Exhibit 1.06
CLASS B COMMON SHARE PURCHASE WARRANT
AGREEMENT
By and Among
PROTOSOURCE CORPORATION,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION,
ANDREW, ALEXANDER, WISE & COMPANY, INC.
and
CORPORATE STOCK TRANSFER, INC.
Dated February ____, 2001
TABLE OF CONTENTS
Section Page
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APPOINTMENT OF WARRANT AGENT.................................................2
FORM OF WARRANT..............................................................2
COUNTERSIGNATURE AND REGISTRATION............................................4
TRANSFERS AND EXCHANGES......................................................4
EXERCISE OF WARRANTS; PAYMENT OF WARRANT SOLICITATION FEE....................5
PAYMENT OF TAXES.............................................................9
MUTILATED OR MISSING WARRANTS................................................9
RESERVATION OF COMMON STOCK.................................................10
ADJUSTMENTS OF WARRANT EXERCISE PRICE AND NUMBER OF SECURITIES..............11
FRACTIONAL INTERESTS........................................................21
NOTICES TO WARRANTHOLDERS...................................................22
DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS.............................23
REDEMPTION OF WARRANTS......................................................24
MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
WARRANT AGENT......................................................25
DUTIES OF WARRANT AGENT.....................................................25
CHANGE OF WARRANT AGENT.....................................................28
IDENTITY OF TRANSFER AGENT..................................................29
NOTICES.....................................................................29
SUPPLEMENTS AND AMENDMENTS..................................................31
NEW YORK CONTRACT...........................................................31
BENEFITS OF THIS AGREEMENT..................................................31
SUCCESSORS..................................................................31
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WARRANT AGREEMENT, dated as of February___, 2001, among Protosource
Corporation, a California corporation (the "Company"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Securities Corporation (the "Underwriter") and Corporate Stock Transfer, Inc.,
as warrant agent (the "Warrant Agent").
RECITALS
A. The Company, currently has outstanding warrants which are governed by
the terms of a Warrant Agreement, dated as of May 14, 1998, by and among the
Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Wise & Company and Warrant Agent, which related to a
prior public offering of the Company.
B. The Company proposes to issue and sell through public offering (the
"Offering") underwritten by the Underwriter, an aggregate of (i) 2,000,000
shares (the "Firm Shares") of common stock, no par value (the "Common Stock"),
1,000,000 Redeemable Class B Common Stock Purchase Warrants (the "Firm
Warrants"), in units, each unit consisting of two Firm Shares and one Firm
Warrant and (ii) an over allotment option granted to the Underwriters to
purchase an additional 150,000 units consisting in aggregate of 300,000 shares
of Common Stock and 150,000 Warrants. Any and all units to be purchased pursuant
to such option are referred to herein as the "Option Units", the Common Stock
underlying such units are called the "Option Shares" and the Firm Shares and any
Option Shares are collectively referred to herein as the "Shares." Any and all
redeemable warrants to purchase Common Stock to be purchased pursuant to such
option are referred to herein as the "Option Warrants," and the Firm Warrants
and any Option Warrants are collectively referred to herein as the "Warrants."
Any shares of Common Stock issuable upon the exercise of any Warrants are
referred to herein as "Warrant Shares." The Firm Units, Firm Shares and the Firm
Warrants are collectively referred to herein as the "Firm Securities;" the
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Option Shares and the Option Warrants are collectively referred to herein as the
"Option Securities;" and the Firm Securities, the Option Securities and the
Warrant Shares are collectively referred to herein as the "Securities."
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing so to act, in connection with the issuance,
registration, transfer, exchange and exercise of the Warrants.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
Warrant Agent to act as Warrant Agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Upon the execution of this Agreement, certificates representing 1,000,000
Firm Warrants to purchase an aggregate of 1,000,000 Firm Shares (subject to
modification and adjustment as provided in Section 9 hereof) shall be executed
by the Company and delivered to the Warrant Agent.
Upon the exercise of the option granted to the Underwriters by the Company,
certificates representing up to 150,000 Option Warrants to purchase an aggregate
of 150,000 Option Shares (subject to adjustment as provided in Section 9 hereof)
shall be executed by the Company and delivered to the Warrant Agent.
Section 2. FORM OF WARRANT. The text of the Warrants and the form of
election to purchase Common Stock to be printed on the reverse thereof shall be
substantially as set forth in Exhibit A attached hereto (the provisions of which
are hereby incorporated herein).
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All of the certificates for the Warrants may have such letters, numbers or other
marks of identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may be listed, or to conform to usage. Each Warrant will be
exercisable at an initial exercise price of $____ (as may be adjusted from time
to time as hereinafter provided, the "Warrant Price"), at any time during the
period (the "Exercise Period") commencing on the date hereof and expiring at
5:00 p.m. New York City time, on [_____ ____, 2006]. The Warrant Price and the
number of Securities issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events, all as hereinafter provided.
