or by Cashless Exercise referred to below. This Warrant Certificate
shall terminate and become void as of the close of business on August 31, 2010
(the "Expiration Date") or upon the exercise hereof as to all the shares of
Common Stock subject hereto. The number of shares purchasable upon exercise of
the Warrants and the Exercise Price per share shall be subject to adjustment
from time to time as set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of April 22, 1999 (the "Warrant Agreement"),
between the Company and HSBC Bank USA (the "Warrant Agent", which term includes
any successor Warrant Agent
2
under the Warrant Agreement), and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The Warrant
Agreement is hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full statement of the
respective rights, limitations of rights, duties and obligations of the Company,
the Warrant Agent and the Holders of the Warrants. Capitalized terms used but
not defined herein shall have the meanings ascribed thereto in the Warrant
Agreement. A copy of the Warrant Agreement may be obtained for inspection by the
Holder hereof upon written request to the Warrant Agent at 000 Xxxxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part (i) by surrender of this Warrant
Certificate with the form of election to purchase Warrant Shares attached hereto
duly executed and with the simultaneous payment of the Exercise Price in cash
(subject to adjustment) to the Warrant Agent for the account of the Company at
the office of the Warrant Agent or (ii) by Cashless Exercise. Payment of the
Exercise Price in cash shall be made in cash or by certified or official bank
check payable to the order of the Company or by wire transfer of funds to an
account designated by the Company for such purpose. Payment by Cashless Exercise
shall be made by the surrender of a Warrant or Warrants represented by one or
more Warrant Certificates and without payment of the Exercise Price in cash, in
exchange for the issuance of such number of shares of Common Stock equal to the
product of (1) the number of shares of Common Stock for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price were
being made in cash and (2) the Cashless Exercise Ratio.
As provided in the Warrant Agreement and subject to the terms
and conditions therein set forth, the Warrants shall be exercisable at any time
or from time to time on or after April 22, 1999 under the terms of the Warrant
Agreement; provided, however, that no Warrant shall be exercisable after the
Expiration Date.
Generally, in the event of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of the Warrants, the
Holder hereof will be entitled to receive upon exercise of the Warrants the
shares of capital stock or other securities or other property of such surviving
entity as such Holder would have been entitled to receive upon or as the result
of such event had the Holder exercised its Warrants immediately prior to such
event; provided, however, that in the event that the Company enters into a
Combination and in connection with such Combination consideration to holders of
Common Stock in exchange for their shares is payable solely in cash, or in the
event of the dissolution, liquidation or winding-up of the Company, the Holder
hereof will be entitled to receive distributions on an equal basis with the
holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such
events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 2.4 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates or the exercise of the
Warrants.
3
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrants shall not have
been exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. The Company may, at
its option, pay an amount in cash equal to the Current Market Value for one
share of Common Stock on the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole cent.
The Warrants do not entitle any Holder hereof to any of the
rights of a shareholder of the Company. All shares of Common Stock issuable by
the Company upon the exercise of the Warrants shall, upon such issue, be duly
and validly issued and fully paid and non-assessable.
The Holder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company and the Warrant Agent as the absolute
owner of the Warrant Certificate for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
STELLEX TECHNOLOGIES, INC.
By
-------------------------------------
Name:
Title:
Attest:
-----------------------------
Secretary
DATED:
Countersigned:
HSBC BANK USA
as Warrant Agent,
by
-----------------------------------
Authorized Signatory
EXHIBIT B
TO
WARRANT AGREEMENT
FORM OF ELECTION TO EXERCISE WARRANT SHARES
(to be executed only upon exercise of
Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise [ ]
Warrants at an exercise price per Warrant (subject to adjustment) of $.01 to
acquire an equal number of shares of Common Stock, no par value of Stellex
Technologies, Inc., on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to
, and directs that the shares of Common Stock deliverable upon
the exercise of such Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Date: ________________, ____
(1)
-------------------------------------
(Signature of Owner)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
--------------------------------------
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
EXHIBIT C
TO
WARRANT AGREEMENT
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Stellex Technologies,
Inc. (the "Company")
This Certificate relates to __________ Warrants held in
definitive form by _______________ (the "Transferor").
