EXHIBIT 10.3
FORM OF WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
SELECT COMFORT CORPORATION
R-1
THIS CERTIFIES THAT, for value received, __________________ (herein called
"Purchaser"), or registered assigns, is entitled to subscribe for and purchase
from Select Comfort Corporation, a corporation organized and existing under the
laws of the State of Minnesota (herein called the "Company"), at the price
specified below (subject to adjustment as noted below) at any time from and
after the date hereof to and including the fifth anniversary of the date hereof,
_____________ (________) fully paid and nonassessable shares of the Company's
Common Stock (subject to adjustment as noted below). This Warrant has been
issued in connection with the purchase from the Company by Purchaser, pursuant
to a Note Purchase Agreement dated June 1, 2001 among the Company and the
Purchasers named in Schedule 1 thereto, as such Schedule 1 is amended or deemed
amended from time to time in accordance with the terms of the Note Purchase
Agreement (the "Purchase Agreement"), of one of several Senior Secured
Convertible Notes of the Company payable to such Purchasers, or registered
assigns, in the aggregate original principal amount of up to $12,000,000
(together with any note or notes issued in exchange or substitution therefor,
collectively, the "Notes").
The warrant purchase price (subject to adjustment as noted below) shall be
$1.00 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant (properly endorsed
if required, and with the Subscription Form attached hereto, or a reasonable
facsimile, duly completed and executed) at the principal office of the Company
and upon payment to the Company by check of the purchase price for the shares to
be purchased upon such exercise. The Company agrees that the shares so purchased
shall be and are deemed to be issued to the holder hereof as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as aforesaid. Subject to
the provisions of the next succeeding paragraph, certificates for the shares of
stock so purchased shall be delivered to the holder hereof within a reasonable
time, not exceeding ten days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend under the heading
"Restriction on Transfer" below.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of issue or transfer upon exercise of
the subscription rights evidenced by this Warrant, a sufficient number of shares
of its Common Stock to provide for the exercise of the rights represented by
this Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of issuance
of this Warrant, be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the warrant purchase price, the holder of this
Warrant shall thereafter be entitled to purchase, at the warrant purchase price
resulting from such adjustment, the number of shares obtained by multiplying the
warrant purchase price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the warrant purchase price
resulting from such adjustment.
(b) If and whenever the conversion price of the Notes is increased or
reduced pursuant to the provisions of paragraph 2(c) thereof, then, effective
simultaneously with such adjustment, the warrant purchase price shall be
increased or reduced, as the case may be, to equal the conversion price of the
Notes in effect immediately after such adjustment. For purposes hereof, the
Notes shall be treated as if they have remained outstanding during the entire
period from and after the issuance of this Warrant to and including the
expiration or earlier exercise in full of this Warrant, regardless of whether
the Notes shall have been paid or converted in full at any time during such
period.
(c) In case the Company shall (i) declare a dividend upon the Common Stock
payable in Common Stock (other than a dividend declared to effect a subdivision
of the outstanding shares of Common Stock, as described in paragraph 2(c)(v) of
the Notes) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record
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holder of this Warrant such holder (i) had been the record holder of the number
of shares of Common Stock then received, and (ii) had retained all dividends or
distributions in stock or securities (including Common Stock or Convertible
Securities, and any rights or options to purchase any Common Stock or
Convertible Securities) payable in respect of such Common Stock or in respect of
any stock or securities paid as dividends or distributions and originating
directly or indirectly from such Common Stock. For the purposes of the
foregoing, a dividend or distribution other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the fair value of such dividend
or distribution as determined by the Board of Directors of the Company.
(d) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation or entity, or the sale of all or substantially all of its assets to
another corporation or entity shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter have
the right to purchase and receive, upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of or in addition to (as the
case may be) the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby (but after giving effect to any adjustment to such number of
shares resulting from such reorganization, reclassification, consolidation,
merger or sale), and in any such case appropriate provision shall be made with
respect to the rights and interests of the holder of this Warrant to the end
that the provisions hereof (including without limitation provisions for
adjustments of the warrant purchase price and of the number of shares
purchasable upon the exercise of this Warrant) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company shall not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation or entity (if other than the Company) resulting from
such consolidation or merger or the corporation or entity purchasing such assets
shall assume, by written instrument executed and mailed (by certified mail,
postage prepaid and return receipt requested) to the registered holder hereof at
its address for notices under the Purchase Agreement, the obligation to deliver
to such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to purchase.
(e) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof to the registered holder
of this Warrant, which notice shall state the warrant purchase 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 this
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Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(f) In case any time:
(1) the Company shall declare any cash dividend on its Common Stock at
a rate in excess of the rate of the last cash dividend theretofore paid;
(2) the Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends)
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other
rights;
(4) 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 all or substantially all of its assets to, another
corporation or entity; or
(5) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice to
the registered holder of this Warrant of the date on which (aa) the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, or (bb) 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 written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
(g) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(h) No fractional shares of Common Stock shall be issued upon the exercise
of this Warrant, but, instead of any fraction of a share which would otherwise
be issuable, the Company shall pay a cash adjustment (which may be effected as a
reduction of the amount to
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be paid by the holder hereof upon such exercise) in respect of such fraction in
an amount equal to the same fraction of the market price per share of Common
Stock as of the close of business on the effective date of such exercise.
"Market price" for purposes of this paragraph 4(h) (and for purposes of
paragraph 11(c) hereof) shall mean, if the Common Stock is traded on a
securities exchange or on The NASDAQ Stock Market, the closing sales price of
the Common Stock on such exchange or market, or, if the Common Stock is
otherwise traded in the over-the-counter market, the closing bid price, in each
case averaged over a period of ten consecutive trading days ending on the date
as of which "market price" is being determined. If at any time the Common Stock
is not traded on an exchange or The NASDAQ Stock Market, or otherwise traded in
the over-the-counter market, the "market price" shall be deemed to be the higher
of (i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided, however, that the shares purchasable pursuant to this Warrant shall
include shares designated as Common Stock of the Company on the date of original
issue of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(d)
above.
6. This Warrant shall not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give written
notice to the Company before transferring this Warrant or transferring any
Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such xxxxxx's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Unless there
is then in effect a registration statement under the Securities Act of 1933 and
all applicable state securities laws covering such transfer or disposition, such
holder shall also provide the Company with a written opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
of this Warrant or disposition of shares may be effected without registration or
qualification (under any federal or state law) of this Warrant or the shares of
Common Stock issuable or issued upon the exercise hereof. Upon receipt of such
written notice and, if required, opinion by the Company, such holder shall be
entitled to transfer this Warrant, or to exercise this Warrant in accordance
with its terms and dispose of the shares received upon such exercise or to
dispose of shares of Common Stock received upon the previous exercise of this
Warrant, all in accordance with the terms of the notice delivered
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by such holder to the Company, provided that an appropriate legend respecting
the aforesaid restrictions on transfer and disposition may be endorsed on this
Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, at the principal office
of the Company by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that the bearer of
this Warrant, when properly endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the holder
hereof at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by said holder hereof at the time of such
surrender.
10. The holder of this Warrant and of the Common Stock issuable or issued
upon the exercise hereof shall be entitled to the registration rights set forth
in the Registration Rights Agreement entered into pursuant to the Purchase
Agreement.
11. (a) In addition to and without limiting the rights of the holder of
this Warrant under the terms of this Warrant, the holder of this Warrant shall
have the right (the "Conversion Right") to convert this Warrant or any portion
thereof into shares of Common Stock as provided in this paragraph 11 at any time
or from time to time prior to its expiration. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the holder of this
Warrant, without payment by the holder of any exercise price or any cash or
other consideration, that number of shares of Common Stock equal to the quotient
obtained by dividing the Net Value (as hereinafter defined) of the Converted
Warrant Shares by the fair market value (as defined in paragraph (c) below) of a
single share of Common Stock, determined in each case as of the close of
business on the Conversion Date (as hereinafter defined). The "Net Value" of the
Converted Warrant Shares shall be determined by subtracting the aggregate
warrant purchase price of the Converted Warrant Shares from the aggregate fair
market value of the Converted Warrant Shares. Notwithstanding anything in this
paragraph 11 to the contrary, the Conversion Right cannot be exercised with
respect to a number of Converted Warrant Shares having a Net Value below $100.
No fractional shares shall be issuable upon exercise of the Conversion Right,
and if the number of shares to be issued in accordance with the foregoing
formula is other than a whole number, the Company
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shall pay to the holder of this Warrant an amount in cash equal to the fair
market value of the resulting fractional share.
(b) The Conversion Right may be exercised by the holder of this Warrant by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in paragraph (a) above as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), but not later than the expiration date of this Warrant.
Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right, together with a check in payment of any fractional share and,
in the case of a partial exercise, a new warrant evidencing the shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder of this Warrant within 15 days following the Conversion
Date.
(c) For purposes of this paragraph 11, the "fair market value" of a share
of Common Stock as of a particular date shall be its "market price" as of such
date, calculated as described in paragraph 4(h) hereof.
12. All questions concerning this Warrant will be governed and interpreted
and enforced in accordance with the internal law of the State of Minnesota. All
notices hereunder shall be in writing and shall be given in the manner and with
the effect provided in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer and this Warrant to be dated as of June 6, 2001.
SELECT COMFORT CORPORATION
By:
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Senior Vice President
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RESTRICTION ON TRANSFER
The securities evidenced hereby may not be transferred without (i) the
opinion of counsel reasonably satisfactory to the Company that such transfer may
be lawfully made without registration under the Federal Securities Act of 1933
and all applicable state securities laws or (ii) such registration.
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FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________ this Warrant, and
appoints __________________________________________________ to transfer this
Warrant on the books of the Company with the full power of substitution in the
premises.
Dated:
In the presence of:
-----------------------------
(Signature must conform in
all respects to the name of
the holder as specified on
the face of this Warrant
without alteration,
enlargement or any change
whatsoever, and the signature
must be guaranteed in the
usual manner)
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SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: Select Comfort Corporation (the "Company")
The undersigned __________________________, whose social security number or
federal employer identification number is ___________________________, hereby
irrevocably elects to exercise the right of purchase represented by this Warrant
for, and to purchase thereunder, _________ shares of the Common Stock provided
for therein and tenders payment herewith to the order of the Company in the
amount of $_______, such payment being made as provided in Section 1 of this
Warrant.
The undersigned requests that certificates for such shares of Common Stock
be issued as follows:
Name:
-------------------------------------------------------------------
Address:
-------------------------------------------------------------------
Deliver to:
-------------------------------------------------------------------
Address:
-------------------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated:
Signature____________________________
Note: The signature on this
Subscription Form must
correspond with the name as
written upon the face of this
Warrant in every particular,
without alteration or
enlargement or any change
whatever.
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