The Warrants shall be executed on behalf of the Company by the manual or
facsimile signature of the present or any future Chairman of the Board or Vice
Chairman, Chief Executive Officer, President or Vice President of the Company,
and attested to by the manual or facsimile signature of the present or any
future Secretary, Treasurer or Assistant Secretary or Assistant Treasurer of the
Company.
Warrants shall be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
In the event the aforesaid expiration date of the Warrants falls on a day
that is not a business day, then the Warrants shall expire at 5:00 p.m. New York
City time on the next succeeding business day. For purposes hereof, the term
"business day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in New York City, New York, are authorized or
obligated by law to be closed.
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Section 3. COUNTERSIGNATURE AND REGISTRATION. The Warrant Agent shall
maintain books for the transfer and registration of the Warrants. Upon the
initial issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the name of the Underwriter. The Warrants shall be countersigned
manually or by facsimile by the Warrant Agent (or by any successor to the
Warrant Agent then acting as warrant agent under this Agreement) and shall not
be valid for any purpose unless so countersigned. The Warrants may, however, be
so countersigned by the Warrant Agent (or by its successor as Warrant Agent) and
be delivered by the Warrant Agent, notwithstanding that the persons whose manual
or facsimile signatures appear thereon as proper officers of the Company shall
have ceased to be such officers at the time of such countersignature or
delivery.
Section 4. TRANSFERS AND EXCHANGES. The Warrant Agent shall transfer, from
time to time, any outstanding Warrants upon the books to be maintained by the
Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be canceled by the Warrant Agent. Warrants so canceled shall be
delivered by the Warrant Agent to the Company from time to time upon request.
Warrants may be exchanged at the option of the holder thereof, when surrendered
at the office of the Warrant Agent, for another Warrant, or other Warrants of
different denominations of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock. No certificates for
Warrants shall be issued except for (i) Warrants initially issued hereunder in
accordance with Section 1 hereof, (ii) Warrants issued upon any transfer or
exchange of Warrants, (iii) Warrants issued in replacement of lost, stolen,
destroyed or mutilated certificates for Warrants pursuant to Section 7 hereof,
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and (iv) at the option of the Board of Directors of the Company, Warrants in
such form as may be approved by its Board of Directors, to reflect any
adjustment or change in the Warrant Price or the number of Securities issuable
upon exercise of the Warrants made pursuant to Section 9 hereof.
Section 5. EXERCISE OF WARRANTS; PAYMENT OF WARRANT SOLICITATION FEE.
Subject to the provisions of this Agreement and applicable sate and federal
securities laws, each registered holder of Warrants shall have the right, at any
time during the Exercise Period, to exercise such Warrants and purchase the
number of fully paid and non- assessable shares of Common Stock specified in
such Warrants upon presentation and surrender of such Warrants to the Company at
the corporate office of the Warrant Agent, with the exercise form on the reverse
thereof duly executed, and upon payment to the Company of the Warrant Price,
determined in accordance with the provisions of Sections 2, 9 and 10 of this
Agreement, for the number of Securities in respect of which such Warrants are
then exercised. Payment of such Warrant Price shall be made in cash or by
certified or bank check payable to the Company. Subject to Section 6 hereof,
upon such surrender of Warrants and payment of the Warrant Price, the Warrant
Agent on behalf of the Company shall cause to be issued and delivered with all
reasonable dispatch to or upon the written order of the registered holder of
such Warrants and in such name or names as such registered holder may designate,
a certificate or certificates for the number of full shares of Common Stock so
purchased upon the exercise of such Warrants. 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 shares of
Common Stock immediately prior to the close of business on the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid. The
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rights of purchase represented by the Warrants shall be exercisable during the
Exercise Period, at the election of the registered holders thereof, either as an
entirety or from time to time for a portion of the shares specified therein and,
in the event that any Warrant is exercised in respect of less than all of the
shares of Common Stock specified therein at any time prior to the date of
expiration of the Warrants, a new Warrant or Warrants will be issued to the
registered holder for the remaining number of shares of Common Stock specified
in the Warrant so surrendered, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrants pursuant to
the provisions of this Section and of Section 3 of this Agreement and the
Company, whenever requested by the Warrant Agent, will supply the Warrant Agent
with Warrants duly executed on behalf of the Company for such purpose. Upon the
exercise of any one or more Warrants, the Warrant Agent shall promptly notify
the Company in writing of such fact and of the number of securities delivered
upon such exercise and, subject to the provisions below, shall cause all
payments of an amount, in cash or by check made payable to the order of the
Company, equal to the aggregate Warrant Price for such Warrants, less any
amounts payable to the Underwriter, as provided below, to be deposited promptly
in the Company's bank account. The Company and Warrant Agent shall determine, in
their sole and absolute discretion, whether a Warrant certificate has been
properly completed for exercise by the registered holder thereof.