The Transferor has requested the Warrant Agent by written
order to exchange or register the transfer of a Warrant or Warrants. In
connection with such request and in respect of each such Warrant, the Transferor
does hereby certify that the Transferor is familiar with the Warrant Agreement
relating to the above captioned Warrants and that the transfer of this Warrant
does not require registration under the Securities Act of 1933 (the "Securities
Act"), because():
[_] Such Warrant is being acquired for the Transferor's own account without
transfer.
[_] Such Warrant is being transferred to the Company.
[_] Such Warrant is being transferred pursuant to an effective registration
statement under the Securities Act.
[_] Such Warrant is being transferred in a transaction meeting the requirements
of Rule 144 under the Securities Act.
[_] Such Warrant is being transferred to a qualified institutional buyer (as
defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
[_] Such Warrant is being transferred pursuant to an offshore transaction in
accordance with Rule 904 under the Securities Act.
[_] Such warrant is being transferred pursuant to another available
exemption from the registration requirements under the Securities Act.
--------
(1) Please check applicable box.
2
The Warrant Agent and the Company are entitled to rely upon
this Certificate and are irrevocably authorized to produce this Certificate or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
by
-------------------------
Date: ____________________
Authorized Representative
EXHIBIT D
TO
WARRANT AGREEMENT
REGISTRATION RIGHTS OF HOLDERS
OF THE WARRANT SECURITIES
Section 1 Shelf Registration. (a) Upon the occurrence of a
Triggering Event (as defined below), the Company shall use its best efforts to,
as promptly as practicable (but no later than 120 days thereafter), cause to be
declared effective a registration statement on an appropriate form under the
Securities Act relating to (i) any resale or offering of the Warrants, (ii) the
issuance of Warrant Shares upon the exercise of the Warrants and (iii) any
resale or offering of any Warrant Shares that have been issued pursuant to the
Warrants (collectively, such Warrants and such Warrant Shares being referred to
as the "Warrant Securities") by the holders of such Warrant Securities (the
"Holders") from time to time in accordance with the methods of distribution
elected by such Holders and set forth in such registration statement
(hereinafter, a "Shelf Registration Statement"). For purposes hereof, a
"Triggering Event" shall mean the first to occur of (i) the first firm
commitment underwritten public offering of Common Stock (a "Public Offering") by
the Company, pursuant to an effective registration statement under the
Securities Act, (ii) the Common Stock being listed on a national securities
exchange or becoming eligible for quotation in the NASDAQ Market System or (iii)
a written demand for registration hereunder by the Holders of 51% of the
outstanding Warrant Securities at any time after the second anniversary of the
date of the last issuance of the Warrants; provided, however, that the Company
shall not be obligated to file and cause to be declared effective any such Shelf
Registration Statement if the Company shall have delivered to the Warrant Agent
a legal opinion of its outside counsel reasonably satisfactory to the Warrant
Agent, in form and substance satisfactory to counsel to the Warrant Agent, to
the effect that all of the Warrant Securities outstanding and held by
non-affiliates of the Company are freely saleable (i.e., without registration or
prospectus delivery) under the Securities Act of 1933, as amended.
(b) The Company shall use its best efforts to keep such Shelf
Registration Statement continuously effective in order to permit the prospectus
forming part thereof to be usable by Holders for a period that will terminate
when an opinion of the Company=s outside counsel reasonably satisfactory to
counsel to the Warrant Agent is delivered to the Warrant Agent to the effect
that all Warrant Securities outstanding and held by non-affiliates of the
Company are freely saleable (i.e., without registration or prospectus delivery
under the Securities Act of 1933, as amended). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would result
in Holders of Warrant Securities covered thereby not being able to offer and
sell such Warrant Securities during that period, unless such action is required
by applicable law, except as provided in Section 2 below.
