Option to Purchase
_______Units
HEURISTIC DEVELOPMENT GROUP, INC.
Finder's Unit Purchase Option
Dated: _____________ ___, 1997
THIS CERTIFIES THAT XXXX XXXXXX, (herein sometimes called the "Holder") is
entitled to purchase from HEURISTIC DEVELOPMENT GROUP, INC., a Delaware
corporation (hereinafter called the "Company"), at the prices and during the
periods as hereinafter specified, up to twelve thousand (12,000) Units
("Units"), each Unit consisting of one share of the Company's Common Stock, $.01
par value, as now constituted ("Common Stock"), one Class A warrant ("Class A
Warrants") and one Class B warrant ("Class B Warrants"). Each Class A Warrant is
exercisable to purchase one share of Common Stock and one Class B Warrant at an
exercise price of $6.50 from _______, 1997 to _______ , 2002, and each Class B
Warrant is exercisable to purchase one share of Common Stock at an exercise
price of $8.75 until _______, 2002. The Class A Warrants and Class B Warrants
are herein collectively referred to as the "Warrants."
The Units have been registered under a Registration Statement on Form SB-2,
(File No. 333-_______ ) declared effective by the Securities and Exchange
Commission on _____, 1997 (the "Registration Statement". This Option, together
with options of like tenor, constituting in the aggregate options (the
"Options") to purchase 12,000 Units, subject to adjustment in accordance with
Section 8 of this Option (the "Option Units"), was originally issued pursuant to
an underwriting agreement between the Company and X.X. Xxxxx Investment Banking
Corp., as underwriter (the "Underwriter") in connection with a public offering
(the "Offering") of 1,200,000 Units (the "Public Units") through the
Underwriter, in consideration of $12 received for the Options.
Except as specifically otherwise provided herein, the Common Stock and the
Warrants issued pursuant to the option herein granted (the "Option") shall bear
the same terms and conditions as described under the caption "Description of
Securities" in the Registration Statement, and the Warrants shall be governed by
the terms of the Warrant Agreement dated as of _____, 1997 executed in
connection with such public offering (the "Warrant Agreement"), and except that
(i) the holder shall have registration rights under the Securities Act of 1933,
as amended (the "Act"), for the Option, the Common Stock and the Warrants
included in the Option Units, and the shares of Common Stock underlying the
Warrants, as more fully described in Section 6 of this Option and (ii) the
Warrants issuable upon exercise of the Option will be subject to redemption by
the Company pursuant to the Warrant Agreement at any time after the Option has
been exercised and the Warrants underlying the Option Units are outstanding. Any
such redemption shall be on the same terms and conditions as the Warrants
included in the Public Units (the "Public Warrants"). The Company will list the
Common Stock underlying this Option and, at the Holder's request the Warrants,
on the
Nasdaq National Market, the Nasdaq Small Cap Market or such other exchange or
market as the Common Stock or Public Warrants may then be listed or quoted. In
the event of any extension of the expiration date or reduction of the exercise
price of the Public Warrants, the same changes to the Warrants included in the
Option Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the prices,
subject to adjustment in accordance with Section 8 of this Option ("the
"Exercise Price"), and during the periods as follows:
(a) During the period from _______ , 1997 to _______, 1999 inclusive,
the Holder shall have no right to purchase any Option Units hereunder,
except that in the event of any merger, consolidation or sale of all or
substantially all the capital stock or assets of the Company or in the case
of any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of another corporation
into the Company) subsequent to _______, 1999 the Holder shall have the
right to exercise this Option and the Warrants included herein at such time
and receive the kind and amount of shares of stock and other securities and
property (including cash) which a holder of the number of shares of Common
Stock underlying this Option and the Warrants included in this Option would
have owned or been entitled to receive had this Option been exercised
immediately prior thereto.
(b) Between _______, 1999 and _______,2002 inclusive, the Holder shall
have the option to purchase Option Units hereunder at a price of $6.00 per
Unit.
(c) After _________, 2002 the Holder shall have no right to purchase
any Units hereunder.
2. (a) The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); and (ii) payment to the
Company of the exercise price then in effect for the number of Option Units
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any. This Option shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this Section 2, and the person or
persons in whose name or names the certificates for shares of Common Stock and
Warrants shall be issuable upon such exercise shall
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become the holder or holders of record of such Common Stock and Warrants at that
time and date. The certificates for the Common Stock and Warrants so purchased
shall be delivered to the Holder as soon as practicable but not later than ten
(10) days after the rights represented by this Option shall have been so
exercised.