Anything in the foregoing to the contrary notwithstanding, no Warrant will
be exercisable and the Company shall not be obligated to deliver any securities
pursuant to the exercise of any Warrant unless at the time of exercise the
Company has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended (the "Act"), covering
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the securities issuable upon exercise of such Warrant and such registration
statement shall have been declared and shall remain effective and shall be
current, and such shares have been registered or qualified or be exempt under
the securities laws of the state or other jurisdiction of residence of the
holder of such Warrant and the exercise of such Warrant in any such state or
other jurisdiction shall not otherwise be unlawful. During the Exercise Period,
the Company shall use its best efforts to have a current registration statement
on file with the Securities and Exchange Commission covering the issuance of
Common Stock underlying the Warrants so as to permit the Company to deliver to
each person exercising a Warrant a prospectus meeting the requirements of
Section 10(a) (3) of the Act and otherwise complying therewith, and will deliver
such prospectus to each such person. During the Exercise Period, the Company
shall also use its best efforts to effect appropriate qualifications of the
Common Stock issuable upon exercise of the Warrants under the laws and
regulations of the states and other jurisdictions in which the Common Stock and
Warrants are sold by the Underwriters in the IPO in order to comply with
applicable laws in connection with the exercise of the Warrants.
(a) If at the time of exercise of any Warrant (i) the market price of
the Common Stock is greater than the then exercise price of the Warrant, (ii)
the exercise of the Warrant is solicited by the Underwriter at such time as it
is a member of the National Association of Securities Dealers, Inc. ("NASD") and
the Underwriter is designated in writing by the holder of the Warrants as the
NASD member soliciting the exercise, (iii) the Warrant is not held in a
discretionary account, (iv) disclosure of the compensation arrangement is made
in documents provided to the holders of the Warrants, and (v) the solicitation
of the exercise of the Warrant is not in violation of Rule 101 of Regulation M
(as such rule or any successor rule may be in effect as of such time of
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exercise) promulgated under the Securities Exchange Act of 1934, as amended, or
otherwise in violation of any undertakings made by the Underwriters to the NASD,
then the Underwriter shall be entitled to receive from the Company following
exercise of each of the Warrants so exercised a fee of five percent (5%) of the
aggregate exercise price of the Warrants so exercised (the "Solicitation Fee").
The procedures for payment of the Exercise Fee are set forth in Section 5(b)
below.
(b) (i) Within five (5) days after the last day of each month
commencing with October 2001, the Warrant Agent will notify the Underwriter of
each Warrant certificate which has been properly completed for exercise by
holders of Warrants during or prior to the last month. The Warrant Agent will
provide the Underwriter with such information, in connection with the exercise
of each Warrant, as the Underwriter shall reasonably request.
(ii) The Company hereby authorizes and instructs the Warrant
Agent to deliver to the Underwriter the Solicitation Fee, if payable, in respect
of each exercise of Warrants, promptly after receipt by the Warrant Agent from
the Company of a check payable to the order of the Underwriter in the amount of
such Solicitation Fee. In the event that a solicitation Fee is paid to the
Underwriter with respect to a Warrant which the Company or the Warrant Agent
determines is not properly completed for exercise or in respect of which the
Underwriter is not entitled to a Solicitation Fee, the Underwriter will return
such Solicitation Fee to the Warrant Agent which shall forthwith return such fee
to the Company.
The Underwriter and the Company may at any time during business hours
examine the records of the Warrant Agent, including its ledger of original
Warrant certificates returned to the Warrant Agent upon exercise of Warrants.
Notwithstanding any provision to the contrary, the provisions of paragraph 5 (a)
and 5 (b) may not be modified, amended or deleted without the prior written
consent of the Underwriter.
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Section 6. PAYMENT OF TAXES. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Stock issuable upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for shares of Common Stock in a name
other than that of the registered holder of Warrants in respect of which such
shares are issued, and in such case neither the Company nor the Warrant Agent
shall be required to issue or deliver any certificate for shares of Common Stock
or any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid or that no such tax is required to be paid.
Section 7. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company may, in its discretion,
issue and the Warrant Agent shall countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant, or in lieu of
and in substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company and the Warrant Agent
of such loss, theft or destruction and, in case of a lost, stolen or destroyed
Warrant, indemnity or bond, if requested, also satisfactory to them. Applicants
for such substitute Warrants shall also comply with such other reasonable
regulations and pay such reasonable charges as the Company or the Warrant Agent
may prescribe.
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Section 8. RESERVATION OF COMMON STOCK. There have been reserved, and 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 the rights of purchase represented by the Warrants, and the transfer agent
for the shares of Common Stock and every subsequent transfer agent for any
shares of Common Stock issuable upon the exercise of any of the aforesaid rights
of purchase are irrevocably authorized and directed at all times to reserve such
number of authorized shares of Common Stock as shall be required for such
purpose. The Company agrees that all shares of Common Stock issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates for such
shares against payment of the Warrant Price therefor, validly issued, fully paid
and nonassessable and listed on any national securities exchange or included in
any interdealer automated quotation system upon or in which the other shares of
outstanding Common Stock are then listed or included. The Company will keep a
copy of this Agreement on file with the transfer agent for the shares of Common
Stock (which may be, but is not required to be the Warrant Agent) and with every
subsequent transfer agent for any shares of Common Stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is irrevocably authorized to requisition from time to time from such
transfer agent stock certificates required to honor outstanding Warrants. The
Company will supply such transfer agent with duly executed stock certificates
for that purpose. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be canceled by the Warrant Agent and shall thereafter be
delivered to the Company, and such canceled Warrants shall constitute sufficient
evidence of the number of shares of Common Stock which have been issued upon the
exercise of such Warrants. Promptly after the date of expiration of the
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Warrants, the Warrant Agent shall certify to the Company the total aggregate
amount of Warrants then outstanding, and thereafter no shares of Common Stock
shall be subject to reservation in respect of such Warrants which shall have
expired.
Section 9. ADJUSTMENTS OF WARRANT EXERCISE PRICE AND NUMBER OF SECURITIES.
(a) Computation of Adjusted Price. Except as hereinafter provided, in
case the Company shall, at any time after the date of closing of the sale of
securities pursuant to the Offering herein, (the "Closing Date"), issue or sell
any shares of Common Stock (other than the issuances or sales referred to in
Section 9 (f) hereof), including shares held in the Company's treasury and
shares of Common Stock issued upon the exercise of any options, rights or
warrants to subscribe for shares of Common Stock (other than the issuances or
sales of Common Stock pursuant to rights to subscribe for such Common Stock
distributed pursuant to Section 9(h) hereof) and shares of Common Stock issued
upon the direct or indirect conversion or exchange of securities for shares of
Common Stock (i) for a consideration per share less than the lesser of (A) the
"Market Price" (as defined in Section 9(a)(vi) hereof) per share of Common Stock
on the trading day immediately preceding such issuance or sale and (B) the
Warrant Price in effect immediately prior to such issuance or sale, or (ii)
without consideration, then forthwith upon such issuance or sale, the Warrant
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) determined by multiplying the Warrant
Price in effect immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the Warrant
Price immediately prior to such issuance or sale plus (2) the consideration
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received by the Company upon such issuance or sale, and the denominator of which
shall be the product of (x) the total number of shares of Common Stock
outstanding immediately after such issuance or sale, multiplied by (y) the
Warrant Price immediately prior to such issuance or sale; provided, however,
that in no event shall the Warrant Price be adjusted pursuant to this
computation to an amount in excess of the Warrant Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock, as provided by Section 9(c) hereof.
For the purposes of any computation to be made in accordance with this
Section 9(a), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for
a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if such securities shall
be sold to underwriters or dealers for public offering without a subscription
offering, the public offering price) before deducting therefrom any compensation
paid or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
lesser of the value for such transactions entered by the Company for such
transactions, or the value of such consideration as determined in good faith by
the independent auditors of the Company.
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(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (ii) of this Section 9(a).
(v) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable upon
the exercise of options, warrants or rights and upon the conversion or exchange
of convertible or exchangeable securities.
(vi) As used herein, the phrase "Market Price" at any date shall
be deemed to be the average of the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the last three trading days, in either case as officially reported by
the principal securities exchange on which the Common Stock is listed or
admitted to trading or as reported by the Nasdaq Stock Market, Inc. ("Nasdaq")
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or, if the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq National Market, but is quoted on
The Nasdaq SmallCap Market or the NASD's Electronic Bulletin Board, the closing
bid quotation as reported by Nasdaq or the National Quotation Bureau
Incorporated or a similar organization, or if the Common Stock is not quoted on
Nasdaq or the Electronic Bulletin Board, as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it for the day immediately preceding such issuance or
sale, the day of such issuance or sale and the day immediately after such
issuance or sale. If the Common Stock is listed or admitted to trading on a
national securities exchange and also quoted on the Nasdaq National Market, the
Market Price shall be determined as hereinabove provided by reference to the
prices reported in the Nasdaq National Market; provided that if the Common Stock
is listed or admitted to trading on the New York Stock Exchange, the Market
Price shall be determined as hereinabove provided by reference to the prices
reported by such exchange.
(b) Options, Rights, Warrants and Convertible and Exchangeable
Securities. Except in the case of the Company issuing rights to subscribe for
shares of Common Stock distributed pursuant to Section 9(h) hereof, if the
Company shall at any time after the Closing Date issue options, rights or
warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, in each case other
than the issuances or sales referred to in section 9 (f) hereof, (i) for a
consideration per share less than the lesser of (a) the Warrant Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, and (b) the Market Price on the trading
day immediately preceding such issuance, or (ii) without consideration, the
Warrant Price in effect immediately prior to the issuance of such options,
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rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 9(a) hereof; provided that:
(i) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable under all the outstanding options, rights or warrants
shall be deemed to be issued and outstanding at the time all the outstanding
options, rights or warrants were issued, and for a consideration equal to the
minimum purchase price per share provided for in the options, rights or warrants
at the time of issuance, plus the consideration (determined in the same manner
as consideration received on the issue or sale of shares in accordance with the
terms of Section 9(a)), if any, received by the Company for the options, rights
or warrants, and if no minimum purchase price is provided in the options, rights
or warrants, then the minimum purchase price shall be equal to zero; provided,
however, that upon the expiration or other termination of the options, rights or
warrants, if any thereof shall not have been exercised, the number of shares of
Common Stock deemed to be issued and outstanding pursuant to this subsection (b)
(and for the purposes of subsection (v) of Section 9(a) hereof) shall be reduced
by such number of shares as to which options, warrants or rights shall have
expired or terminated unexercised, and such number of shares shall no longer be
deemed to be issued and outstanding, and the Warrant Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not have expired or terminated unexercised.
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(ii) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale of
shares of Common Stock in accordance with the terms of Section 9 (a)) received
by the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof; provided,
however, that upon the expiration or other termination of the right to convert
or exchange such convertible or exchangeable securities (whether by reason of
redemption or otherwise), the number of shares deemed to be issued and
outstanding pursuant to this subsection (ii) (and for the purpose of subsection
(v) of Section 9(a) hereof) shall be reduced by such number of shares as to
which the conversion or exchange rights shall have expired or terminated
unexercised, and such number of shares shall no longer be deemed to be issued
and outstanding, and the Warrant Price then in effect shall forthwith be
readjusted and thereafter be the price which it would have been had adjustment
been made on the basis of the issuance only of the shares actually issued or
issuable upon the conversion or exchange of those convertible or exchangeable
securities as to which the conversion or exchange rights shall not have expired
or terminated unexercised. No adjustment will be made pursuant to this
subsection (ii) upon the issuance by the Company of any convertible or
exchangeable securities pursuant to the exercise of any option, right or warrant
exercisable therefor, to the extent that adjustments in respect of such options,
rights or warrants were previously made pursuant to the provisions of subsection
(i) of this subsection 9 (b) .
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(iii) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (i) of
this Section 9 (b), or in the price per share at which the securities referred
to in subsection (ii) of this Section 9(b) are convertible or exchangeable, or
if any such options, rights or warrants are exercised at a price greater than
the minimum purchase price provided for in such options, rights or warrants, or
any such securities are converted or exercised for more than the minimum
consideration receivable by the Company upon such conversion or exchange, the
options, rights or warrants or conversion or exchange rights, as the case may
be, shall be deemed to have expired or terminated on the date when such price
change became effective in respect of shares not theretofore issued pursuant to
the exercise or conversion or exchange thereof, and the Company shall be deemed
to have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities; provided, however,
that no adjustment shall be made pursuant to this subsection (iii) with respect
to any change in the price per share provided for in any of the options, rights
or warrants referred to in subsection (b) (i) of this Section 9 (b), or in the
price per share at which the securities referred to in subsection (b) (ii) of
this Section 9(b) are convertible or exchangeable, which change results from the
application of the anti-dilution provisions thereof in connection with an event
for which, subject to subsection (iv) of this Section 9(f), an adjustment to the
Warrant Price and the number of securities issuable upon exercise of the
Warrants will be required to be made pursuant to this Section 9.
17
(c) Subdivision and Combination. In case the Company shall at any time
after the Closing Date subdivide or combine the outstanding shares of Common
Stock, the Warrant Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Warrant Price pursuant to the provisions of this Section 9, the number of shares
of Common Stock issuable upon the exercise of the Warrants shall be adjusted to
the nearest full whole number by multiplying a number equal to the Warrant Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Warrant Price.
(e) Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value, or from no par value to par value, or as
a result of a subdivision or combination), or in the case of any consolidation
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the shares of
Common Stock underlying the Warrants immediately prior to any such events at a
price equal to the product of (x) the number of shares issuable upon exercise
18
of the Warrants and (y) the Warrant Price in effect immediately prior to the
record date for such reclassification, change, consolidation, merger, sale or
conveyance as if such Holder had exercised the Warrant.
(f) No Adjustment of Warrant Price in Certain Cases. Notwithstanding
anything herein to the contrary, no adjustment of the Warrant Price shall be
made:
(i) Upon the issuance or sale to the Underwriters of warrants to
purchase units consisting of 2 shares of Common Stock and Common Stock Purchase
Warrants (collectively, the "Underwriters' Warrant") in connection with the
Offering, the shares of Common Stock or Common Stock Purchase Warrants issuable
upon the exercise of the Underwriters' Warrant or the shares of Common Stock
issuable upon exercise of the Common Stock Purchase Warrants issuable upon
exercise of the Underwriters' Warrant; or
(ii) Upon the issuance or sale of (A) the shares of Common Stock
or Warrants issued by the Company in the Offering (including the Warrants issued
pursuant to the Underwriter's option) or other shares of Common Stock or
warrants issued by the Company upon consummation of the Offering, or (B) the
shares of Common Stock (or other securities) issuable upon exercise of Warrants;
or
(iii) Upon the issuance or sale by the Company of any shares of
Common Stock in connection with any merger, acquisition or other business
combination.
(iv) Upon the issuance or sale by the Company of any shares or
securities that would have normally triggered the anti-dilution provisions
herein, if such offer or grant is extended to the Warrant Holders as well.
19
(g) Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time after the Closing
Date and prior to the exercise or expiration of all Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock or a cash
dividend or distribution payable out of current or retained earnings) or
otherwise distribute to the holders of Common Stock any monies, assets,
property, rights, evidences of indebtedness, securities (other than such a cash
dividend or distribution or dividend consisting solely of shares of Common
Stock), whether issued by the Company or by another person or entity, or any
other thing of value, the Holders of the unexercised Warrants shall thereafter
be entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise thereof, to receive, only upon the exercise of such
Warrants, the same monies, property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled to
receive at the time of such dividend or distribution as if the Holders were the
owners of the shares of Common Stock underlying such Warrants. At the time of
any such dividend or distribution, the Company shall make appropriate reserves
to ensure the timely performance of the provisions of this Section 9(g).
(h) Subscription Rights for Shares of Common Stock or Other
Securities. In case the Company or an affiliate of the Company shall at anytime
after the date hereof and prior to the exercise of all the Warrants issue any
rights to subscribe for shares of Common Stock or any other securities of the
Company or of such affiliate to all the holders of Common Stock, the Holders of
the unexercised Warrants shall be entitled, in addition to the shares of Common
Stock or other securities receivable upon the exercise of the Warrants, to
receive such rights at the time such rights are distributed to the other
stockholders of the Company but only to the extent of the number of shares of
Common Stock, if any, for which the Warrants remain exercisable.
20
(i) Notice in Event of Dissolution. In case of the dissolution,
liquidation or winding-up of the Company, all rights under the Warrants shall
terminate on a date fixed by the Company, such date to be no earlier than ten
(10) days prior to the effectiveness of such dissolution, liquidation or
winding-up and not later than five (5) days prior to such effectiveness. Notice
of such termination of purchase rights shall be given to each registered holder
of the Warrants, as the same shall appear on the books of the Company maintained
by the Warrant Agent, by registered mail at least thirty (30) days prior to such
termination date.
(j) Computations. The Company may retain a firm of independent public
accountants (who may be any such firm regularly employed by the Company) to make
any computation required under this Section 9, and any certificate setting forth
such computation signed by such firm shall be conclusive evidence of the
correctness of any computation made under this Section 9.
Section 10. FRACTIONAL INTERESTS. The Warrants may only be exercised to
purchase full shares of Common Stock and the Company shall not be required to
issue fractions of shares of Common Stock on the exercise of Warrants. However,
if a Warrantholder exercises all Warrants then owned of record by him and such
exercise would result in the issuance of a fractional share, the Company will
pay to such Warrantholder, in lieu of the issuance of any fractional share
otherwise issuable, an amount of cash based on the Market Price on the last
trading day prior to the exercise date.
21
Section 11. NOTICES TO WARRANTHOLDERS.
(a) Upon any adjustment of the Warrant Price and the number of shares
of Common Stock issuable upon exercise of a Warrant, then and in each such case,
the Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Warrant Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. The Company
shall also mail such notice to the holders of the Warrants at their respective
addresses appearing in the Warrant register. Failure to give or mail such
notice, or any defect therein, shall not affect the validity of the adjustments.
(b) In case at any time after the Closing Date:
(i) the Company shall pay dividends payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends) to the
holders of Common Stock; or
(ii) the Company shall offer for subscription pro rata to all of
the holders of Common Stock any additional shares of stock of any class or other
rights; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of substantially all of its assets to another
corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; then in any one or more of such cases,
the Company shall give written notice to the Warrant Agent and the holders of
the Warrants in the manner set forth in Section 11(a) of the date on which (A) a
record shall be taken for such dividend, distribution or subscription rights,
22
or (B) such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, as the case
may be. Such notice shall be given at least ten (10) days prior to the action in
question and not less than ten (10) days prior to the record date in respect
thereof. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any of the matters set forth in this Section 11(b).
(c) The Company shall cause copies of all financial statements and
reports, proxy statements and other documents that are sent to its stockholders
to be sent by an identical class of mail, postage prepaid, on the date of
mailing to such stockholders, to each registered holder of Warrants at his
address appearing in the Warrant register as of the record date for the
determination of the stockholders entitled to such documents.
Section 12. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS.
(a) The Warrant Agent shall promptly forward to the Company all monies
received by the Warrant Agent for the purchase of shares of Common Stock through
the exercise of these Warrants.
(b) The Warrant Agent shall keep copies of this Agreement available
for inspection by holders of Warrants during normal business hours.
23
Section 13. REDEMPTION OF WARRANTS. The Warrants are redeemable by the
Company commencing on the date that is one year from the date of this Agreement,
(or earlier with the consent of the Underwriter), in whole or in part, on not
less than thirty (30) days' prior written notice (the date of notice being
referred to as the "Notice Date" and the date set for redemption is referred to
as the "Redemption date") at a redemption price of $.10 per Warrant, provided
the closing bid quotation of the Common Stock as reported on The Nasdaq SmallCap
Market, if traded thereon, or if not traded thereon, the closing sale price if
listed on a national securities exchange or the Nasdaq National Market (or other
reporting system that provides last sale prices), has averaged 150% of the then
current Warrant exercise price (initially $____ per share, subject to
adjustment), for 20 trading days during the 30 trading day period ending 15 days
prior to the Notice Date, subject to the right of the holder to exercise such
Warrants prior to the Redemption Date. Any redemption in part shall be made pro
rata to all Warrant holders. The redemption notice shall be mailed to the
holders of the Warrants at their respective addresses appearing in the Warrant
register as of the Notice Date. Any such notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given in accordance with
this Agreement whether or not the registered holder receives such notice. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
registered holder of a Warrant (i) to whom notice was not mailed or (ii) whose
notice was defective. An affidavit of the Warrant Agent or the Secretary or
Assistant Secretary of the Company that notice of redemption has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein. Holders of the Warrants will have exercise rights until the close of
business on the day immediately preceding the date fixed for redemption.
24
Unless otherwise specified herein, sending a notice of redemption shall not
obligate the Company to redeem such Warrants if market conditions or the
circumstances of the Company on the Redemption Date, have changed materially.
Section 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation or company which may succeed to the corporate trust business of the
Warrant Agent by any merger or consolidation or otherwise shall be the successor
to the Warrant Agent hereunder without the execution or filing of any paper or
any further act on the part of any of the parties hereto; provided, that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrants so countersigned. In all such cases such Warrants shall have
the full force provided in the Warrants and in this Agreement.
Section 15. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
25
(a) The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except as such
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrants
except as herein expressly provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants in this Agreement or in the Warrants
to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant for any action taken in reliance on
any notice, resolution, waiver, consent, order, certificate or other instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
26
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expenses unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding. Any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the registered
holders of the Warrants, as their respective rights and interests may appear.
(g) The Warrant Agent and any stockholder, director, officer, partner
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to 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.
(h) The Warrant Agent shall act hereunder solely as agent and its
duties shall be determined solely by the provisions hereof.
27
(i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any such attorneys, agents or employees or for any
loss to the Company resulting from such neglect or misconduct, provided
reasonable care had been exercised in the selection and continued employment
thereof.
(j) Any request, direction, election, order or demand of the Company
shall be sufficiently evidenced by an instrument signed in the name of the
Company by its President or a Vice President or its Secretary or an Assistant
Secretary or its Treasurer or an Assistant Treasurer (unless other evidence in
respect thereof be herein specifically prescribed); and any resolution of the
Board of Directors may be evidenced to the Warrant Agent by a copy thereof
certified by the Secretary or an Assistant Secretary of the Company.
Section 16. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by mailing such notice to
the holders at their respective addresses appearing on the Warrant register, of
such resignation, specifying a date when such resignation shall take effect. The
Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and the like mailing of notice to the holders of the Warrants. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
action, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Warrant Agent or after the
28
Company has received such notice from a registered holder of a Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then
the registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or by such a court,
shall be a bank or trust company, in good standing, incorporated under New York
or federal law. After appointment, the successor Warrant Agent shall be vested
with the same powers, rights, duties and responsibility as if it had been
originally named as Warrant Agent without further act or deed and the former
Warrant Agent shall deliver and transfer to the successor Warrant Agent all
canceled Warrants, records and property at the time held by it hereunder, and
execute and deliver any further assurance or conveyance necessary for this
purpose. Failure to file or mail any notice provided for in this Section,
however, or any defect therein, shall not affect the validity of the resignation
or removal of the Warrant Agent or the appointment of the successor Warrant
Agent, as the case may be.
Section 17. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of
any transfer agent (other than Corporate Stock Transfer, Inc.) for the shares of
Common Stock or of any subsequent transfer agent for the shares of Common Stock,
the Company will file with the Warrant Agent a statement setting forth the name
and address of such transfer agent.
Section 18. NOTICES. Any notice pursuant to this Agreement to be given by
the Warrant Agent or the registered holder of any Warrant to the Company, shall
be sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another is filed in writing by the Company with the Warrant Agent) as
follows:
29
Protosource Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
and a copy thereof to:
Sichenzia, Ross & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Any notice pursuant to this Agreement to be given by the Company or the
registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:
Corporate Stock Transfer, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Any notice pursuant to this Agreement to be given by the Warrant Agent or
the Company to the Underwriter shall be sufficiently given if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Warrant Agent) as follows:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Wise & Company, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and a copy thereof to:
Snow ▇▇▇▇▇▇ ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
30
Section 19. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
materially adversely affect the interest of the holders of Warrants; and in
addition the Company and the Warrant Agent may modify, supplement or alter this
Agreement with the consent in writing of the registered holders of the Warrants
representing not less than a majority of the Warrants then outstanding.
Section 20. NEW YORK CONTRACT. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and shall be construed in accordance with the laws of New York without
regard to the conflicts of law principles thereof.
Section 21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
Section 22. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
31
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
CORPORATE STOCK TRANSFER, INC.
By: ________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
President
PROTOSOURCE CORPORATION
By: ________________________________
Name:
Title:
▇▇▇▇▇▇▇ DAVIDSON SECURITIES
CORPORATION
By: ________________________________
Name:
Title:
32
No. WB-_______________________ Void After_____, 2006
Class B Warrants
REDEEMABLE CLASS B WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
PROTOSOURCE CORPORATION
CUSIP ___________
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number
of the Class B Redeemable Warrants (the "Warrants") specified above. Each
Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock, no
par value (the "Common Stock"), of Protosource Corporation, a California
corporation (the "Company"), at any time from [February__, 2001] (the "Initial
Warrant Exercise Date") , and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Exercise Form on the reverse hereof duly executed, at the corporate office
of Corporate Stock Transfer, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as
Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of
$_____, subject to adjustment (the "Exercise Price"), in lawful money of the
United States of America in cash or by certified or bank check made payable to
the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Class B Warrant Agreement, dated as of [February___, 2001] (the
"Warrant Agreement"), among the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Securities Corporation
(the "Underwriter") and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Exercise Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares will be issued. In the case of the
exercise of less than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
1
The term "Expiration Date" shall mean 5:00 p.m. (New York City time) on [
February __, 2006; provided, that if such date is not a business day, it shall
mean 5:00 p.m., New York City time, on the next following business day. For
purposes hereof, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in New York City, New
York, are authorized or obligated by law to be closed.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of the Warrants represented hereby unless at the time of exercise
the Company has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended (the "Act"), covering the
securities issuable upon exercise of the Warrants represented hereby and such
registration statement has been declared and shall remain effective and shall be
current, and such securities have been registered or qualified or be exempt
under the securities laws of the state or other jurisdiction of residence of the
Registered Holder and the exercise of the Warrants represented hereby in any
such state or other jurisdiction shall not otherwise be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon the presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder, as such, shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, at a redemption price of $.10 per
Warrant, at any time commencing one year from the Initial Warrant Exercise Date
(or earlier with the consent of the Underwriter), provided that the closing bid
quotation of the Common Stock as reported on The Nasdaq SmallCap Market, if
traded thereon, or if not traded thereon, the closing sale price if listed on a
national exchange or the Nasdaq National Market (or other reporting system that
provides last sale prices), shall have been at least 150% of the then current
Warrant exercise price (initially $____ per share, subject to adjustment), for
20 trading days during the 30 trading day period ending 15 days prior to the
date on which the Company gives notice of redemption, subject to the right of
the holder to exercise such Warrants prior to redemption, as provided herein.
Notice of redemption (the "Notice of Redemption") shall be given by the
2
Company no less than thirty days before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no right with respect to this Warrant except to
receive the $0.10 per Warrant upon surrender of this Certificate.
Under certain circumstances described in the Warrant Agreement, the
Underwriter shall be entitled to receive as a solicitation fee an aggregate of
five percent (5%) of the Exercise Price of the Warrants represented hereby.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York without regard to the conflicts of law
principles thereof.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: [February___, 2001]
SEAL PROTOSOURCE CORPORATION
By: _______________________________
Name:
Title:
Attest
By: _______________________________
Name:
Title: Secretary
COUNTERSIGNED:
CORPORATE STOCK TRANSFER, INC.
as Warrant Agent
By: __________________________________________________
Name:
Title:
3
EXERCISE FORM
-------------
To Be Executed by the Registered Holder
in order to Exercise Redeemable Class B Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
--------------------------
--------------------------
--------------------------
(please print or type name and address)
and be delivered to
--------------------------
--------------------------
--------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. The exercise of this Warrant was solicited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
and Company, Inc.[ ]
2. The exercise of this Warrant was solicited by
---------------------------------------------------------------
3. If the exercise of this Warrant was not solicited, please check the
following box. |_|
4
Dated: _____________________________ X__________________________________
----------------------------------
----------------------------------
Address
-----------------------------------
Social Security or Taxpayer
Identification Number
-----------------------------------
Signature Guaranteed
5
ASSIGNMENT
----------
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, ____________________________, hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
-------------------------
-------------------------
-------------------------
(please print or type name and address)
________________________ of the Redeemable Class B Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints
___________________________________ as its/his/her attorney-in-fact to transfer
this Warrant Certificate on the books of the Company, with full power of
substitution in the premises.
Dated: ______________________ x_______________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE EXERCISE FORM MUST CORRESPOND TO THE NAME
AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION OR OTHER
ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER AGENTS
MEDALLION PROGRAM.
6