(c) Notwithstanding any other provisions hereof, the Company
will ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereof complies in
all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment
2
thereto does not, when it becomes effective, contain 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 and (iii) any prospectus
forming part of any Shelf Registration Statement, and any supplement to such
prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company shall not be responsible for any information provided
by any Holder specifically for use in the Shelf Registration Statement, any
prospectus forming part of any Shelf Registration Statement or any supplement to
any such prospectus.
Unless the Holders of a majority of the outstanding Warrant
Securities shall otherwise consent in writing, no other person (including the
Company), other than another Holder, shall be permitted to offer any securities
under any registration pursuant to this Section 1.
Section 2. Effective Registration Statement. A registration
pursuant to Section 1 will not be deemed to have been effected unless the
registration statement relating thereto has become effective under the
Securities Act. The Company may, at any time, delay the filing or suspend the
effectiveness of such registration statement, or without suspending such
effectiveness, instruct the Holders not to sell Warrants or Warrant Shares
included in any such registration statement, without penalty or liability to the
Company, if the Company shall have determined upon the advice of counsel that
the Company would be required to disclose any actions taken or proposed to be
taken by the Company in good faith and for valid business reasons, including
without limitation, the acquisition or divestiture of assets, which disclosure
would have a material adverse effect on the Company or such actions (a
"Suspension Period"), by providing the Holders with written notice of such
Suspension Period and the reasons therefor; provided, however, that the
Suspension Periods referred to above, in the aggregate, do not exceed forty-five
(45) days in the aggregate in any twelve-month period. The Company shall use its
best efforts to provide such notice as soon as practicable and in any event
prior to the commencement of such a Suspension Period.
Section 3. Selection of Underwriters. If any method of
distribution selected by the Holders is in the form of an underwritten offering
under such Shelf Registration Statement, the Holders of a majority of the
outstanding Warrant Securities may select one or more other nationally
recognized firms of investment bankers reasonably acceptable to the Company to
act as manager or co-managers to administer the offering. Under no circumstances
shall (i) there be more than two underwritten offerings of Warrant Securities
pursuant to this Exhibit D or (ii) any underwritten offering of Warrant
Securities include less than 25% of the aggregate Warrant Securities owned by
all Holders.
Section 4. Piggyback Registrations.
(a Each time the Company proposes to register any of its
Common Stock under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of its securityholders on any form
(other than (i) a Registration Statement on Form S-4 or S-8 (or any substitute
form that may be adopted by the SEC) or (ii) a Registration
3
Statement filed in connection with an exchange offer or offering of securities
solely to the Company's existing securityholders) that would legally permit the
inclusion of Warrant Securities, the Company shall give each Holder prompt
written notice thereof as soon as practicable but in no event not less than 30
days prior to the date the registration statement is filed and shall include in
such registration statement all Warrant Securities requested in writing to be
included therein, subject to the limitations contained in Section 4(b) (a
"Piggy-Back Registration"). Subject to Section 4(b), the Company shall include
in such registration statement all such Warrant Securities so requested to be
included therein pursuant to the piggyback rights granted under this Section
4(a). If such registration is pursuant to an underwritten offering, the Company
shall use its reasonable best efforts to cause the managing underwriter or
underwriters of such proposed offering to permit the Warrant Securities
requested to be included in a Piggy-Back Registration to be included, subject to
Section 4(b), on the same terms and conditions as any Common Stock of the
Company or any other securityholder included therein and to permit the sale or
other disposition of such Warrant Securities in accordance with the intended
method of distribution thereof. The Company will pay all registration expenses
(including any described in Section 1) in connection with each registration of
Warrant Securities requested pursuant to this Section 4, and each Holder shall
pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Warrant Securities pursuant
to a registration statement effected pursuant to this Section 4.
No registration effected under this Section 4, and no failure
to effect a registration under this Section 4, shall relieve the Company of its
obligation to effect a registration pursuant to Section 1 hereof.
(b In a registration pursuant to Section 4(a) involving an
underwritten offering, if the managing underwriter or underwriters of such
underwritten offering have informed, in writing, the Company and the Holders
requesting inclusion in such offering that in such underwriter's or
underwriters' opinion the total number of securities which the Company, the
Holders and any other Persons desiring to participate in such registration
intend to include in such offering is such as to adversely affect the success of
such offering, including the price at which such securities can be sold, then
the Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event: (x) in cases initially involving the registration for sale of
securities for the Company's own account, securities shall be registered in such
offering in the following order of priority: (i) first, the securities which the
Company proposes to register, (ii) second, the securities of other
securityholders of the Company (other than the Permitted Holders) that the
Company proposes to register pursuant to the exercise by such securityholders of
any rights such securityholders may have to request that the Company register
such securities, (iii) third, the Warrant Securities of the Holders and their
assigns and the securities of other securityholders of the Company that the
Company proposes to register; provided, that in the event that the number of
such Warrant Securities and/or securities, as the case may be, exceeds the
amount of securities to be registered, such amount shall be allocated pro rata
among all such requesting holders on the basis of the relative number of Warrant
Securities or securities, as the case may be, each such holder has requested to
be included in such registration and (iv) fourth, the securities of other
Persons entitled to exercise "piggy-back" or "demand" registration rights
pursuant to contractual commitments of the Company (pro rata based on the amount
of securities sought to be registered
4
by such Persons); and (y) in cases not initially involving the registration for
sale of securities for the Company's own account, securities shall be registered
in such offering as follows: (i) first, the securities of other securityholders
of the Company (other than the Permitted Holders) that the Company proposes to
register pursuant to the exercise by such securityholders of any rights such
securityholders may have to request that the Company register such securities,
(ii) second, the Warrant Securities of the Holders and their assigns and the
securities of other securityholders of the Company that the Company proposes to
register; provided, that in the event that the number of such Warrant Securities
and/or securities, as the case may be, exceeds the amount of securities to be
registered, such amount shall be allocated pro rata among all such requesting
holders on the basis of the relative number of Warrant Securities or securities,
as the case may be, each such holder has requested to be included in such
registration and (iii) third, the securities of other Persons entitled to
exercise "piggy-back" or "demand" registration rights pursuant to contractual
commitments of the Company (pro rata based on the amount of securities sought to
be registered by such Persons) based upon the percentage of the outstanding
securities held by such Person.
(c For purposes of this Section 4, the Company shall enter
into such agreements and take such other actions as the Holders or the
underwriters reasonably request in order to expedite and facilitate the
disposition of Warrant Securities pursuant to this Section 4, including, without
limitation, preparing for, and participating in, such number of "road shows" and
all other customary selling efforts as the underwriters reasonably request in
order to expedite and facilitate such disposition, and generally use its best
efforts to take all other steps necessary to effect the registration and sale of
such Warrant Securities.
In the event of any underwritten offering as to which Holders
of Warrants have participation rights pursuant to this Section 4, the
underwriter(s) or managing underwriter(s) will be chosen by the Company or the
holder of Common Stock initiating the registration, and in no event will the
Holders of Warrants be entitled to select the underwriter(s) or managing
underwriter(s).
Section 5. Tag-Along Rights. (a) So long as the Warrant
Agreement shall remain in effect and the Permitted Holders beneficially own on a
fully diluted basis, directly or indirectly, an aggregate number of shares of
Common Stock equal to not less than forty percent (40%) of the Common Stock
owned, directly or indirectly, by the Permitted Holders on the date hereof, with
respect to any proposed sale to a non-Affiliate (a "Transfer") by the Permitted
Holders (or any one of them) (in such capacity, a "Transferring Shareholder") of
Common Stock permitted hereunder, other than a Public Offering, which, when
added to the aggregate amount of all prior Transfers, is not less than twenty
percent (20%) of the Common Stock owned, directly or indirectly, by the
Permitted Holders on the date hereof, the Transferring Shareholder shall have
the obligation, and each Holder of Warrants and Warrant Shares shall have the
right, to require the proposed transferee to purchase from such Holder (in such
capacity, a "Tagging Shareholder") a number of shares of Warrant Shares up to
the product (rounded up to the nearest whole number) of (i) the quotient
determined by dividing (A) the aggregate number of shares of Common Stock owned
by such Tagging Shareholder by (B) the aggregate number of shares of Common
Stock owned by the Transferring Shareholder and all Tagging Shareholders, and
(ii) the total number of shares of Common Stock proposed to be directly or
indirectly transferred by the Transferring Shareholder to the transferee in the
contemplated Transfer, and at the same price
5
per share of Common Stock and upon the same terms and conditions (including
without limitation time of payment and form of consideration) as to be paid and
given to the Transferring Shareholder; provided, that upon any Transfer
resulting in a Change of Control, each Holder of Warrants and Warrant Shares
shall have the rights of a Tagging Shareholder pursuant to this Section 5
without regard to the aggregate number of shares theretofore sold by a Permitted
Holder pursuant to any Transfer; provided further, that in order to be entitled
to exercise its right to sell shares of Common Stock to the proposed transferee
pursuant to this Section 5, the Tagging Shareholder must agree to make to the
transferee the same representations, warranties, covenants, indemnities and
agreements as the Transferring Shareholder agrees to make in connection with the
proposed Transfer of the shares of Common Stock of the Transferring Shareholder
insofar as such provisions relate to transfers of securities under the
securities laws, due authorization and other corporate governance matters and
title to the Warrant Shares; provided further, that all representations and
warranties shall be made by the Tagging Shareholder and the Transferring
Shareholder severally and not jointly and that the liability of the Transferring
Shareholder and the Tagging Shareholder (whether pursuant to a representation,
warranty, covenant, indemnification provision or agreement) for liabilities in
respect of the Company shall be evidenced in writings executed by them and the
transferee and shall be borne by each of them on a pro rata basis.
(b The Transferring Shareholder shall give notice to the
Holders of each proposed Transfer giving rise to the rights of the Tagging
Shareholder set forth in the first sentence of Section 5(a) at least 30 days
prior to the proposed consummation of such Transfer, setting forth the number of
shares of Common Stock proposed to be so transferred, the name and address of
the proposed transferee, the proposed amount and form of consideration and other
terms and conditions of payment offered by the proposed transferee, and a
representation that the proposed transferee has been informed of the tag-along
rights provided for in this Section 5 and has agreed to purchase shares of
Common Stock in accordance with the terms hereof. The tag-along rights provided
by this Section 5 must be exercised by the Tagging Shareholder within 10
Business Days following receipt of the notice required by the preceding
sentence, by delivery of a written notice to the Transferring Shareholder
indicating such Tagging Shareholder's desire to exercise its rights and
specifying the number of shares of Common Stock it desires to sell. The
Transferring Shareholder shall be entitled under this Section 5 to Transfer to
the proposed transferee the number of shares of Common Stock equal to the
difference between the number referred to in clause (ii) of paragraph (a) above
and the aggregate number of shares of Common Stock set forth in the written
notice, if any, delivered by the Tagging Shareholder pursuant to the preceding
sentence (up to the maximum number of shares of Common Stock beneficially owned
by such Tagging Shareholder required to be purchased by the proposed transferee
pursuant to the first sentence of Section 5(a)). If the proposed transferee
fails to purchase shares of Common Stock from any Tagging Shareholder that has
properly exercised its tag-along rights under Section 5(a), then the
Transferring Shareholder shall not be permitted to make the proposed Transfer,
and any such attempted Transfer shall be void and of no effect.
If the Tagging Shareholder exercises its rights under Section
5(a), the closing of the purchase of the Common Stock with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the Transferring Shareholder's Common Stock.
6
Section 6. Drag-Along Rights. So long as the Warrant
Agreement shall remain in effect and the Permitted Holders beneficially own on a
fully diluted basis, directly or indirectly, an aggregate number of shares of
Common Stock not less than forty percent (40%) of the Common Stock equity owned,
directly or indirectly, by the Permitted Holders on the date hereof, if any of
the Permitted Holders receives an offer from a Person (a "Third Party") to
purchase at least 80% of the outstanding shares of Common Stock owned in the
aggregate by the Permitted Holders or a lesser percentage if such shares of
Common Stock represent more than 51% of the outstanding Common Stock of the
Company at such time and such offer is accepted by any such Permitted Holder,
then each Holder hereby agrees that upon request of such Third Party it will
Transfer all Warrant Securities owned by it to such Third Party on the terms of
the offer so accepted by the Permitted Holders, including the same per share
consideration; provided, that the consideration to be received by the Holders
shall be in cash, and in the good faith exercise of its fiduciary duties to the
equityholders of the Company, including the Holders, the Board determines that
the price per share of Common Stock is not less than the fair market value
thereof.
Section 7. Expenses. The Company will pay all expenses
incident to the Company's performance of its obligations hereunder, including
registration and filing fees, fees and expenses of the Company of compliance
with securities or blue sky laws, printing expenses, internal expenses of the
Company (including all salary and expenses of its officers and employees
performing legal or accounting duties), reasonable fees and disbursements of one
firm of attorneys designated pursuant to Section 10 and fees and disbursements
of the Company's independent public accountants. Notwithstanding the foregoing,
the parties hereto hereby agree that the Company shall not be responsible for
the fees and disbursements of any experts or advisors retained by such Holders,
and that in an underwritten offering of Registrable Warrant Shares, the
underwriting discounts and commissions shall be for the account of the Holders.
Section 8. Restrictions on Public Sales by the Company and
Others. If any registration of Warrant Securities shall be in connection with
an underwritten public offering, the Company agrees (subject to exceptions
customary in underwritten public offerings) (i) not to effect any public sale or
distribution of any securities during the 30 days prior to, and during the
90-day period beginning on, the effective date of such registration statement
(except as part of such registration) and (ii) after the date upon which the
Holders receive Warrants representing 5% of the fully diluted Common Stock of
the Company pursuant to Section 4.1 of the Warrant Agreement, that any agreement
entered into after the date of the Warrant Agreement pursuant to which the
Company issues or agrees to issue any privately placed Common Stock shall
contain a provision under which holders of such Common Stock (to the extent that
they own in excess of 5% of the issued and outstanding Common Stock) agree not
to effect any public sale or distribution of any such Common Stock during the
period referred to in the foregoing clause (i).
Section 9. Registration Procedures. If and whenever the
Company is required to use its best efforts to effect or cause the registration
of any Warrant Securities under the Securities Act as provided herein, the
Company will, as expeditiously as possible:
7
(a use its best efforts to file as promptly as possible a
registration statement on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate, as the case
may be, and which form shall be available for the sale of the Warrant
Securities in accordance with the intended methods of distribution
thereof, and use its best efforts to cause such registration statement
to become and remain effective as promptly as practicable; provided,
however, that before filing with the SEC a registration statement or
prospectus or any amendments or supplements thereto, the Company will
(i) furnish to one counsel selected by the Holders of a majority of
Warrant Securities, and one counsel selected by the sole underwriter,
managing underwriter or co-managing underwriter, as the case may be, of
the Warrant Securities covered by such registration statement, copies
of all such documents proposed to be filed, which documents will be
subject to the review of each such counsel, and (ii) notify each Holder
and each underwriter, if any, of the Warrant Securities covered by each
registration statement of any stop order issued or threatened by the
SEC and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered;
(b prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in Section 1 above (but
not before the expiration of the 90-day period referred to in Section
4(3) of the Securities and Exchange Act of 1934 and Rule 174
thereunder, if applicable), and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in accordance
with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c furnish to each Holder and each underwriter, if any, of
the Warrant Securities covered by such registration statement such
number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto) and
the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as any such Holder or
underwriter may reasonably request in order to facilitate the
disposition of the Warrant Securities owned by such Holder;
(d use its best efforts to register or qualify such Warrant
Securities under such other securities or blue sky laws of such United
States jurisdictions as any Holder and each underwriter, if any, of the
Warrant Securities covered by such registration statement reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder and each such
underwriter, if any, to consummate the disposition in such
jurisdictions of the Warrant Securities owned by such Holder or
underwritten by such underwriter; provided, however, that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
8
(e use its best efforts to cause the Warrant Securities
covered by such registration statement to be registered with or
approved by such other United States governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the Holder or Holders and each
underwriter, if any, thereof to consummate the disposition of such
Warrant Securities; subject, however, to the proviso set forth in
paragraph (d) above;
(f immediately notify each Holder and each underwriter, if
any, of the Warrant Securities, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event if as a result of such event the prospectus
included in such registration statement contains 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, in the
light of the circumstances under which they were made, not misleading,
and the Company will promptly prepare and furnish to each such Holder
and underwriter a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Warrant Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(g enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
customary actions as the Holders of a majority of the Warrant
Securities being sold or each underwriter, if any, retained by such
Holders reasonably request in order to expedite or facilitate the
disposition of such Warrant Securities, including customary
indemnification;
(h make available for inspection by any Holder of Warrant
Securities covered by such registration statement, each underwriter, if
any, participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such Holder or underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees to supply all information and respond to all
inquiries reasonably requested by any such Inspector in connection with
such registration statement (provided that the Inspectors enter into
appropriate confidentiality agreements with the Company and agree to be
bound by confidentiality agreements to which the Company is subject);
(i in the case of an underwritten offering only, obtain a
"cold comfort" letter from the Company's independent public accountants
in customary form and covering such matters of the type customarily
covered by "cold comfort" letters as the Holders of a majority of the
Warrant Securities being sold and each underwriter, if any, reasonably
request;
(j otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably
9
practicable, an earnings statement covering a period of at least 12
months, beginning with the first month after the effective date of the
registration statement (as the term "effective date" is defined in
Rule 158(c) under the Securities Act), which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder.
The Company recognizes that by undertaking to use its best
efforts to effect registration of any Warrant Securities that it may incur
substantial accounting, legal and other expenses and may be required (by the
SEC, each underwriter, if any, or otherwise) to provide information (which could
be of interest to the Company's competitors, customers and suppliers) regarding
its business, compensation of executives and other matters which it might
otherwise not publicly disclose.
The Company may require each Holder as to which any
registration is being effected to furnish to the Company such information
regarding such Holder and the distribution of such Warrant Securities that is
necessary for the filing of the Shelf Registration as the Company may from time
to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in subdivision (f)
hereof, such Holder will forthwith discontinue disposition of Warrant Securities
pursuant to the registration statement covering such Warrant Securities until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in such Holder's possession of the prospectus
covering such Warrant Securities current at the time of receipt of such notice.
Section 10. Indemnification. (a) Indemnification by the
Company. In the event of any registration of any securities of the Company under
the Securities Act, the Company and its subsidiaries, jointly and severally,
will, and hereby do, indemnify and hold harmless, to the full extent permitted
by law, each of the Holders of any Warrant Securities covered by such
registration statement, its directors and officers, general partners, limited
partners and managing directors (and directors, officers, general partners,
limited partners and managing directors thereof), each such person who
participates as an underwriter in the offering or sale of such securities and
each other person, if any, who controls, is controlled by or is under common
control with such Holder or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, and reasonable expenses (including any amounts paid in any
settlement effected with the Company's consent) to which such Holder, any such
director or officer or general or limited partner or managing director or any
such underwriter or controlling person may become subject under the Securities
Act, state securities or blue sky laws, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) or expenses arise out of or are based upon (a) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto or (b) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the
10
Company and its subsidiaries, jointly and severally, will reimburse such Holder
and each such director, officer, general partner, limited partner, managing
director, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending such
loss, claim, liability, action or proceeding; provided, however, that the
Company and its subsidiaries shall not be liable in any such case to any
indemnified person to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or amendment or supplement
thereto or in any such preliminary, final or summary prospectus in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by any indemnified person specifically stating that it
is for use in the preparation thereof; and provided further, however, that the
Company will not be liable to any person who participates as an underwriter in
the offering or sale of Warrant Securities or any other person, if any, who
controls, is controlled by or is under common control with such underwriter
within the meaning of the Securities Act, under the indemnity agreement in this
Section 10 with respect to any preliminary prospectus as amended or supplemented
as the case may be, to the extent that any such loss, claim, damage or liability
of such underwriter or such other person results from the fact that such
underwriter sold Warrant Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented (including
any documents incorporated by reference therein), whichever is most recent, if
the Company has previously furnished copies thereof to such underwriter and such
final prospectus as then amended or supplemented has corrected any such
misstatement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Holder or any such
director, officer, general partner, limited partner, managing director,
underwriter or controlling person and shall survive the transfer of such
securities by such Holder. To the extent the indemnity provided in this Section
10 relates to persons participating as an underwriter in an offering or sale of
securities, such indemnity shall be superseded by any indemnification agreement
entered into in connection with the registration, offering and sale of the
Warrant Securities.
(b Indemnification by the Holders. The Company may require,
as a condition to including any Warrant Securities in any registration statement
filed in accordance with Section 1 hereof, that the Company shall have received
an undertaking reasonably satisfactory to it from the Holders, to severally
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 10) the Company and its shareholders,
affiliates, directors, officers and controlling persons and all other
prospective sellers and their respective directors, officers, general and
limited partners, managing directors and their respective controlling persons
with respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such statement
or alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company or its
representatives through an instrument duly executed by or on behalf of such
Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement, or a document incorporated by reference into any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the
11
Company or any of the Holders of any of their respective directors, officers,
general or limited partners, managing directors or controlling persons and shall
survive the transfer of such securities by such Holder.
(c Notice of Claims, etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 10, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly give written
notice to the latter of the commencement of such action; provided, however, that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Section 10, except to the extent the indemnifying party is
prejudiced thereby. In case any such claim or action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties exists in
respect of such claim, the indemnifying party will be entitled to participate in
and, jointly with any other indemnifying party similarly notified, to assume the
defense thereof, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof, unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties arises
in respect of such claim after the assumption of the defense thereof, and the
indemnifying party will not be subject to any liability for any settlement made
without its consent (which consent shall not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by an indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest exists
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d Contribution. If the indemnification provided for in this
Section 10 is unavailable or insufficient to hold harmless an indemnified party
under Section 10(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and such Holder on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or to any
Holders' information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and
12
opportunity to correct or prevent such untrue statement or omission. The Company
and the Holders agree that it would not be just and equitable if contributions
pursuant to this Section 10(d) were to be determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10(d) shall be deemed to include, for
purposes of this Section 10(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 10(d), no Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Warrant Securities sold by such Holder to any purchaser
exceeds the amount of any damages which such Holder has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 10 (with appropriate
modifications) shall be given by the Company and each Holder with respect to any
required registration or other qualification of securities under any Federal or
state law or regulation of governmental authority other than the Securities Act.