(b) At any time during the period above specified, during which this Option
may be exercised, the Holder may, at its option, exchange this Option, in whole
or in part (an "Option Exchange"), into the number of Option Units determined in
accordance with this Section (b), by surrendering this Option at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice stating such Xxxxxx's intent to effect such exchange, the number of
Option Units into which this Option is to be exchanged and the date on which the
Holder requests that such Option Exchange occur (the "Notice of Exchange"). The
Option Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company (the
"Exchange Date"). Certificates for the shares of Common Stock and Warrants
issuable upon such Option Exchange and, if applicable, a new Option of like
tenor evidencing the balance of the Option Units remaining subject to this
Option, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any Option
Exchange, this Option shall represent the right to subscribe for and acquire the
number of Option Units (rounded to the next highest integer) equal to (x) the
number of Option Units specified by the Holder in its Notice of Exchange up to
the maximum number of Option Units subject to this option (the "Total Number")
less (y) the number of Option Units equal to the quotient obtained by dividing
(A) the product of the Total Number and the existing Exercise Price by (B) the
Fair Market Value. "Fair Market Value" shall mean first, if there is a trading
market as indicated in Subsection (i) below for the Units, such Fair Market
Value of the Units and if there is no such trading market in the Units, then
Fair Market Value shall have the meaning indicated in Subsections (ii) through
(v) below for the aggregate value of all shares of Common Stock and Warrants
which comprise a Unit:
(i) If the Units are listed on a national securities exchange or
listed or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market or the Nasdaq Small Cap
Market, the Fair Market Value shall be the average of the last reported
sale prices or the average of the means of the last reported bid and asked
prices, respectively, of the Units on such exchange or market for the
twenty (20) business days ending on the last business day prior to the
Exchange Date; or
(ii) If the Common Stock or Warrants are listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market or the Nasdaq
Small Cap Market, the Fair Market Value shall be the average of the last
reported sale prices or the average of the means of the last reported bid
and asked prices, respectively, of Common Stock or Warrants, respectively,
on such exchange or market for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
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(iii) If the Common Stock or Warrants are not so listed or admitted to
unlisted trading privileges, the Fair Market Value shall be the average of
the means of the last reported bid and asked prices of the Common Stock or
Warrants, respectively, for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
(iv) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Fair
Market Value shall be an amount, not less than book value thereof as at the
end of the most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be prescribed by
the Board of Directors of the Company; or
(v) If the Warrants are not so listed or admitted to unlisted trading
privileges, and bid and asked prices are not so reported for Warrants, then
Fair Market Value for the Warrants shall be an amount equal to the
difference between (i) the Fair Market Value of the shares of Common Stock
and Warrants which may be received upon the exercise of the Warrants, as
determined herein, and (ii) the Warrant Exercise Price.
3. Neither this Option nor the underlying securities shall be transferred,
sold, assigned, or hypothecated for a period of two years commencing ____, 1997
except that they may be transferred to successors of the Holder, and may be
assigned in whole or in part to the Underwriter or any person who is an officer
of the Underwriter, any member participating in the selling group relating to
the Offering or any officer of such selling group member. Any such assignment
shall be effected by the Holder (i) executing the form of assignment at the end
hereof and (ii) surrendering this Option for cancellation at the office or
agency of the Company referred to in Section 2 hereof, accompanied by a
certificate (signed by an officer of the Holder if the Holder is a corporation),
stating that each transferee is a permitted transferee under this Section 3
hereof; whereupon the Company shall issue, in the name or names specified by the
Holder (including the Holder) a new Option or Options of like tenor and
representing in the aggregate rights to purchase the same number of Option Units
as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Option Units purchased hereunder and the Common
Stock which may be issued upon exercise of the Warrants will, upon issuance, be
duly and validly issued, fully paid and nonassessable and no personal liability
will attach to the holder thereof. The Company further covenants and agrees that
during the periods within which this Option may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of its
Common Stock to provide for the exercise of this Option and that it will have
authorized and reserved a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants included in the Option Units.
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5. This Option shall not entitle the Holder to any voting rights or any
other rights, or subject to the Holder to any liabilities, as a stockholder of
the Company.
6. (a) The Company shall advise the Holder or its transferee, whether the
Holder holds the Option or has exercised the Option and holds Option Units or
any of the securities underlying the Option Units, by written notice at least
two weeks prior to the filing of any post-effective amendment to the
Registration Statement or of any new registration statement or post-effective
amendment thereto under the Act covering any securities of the Company, for its
own account or for the account of others, and will for a period of seven years
from the effective date of the Registration Statement, upon the request of the
Holder, include in any such post-effective amendment or registration statement,
such information as may be required to permit a public offering of the Option,
all or any of the Option Units, the Common Stock or Warrants included in the
Option Units or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities").
If any registration pursuant to this Section 6(a) shall be underwritten in
whole or in part, the Company may require that the Registrable Securities
requested for inclusion pursuant to this Section 6(a) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. In the event that the Registrable Securities
requested for inclusion pursuant to this Section 6(a) together with any other
shares which have similar piggyback registration rights (such shares and the
Registrable Securities being collectively referred to as the "Requested Stock")
would constitute more than 5% of the total number of shares to be included in a
proposed underwritten public offering, and if in the good faith judgment of the
managing underwriter of such public offering the inclusion of all of the
Requested Stock originally covered by a request for registration would reduce
the number of shares to be offered by the Company or interfere with the
successful marketing of the shares of stock offered by the Company, the number
of shares of Requested Stock otherwise to be included in the underwritten public
offering may be reduced pro rata (by number of shares) among the holders thereof
requesting such registration or excluded in their entirety if so required by the
underwriter. To the extent only a portion of the Requested Stock is included in
the underwritten public offering, those shares of Requested Stock which are thus
excluded from the underwritten public offering shall be withheld from the market
by the holders thereof for a period, not to exceed 60 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
(b) Whenever pursuant to Section 6 a registration statement relating to any
Registrable Securities is filed under the Act, amended or supplemented, the
Company shall (i) supply prospectuses and such other documents as the Holder may
request in order to facilitate the public sale or other disposition of the
Registrable Securities, (ii) use its best efforts to register and qualify any of
the Registrable Securities for sale in such states as such Holder designates,
(iii) furnish indemnification in the manner provided in Section 7 hereof, (iv)
notify each Holder of Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
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registration statement, as then in effect, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and, at the request of
any such Holder, prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not included an untrue statement of a material
fact or omit to state material fact required to be stated therein or necessary
to make the statements therein not misleading and (v) do any and all other acts
and things which may be necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Registrable Securities,
The Holder shall furnish appropriate information in connection therewith and
indemnification as set forth in Section 7.
(c) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) if such registration includes an underwritten
public offering, a "cold comfort" letter dated the effective date of such
registration statement and dated the date of the closing under the underwriting
agreement signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(d) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and to the
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonable necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to
non-confidential books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times as any such Holder shall
reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement relating to
the Registrable Securities is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the Registrable
Securities covered by such registration statement, amendment or supplement (such
holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each
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underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished by such
Distributing Holder specifically for use in the preparation thereof.
(b) If requested by the Company prior to the filing of any registration
statement covering the Registrable Securities, each Distributing Holder will
agree, severally but not jointly, to indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder specifically for use in the preparation
thereof; except that the maximum amount which may be recovered from the
Distributing Holder pursuant to this Section 7 or otherwise shall be limited to
the amount of net proceeds received by the Distributing Holder from the sale of
the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
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(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(8) In addition to the provisions of Section 1(a) of this Option, the
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Options shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Whenever the Exercise Price payable upon exercise of each Option
is adjusted pursuant to Subsections (a), above, (i) the number of shares of
Common Stock included in an Option Unit shall simultaneously be adjusted by
multiplying the number of shares of Common Stock included in Option Unit
immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price, as adjusted and (ii) the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants included
in the Option Units and the exercise price of such Warrants shall be
adjusted in accordance with the applicable terms of the Warrant Agreement.
(c) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (c) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section 8 shall be made to the
nearest cent or to the nearest one-hundredth of a share,
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as the case may be. Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled, but shall not be required,
to make such changes in the Exercise Price, in addition to those required
by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into
Common Stock (including Warrants issuable upon exercise of this Option).
(d) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Option Units issuable upon exercise
of each Option and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holders, at the
address set forth herein, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the Board of Directors
(who may be the regular accountants employed by the Company) to make any
computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of this Option thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Option shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in Subsections (a) to (c)
inclusive above.
(f) In case any event shall occur as to which the other provisions of
this Section 8 or Section 1(a) hereof are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the
purchase rights represented by this Option in accordance with the essential
intent and principles hereof then, in each such case, the Holders of
Options representing the right to purchase a majority of the Option Units
may appoint a firm of independent public accountants reasonably acceptable
to the Company, which shall give their opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the purchase rights represented
by the Options. Upon receipt of such opinion, the Company will promptly
mail a copy thereof to the Holder of this Option and shall make the
adjustments described therein. The fees and expenses of such independent
public accountants shall be borne by the Company.
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9. This Agreement shall be governed by and in accordance with the laws of
the State of New York, without giving effect to the principles of conflicts of
law thereof.
IN WITNESS WHEREOF, HEURISTIC DEVELOPMENT GROUP, INC. has caused this
Option to be signed by its duly authorized officers under its corporate seal,
and this Option to be dated __________ ___, 1997.
HEURISTIC DEVELOPMENT GROUP, INC.
By: ____________________________
Xxxxxxx X. Xxxx, President
(Corporate Seal)
Attest:
______________________________
Xxxxxxx X. Xxxxxxx, Secretary
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder, Units of HEURISTIC DEVELOPMENT GROUP, INC. , each Unit
consisting of one share of $.01 Par Value Common Stock, one Class A Warrant to
purchase one share of Common Stock and one Class B Warrant(s) and herewith makes
payment of $_________ thereof.
Dated: _________, ____. Instructions for Registration of Stock
and Warrants
________________________________________
Print Name
________________________________________
Address
________________________________________
Signature
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Option, hereby
elects to exchange its Option for _________ Units of HEURISTIC DEVELOPMENT
GROUP, INC., each Unit consisting of one share of $.01 Par Value Common Stock,
One Class A Warrant(s) to purchase one share _________ of Common Stock and One
Class B Warrant, pursuant to the Option Exchange provisions of the Option.
Dated: _____________, ____.
________________________________________
Print Name
________________________________________
Address
________________________________________
Signature
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and transfers
unto the right to purchase Units represented by the foregoing Option to the
extent of Units , and appoints _____________ attorney to transfer such rights on
the books of _____________, with full power of substitution in the premises.
Dated: _______________, ____
By: _________________________________
______________________________________
Address
In the presence of:
