1
EXHIBIT 1.2
UNDERWRITER'S WARRANT AGREEMENT
This UNDERWRITER'S WARRANT AGREEMENT has been made and entered into as
of February ___, 2000, by and between XXXXXXX.XXX CORPORATION, a Washington
corporation (the "Company"), and XXXXXX XXXXXX & CO., LLC, a New York limited
liability company (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter, warrants (the
"Warrants") to purchase up to an aggregate of 140,000 shares of common stock,
no par value per share, of the Company (the "Common Stock");
WHEREAS, the Underwriter has agreed pursuant to the Underwriting
Agreement (the "Underwriting Agreement") dated as of February ___, 2000, by and
between the Company and the Underwriter, to act as Underwriter in connection
with the Company's proposed public offering (the "Offering") of 1,400,000 shares
of Common Stock at an initial public offering price of $_________ per share of
Common Stock; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriter, or its designees, in consideration
for, and as part of the Underwriter's compensation in connection with, the
Representative acting as such pursuant to the terms of the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises hereof, the payment by
the Underwriter to the Company of an aggregate of $140, the agreements herein
set forth and other good and valuable consideration, hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Underwriter is hereby granted the right to purchase, at
any time from ____________, 2001, until 5:30 P.M., New York time, on
_____________, 2005 (the "Expiration Date"), up to an aggregate of 140,000
shares of Common Stock (the "Shares" or "Warrant Securities") (subject to
adjustment as provided in Section 8 hereof) at the initial Exercise Price (as
hereinafter defined) (subject to the terms and conditions of this Agreement).
Except as set forth herein, the Shares issuable upon exercise of the Warrants
will be in all respects identical to the shares of Common Stock being purchased
by the Underwriter for resale to the public pursuant to the terms and provisions
of the Underwriting Agreement. Any Warrant that is not exercised on or prior to
the Expiration Date shall be void and all rights hereunder shall cease.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
2
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants are exercisable at the
Exercise Price payable by certified or official bank check in New York Clearing
House funds. Upon surrender of a Warrant Certificate with a duly executed
Election to Purchase (in the form of Annex A to the Warrant Certificate),
together with payment at the Company's principal offices (presently located at
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 98109) of the aggregate
Exercise Price of the Warrants being exercised, the registered holder of a
Warrant Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. The
purchase rights represented by each Warrant Certificate are exercisable at the
option of the Holder thereof, in whole or in part (but not as to fractional
shares of the Common Stock underlying the Warrants). In the case of the purchase
of less than all the shares of Common Stock purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrants exercisable thereunder.
3.2 Exercise by Surrender of Warrants. In addition to the method
of payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, Holders shall have the right, at any time, and from time to time, to
exercise the Warrants in full or in part by surrendering Warrant Certificates
representing a certain number of additional Warrants as payment of the aggregate
Exercise Price for the shares of Common Stock being acquired upon exercise of
the Warrants. The Warrants are exercisable pursuant to this Section 3.2 by
surrender of the Warrant Certificate with a duly executed Election to Purchase
(in the form of Annex B to the Warrant Certificate) and surrender of a certain
number of Warrants in addition to those being exercised. The number of
additional Warrants to be surrendered in payment of the aggregate Exercise Price
for the Warrants being exercised shall be determined by multiplying the number
of Warrants to be exercised by the Exercise Price, and then dividing the product
thereof by an amount equal to the Market Price (as defined below). Solely for
the purposes of this Section 3.2, Market Price shall be calculated either (i) on
the date which the Election to Purchase (in the form of Annex B to the Warrant
Certificate) is deemed to have been sent to the Company pursuant to Section 13
hereof ("Notice Date") or (ii) as the average of the Market Prices for each of
the five trading days preceding the Notice Date, whichever of (i) or (ii) is
greater.
3.3 Definition of Market Price. As used herein, the phrase
"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported bid prices for the last three trading days, in either case as
officially reported by the Nasdaq SmallCap Market or the principal securities
exchange on which the Common Stock is listed or admitted to trading or by the
Nasdaq National Market (collectively, "NASDAQ"), or, if the Common Stock is not
quoted by the Nasdaq SmallCap Market listed or admitted to trading on any
national securities exchange or quoted by NASDAQ, the average closing bid price
as furnished by the NASD or similar organization, or if the Common Stock is not
quoted on the Nasdaq SmallCap Market, as determined in good faith by resolution
of the Board of Directors of the Company, based on the best information
available to it.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for the total number of whole shares of Common Stock
for which such Warrants
2
3
were exercised shall be made promptly (and in any event within five business
days thereafter) without charge to the Holder thereof including, without
limitation, any stock transfer or similar tax which may be payable with respect
to the issuance thereof, and such certificates shall (subject to the provisions
of Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable with respect to any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
Shares underlying the Warrants shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman of the Board of
Directors or President of the Company under its corporate seal reproduced
thereon and by the then present Treasurer or Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer. Certificates
representing the shares of Common Stock issuable upon exercise of the Warrants
shall be dated the date on which the Company receives the Election to Purchase,
Warrant Certificate and payment of the Exercise Price.
5. Restriction on Transfer of Warrants. The Warrants may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, except that the Warrants may be (i) assigned in whole or part to any
officer or partner of the Underwriter and (ii) transferred by operation of law
as a result of the death or divorce of any transferee to whom the Warrants may
have been transferred. Any assignment shall be effected by a duly executed
assignment in the form of Annex C to the Warrant Certificate.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. The initial exercise
price of each Warrant shall be $[________] per share of Common Stock. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, as the case may be.
7. Registration Rights.
7.1 Piggyback Registration. If, at any time commencing after
February ___, 2001 and expiring five years thereafter, the Company proposes to
register any of its securities under the Securities Act of 1933, as amended (the
"Securities Act") (other than pursuant to a Form X-0, Xxxx X-0 or any other
successor form of limited purpose), it will give written notice by registered
mail at least 30 days prior to the filing of each such registration statement,
to the Underwriter and to all other Holders of Warrants and Warrant Securities
of its intention to do so. If the Underwriter or other Holders of Warrants and
Warrant Securities notify the Company
3
4
within 20 business days after receipt of any such notice of its or their desire
to include any of their respective Warrant Securities in such proposed
registration statement, the Company shall afford the Underwriter and such
Holders of Warrants and Warrant Securities the opportunity to have any such
Warrant Securities registered under such registration statement, provided,
however, that if the managing underwriter advises the Company in writing that
the inclusion of all Warrant Securities that Holders have proposed be included
in such registration statement would interfere with the successful marketing of
the securities proposed to be registered by the Company, then the securities to
be included in such registration statement shall be included in the following
order:
(a) first, the securities proposed to be included in such
registration by the Company or, if such registration is for securities of
specified security holders of the Company, by such holders;
(b) second, the Warrant Securities held by the Holders
requested to be included in such registration; and
(c) third, all other holders of Common Stock entitled to
be included in such registration statement (pro rata among the holders
requesting such registration based upon the number of shares of Common Stock
requested by each such holder to be registered).
Notwithstanding the provisions of this Section 7.1, the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 7.1 (irrespective of whether a written request for
inclusion of any such Warrant Securities shall have been made) to elect not to
file any such proposed registration statement or to withdraw the same after the
filing but prior to the effective date thereof.
7.2 Demand Registration.
(a) At any time commencing on February ___, 2001 and
expiring four years thereafter (which date is the fifth anniversary of the
effective date of the Registration Statement on Form SB-2 (File No. 333-80849))
(or such earlier time as the Warrant Securities are eligible for sale under Rule
144(k), the Holders of the Warrants and/or Warrant Securities representing at
least 50% of such securities (assuming the exercise of all of the Warrants)
shall have the right (which right is in addition to the registration rights
under Section 7.1 hereof), exercisable by written notice to the Company, on one
occasion only to request to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), a registration statement
and such other documents, including a prospectus, as may be necessary in the
opinion of counsel for the Company and, if either the Underwriter or a majority
of the Holders electing to participate in the registration requested pursuant to
this Section 7.2(a) have retained counsel in connection with such registration,
counsel for each of the Underwriter and a majority of the Holders electing to
participate in such registration, in order to comply with the provisions of the
Securities Act, so as to permit a public offering and sale of their respective
Warrant Securities for nine consecutive months by such Holders and any other
Holders of the Warrants and/or Warrant Securities who notify the Company of
their decision to join within 15 days after receiving notice from the Company
pursuant to Section 7.2(b).
4
5
(b) The Company covenants and agrees to give written
notice of any registration request under this Section 7.2 by any Holder or
Holders to all other registered Holders of Warrants and Warrant Securities
within ten days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section
7.1 and Section 7.2(a), at any time commencing after February ___, 2001 and
expiring four years thereafter (or such earlier time as the Warrant Securities
are eligible for sale under Rule 144(k)), any Holder(s) of Warrants and/or
Warrant Securities shall have the right, exercisable by written request to the
Company, to require the Company to prepare and file, with the Commission a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of counsel for the Company and, if either the
Underwriter or a majority of the Holders electing to participate in the
registration requested pursuant to this Section 7.2(c) have retained counsel in
connection with such registration, counsel for each of the Underwriter and the
majority of the Holders electing to participate in such registration, so as to
permit a public offering and sale for nine consecutive months by any such
Holder(s) of their respective Warrant Securities, provided, however, that (i) a
minimum of 50% of the Warrant Securities issuable upon exercise of the Warrants
issued on the date hereof must be registered under such registration statement,
and (ii) the provisions of Section 7.3(b) hereof shall not apply to any such
registration request and all reasonable costs, fees and expenses in connection
therewith, including, without limitation, registration fees, legal and
accounting fees, printing fees, blue sky fees and expenses, that have been
approved in advance by a majority of the Holders participating in such
registration, shall be at the expense of the Holder or Holders making such
request.
(d) Notwithstanding the provisions of Sections 7.2(a) and
7.2(c), if the Company shall not have filed a registration statement relating to
the Warrant Securities within the time period specified in Section 7.3(a)
hereof, the Company shall have the obligation, upon the written notice of
election of at least 50% of the Holders of the Warrants and/or Warrant
Securities, to repurchase (i) any and all Warrant Securities held by such
persons at the higher of the Market Price per share of Common Stock on (x) the
date of the notice sent pursuant to Section 7.2(a) or (y) the expiration of the
period specified in Section 7.3(a) and (ii) any and all Warrants at such Market
Price less the Exercise Price of such Warrant. Such repurchase shall be in
immediately available funds and shall close within two days after the later of
(i) the expiration of the period specified in Section 7.3(a) or (ii) the
delivery of the written notice of election specified in this Section 7.2(d).
(e) Notwithstanding the provisions of Sections 7.2(a) and
(c), if at any time during which the Company is obligated to maintain the
effectiveness of a registration statement pursuant to such Sections 7.2(a) and
(c), the Company's Board of Directors, after the consultation with counsel to
the Company (which counsel shall be experienced in securities matters) has
determined in good faith that the filing of such registration statement or the
compliance by the Company with its disclosure obligations thereunder would
require the disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential, then the Company may delay the
filing or the effectiveness of such registration statement (if not then filed or
effective, as appropriate) and shall not be required to maintain the
effectiveness thereof for a period expiring upon the earlier to occur of (i) the
date on which such information is disclosed to the public or ceases to be
material or the Company is so
5
6
able to comply with its disclosure obligations or (ii) 30 days after the
Company's Board of Directors makes such good faith determination. There shall
not be more than one such delay period with respect to any registration pursuant
to Section 7.2(a) or (c). Notice of any such delay period and of the termination
thereof will be promptly delivered by the Company to each Holder and shall be
maintained in confidence by each such Holder.
7.3 Covenants of the Company with Respect to Registration. In
connection with any registration under Section 7.1 or 7.2 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement, as soon as practicable, but in any event within 60 days
of receipt of any demand therefor, shall use its best efforts to have any
registration statement declared effective at the earliest possible time and
shall furnish each Holder desiring to sell Warrant Securities such number of
prospectuses as shall reasonably be requested; provided, however, that the
Company shall not be obligated to effect such registration under the Securities
Act except in accordance with the following provisions:
(i) the Company shall not be obligated to use its
best efforts to file and cause to become effective any
registration statement for a period of up to 90 days if at the
time of such request any other registration statement pursuant to
which shares of Common Stock of the Company are to be or were
sold has been filed with the Commission and not withdrawn or has
been declared effective within the prior 60 days; and
(ii) the Company may delay the filing or
effectiveness of the registration statement for a period of up to
90 days after the date of a request for registration if at the
time of such request the Company is engaged in a firm commitment
underwritten public offering of Common Stock in which the Holders
may include their Warrant Securities pursuant to Section 7.1
hereof.
(b) The Company shall pay all costs, fees and expenses in
connection with all registration statements filed pursuant to Sections 7.1 and
7.2(a) hereof (excluding fees and expenses of the Underwriter's and Holders'
counsel and accountants and any underwriting or selling commissions) including,
without limitation, the Company's legal and accounting fees, printing expenses,
blue sky fees and expenses. The Holder(s) whose Warrant Securities are the
subject of a Registration Statement filed pursuant to Section 7.2(c) will pay
all reasonable costs, fees and expenses in connection therewith, including,
without limitation, registration fees, legal and accounting fees, printing fees,
blue sky fees and expenses that have been approved in advance by a majority of
the Holders participating in such registration. If the Company shall fail to
comply with the provisions of Section 7.3(a) hereof, the Company shall, in
addition to any other equitable or other relief available to such Holders,
extend the Expiration Date by such number of days as shall equal the delay
caused by the Company's failure and be liable for any or all incidental, special
and consequential damages sustained by such Holders.
(c) The Company will take all necessary action which may
be required in qualifying or registering the Warrant Securities included in a
registration statement for
6
7
offering and sale under the securities or blue sky laws of such states as
reasonably are requested by the Holder(s), provided, that, the Company shall not
be obligated to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process or to taxation in any jurisdiction where it is not then so
subject.
(d) The Company shall furnish without charge to each
Holder of Warrant Securities, promptly after filing thereof with the Commission,
at least one copy of the registration statement filed pursuant to Section 7.1 or
7.2 (a "Registration Statement") and each amendment thereto or each amendment or
supplement to the prospectus included therein (the "Prospectus") including all
financial statements and schedules, documents incorporated by reference therein
and if the Holder so requests in writing, all exhibits thereto.
(e) The Company shall take such action as may be
reasonably necessary so that (i) the Registration Statement and any amendment
thereto and any Prospectus forming a part thereof and any supplement or
amendment thereto complies in all material respects with the Securities Act and
the rules and regulations thereunder, (ii) the Registration Statement and any
amendment thereto (in either case, other than with respect to written
information furnished to the Company by or on behalf of any Holder specifically
for inclusion therein) does not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make any statement therein not misleading and (iii) the Prospectus and any
supplement thereto (in either case, other than with respect to such information
from Holders), does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(f) The Company shall promptly advise the Holders of
Warrant Securities registered under the Registration Statement (which advice
pursuant to clauses (ii) - (iv) shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been made)
and, if requested by such persons, shall confirm such advice in writing:
(i) when the Registration Statement and any
amendment thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for
amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information
relating thereto;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement
or of the suspension by any state securities commission of the
qualification of the Warrant Securities for offering or sale in
any jurisdiction, or the initiation of any proceeding for any of
the preceding purposes; and
7
8
(iv) of the happening of any event that requires
the making of any changes in the Prospectus so that, as of such
date, the Prospectus does not contain an untrue statement of a
material fact and does not omit to state a material fact required
to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
(g) If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Warrant
Securities under state securities or Blue Sky laws, the Company shall use its
reasonable best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(h) The Company shall, during the period the Company is
obligated to maintain the effectiveness of a Registration Statement under
Section 7.2 hereof, deliver to each Holder of Warrant Securities included under
the Registration Statement, without charge, such reasonable number of copies of
the Prospectus (including each preliminary prospectus) included in the
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request to facilitate the public sale or other disposition of the
Warrant Securities by the selling Holder.
(i) The Company shall cooperate with the Holders and the
underwriter(s), if any, to facilitate the timely preparation and delivery of
certificates representing Warrant Securities to be sold under the Registration
Statement, free of any restrictive legends and in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
reasonably request in connection with the sales of Warrant Securities pursuant
to the Registration Statement.
(j) Upon the occurrence of any event contemplated by
Section 7.3(f)(ii) - (iv) hereof or any request by the Commission for any
amendments to the Registration Statement or for additional information relating
thereto or the happening of any event that requires the making of any changes in
the Registration Statement, the Company shall file (and use its reasonable best
efforts to have declared effective as soon as possible) a post-effective
amendment to the Registration Statement or an amendment or supplement to the
Prospectus or file any other required document so that, as thereafter delivered
to the purchasers of Warrant Securities registered under the Registration
Statement, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
in light of the circumstances under which they were made not misleading. Each
Holder of Warrant Securities registered under the Registration Statement agrees
by acquisition of such Warrant Securities that, upon receipt of any notice from
the Company of the existence of any fact of the kind described in Section
7.3(f)(ii) - (iv) hereof, such Holder will forthwith discontinue disposition of
Warrant Securities pursuant to the Registration Statement until such Holder
receives copies of the supplemented or amended Prospectus contemplated by this
Section 7.3(j), or until such Holder is advised in writing by the Company that
the use of the Prospectus may be resumed, and such Holder has received copies of
any additional or supplemental filings which are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent
8
9
file copies then in such Holder's possession, of the Prospectus covering such
Warrant Securities current at the time of receipt of such notice.
(k) Nothing contained in this Agreement shall be construed
as requiring the Holders to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(l) The Company shall not permit the inclusion of any
securities other than Warrant Securities to be included in any Registration
Statement filed pursuant to Section 7.2(a) or 7.2(c) hereof without the prior
written consent of the Holders representing a majority of the Holders then
requesting registration under such Section 7.2(a) or Section 7.2(c),
respectively.
(m) 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 (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), and (ii) if and to the extent
permitted by Statement of Auditing Standards No. 72, a "cold comfort" letter
dated the effective date of such Registration Statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such Registration Statement, in each case covering
substantially the same matters with respect to such Registration Statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(n) The Company shall as soon as practicable after the
effective date of the Registration Statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 of the General Rules and Regulations under the Securities
Act) an earnings statement (which need not be audited) complying with Section
11(a) of the Securities Act and covering a period of at least 12 consecutive
months beginning after the effective date of the Registration Statement.
(o) The Company shall deliver promptly to each Holder
participating in the offering upon request, and to the managing underwriters, if
any, copies of all correspondence between the Commission and the Company, its
counsel or accountants and all memoranda relating to discussions with the
Commission or its staff with respect to the Registration Statement and shall
permit each Holder and such underwriters to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the Registration Statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent accountants, all to
such reasonable extent and at such reasonable times and as often as any Holder
or underwriter shall reasonably request.
9
10
(p) With respect to the registration of Warrant Securities
pursuant to Section 7.2 to be sold to an underwriter for reoffering to the
public, the Company shall negotiate in good faith with respect to entering into
an underwriting agreement with the managing underwriters selected for such
underwriting by Holders holding a majority of the Warrant Securities requested
to be included in such underwriting, which may include the Underwriter. Such
agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriter and shall contain such representations,
warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Securities and may, at their option, require
that any or all the representations, warranties and covenants of the Company to
or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company except as they
may relate to such Holders and their intended methods of distribution and shall
not be requested by the Company to provide indemnification except as provided in
Section 7.3(s) hereof.
(q) In addition to Warrant Securities, and except as
otherwise provided in Section 7.3(l) hereof, upon the written request therefor
by any Holders, the Company shall include in the Registration Statement any
other securities of the Company held by such Holders as of the date of filing of
such Registration Statement, including, without limitation, restricted shares of
Common Stock, options, warrants or securities convertible into shares of Common
Stock and shall not be requested by the Company to provide indemnification
except as provided in Section 7.3(s) hereof.
(r) For purposes of this Agreement, wherever a specified
percent of Holders is required to take action, such percentage shall be
calculated: (i) assuming the immediate exercise of all of the outstanding
Warrants for Common Stock and (ii) excluding the shares of Common Stock then
issued or issuable pursuant to Warrants that (x) are held by the Company, an
affiliate or officer thereof or any of their respective affiliates, members of
their family or persons acting as their nominees or in conjunction therewith or
(y) have been resold to the public pursuant to a Registration Statement filed
with the Commission under the Securities Act.
(s) Indemnification and Contribution.
(1) The Company agrees to indemnify and hold
harmless each Holder (for purposes of this Section 7.3(s), "Holder" shall
include the officers, directors, partners, employees and agents, and each
person, if any, who controls any Holder ("controlling person") within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions, proceedings, suits and litigation in
respect thereof), whatsoever, as the same are incurred, to which such Holder or
any such controlling person may become subject, under the Securities Act, the
Exchange Act or any other statute or at common law or otherwise insofar as such
losses, claims, damages, expenses or liabilities arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, or any preliminary Prospectus or Prospectus (as from
time to time amended and supplemented)
10
11
or arise out of or are based upon the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein (with respect to any preliminary Prospectus or Prospectus, in
the light of the circumstances under which they were made), not misleading;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, expense or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, or any preliminary
Prospectus or Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Holder specifically for inclusion therein and provided, further,
that the Company shall not be liable to any such Holder under the indemnity
agreement in this subsection (1): (i) with respect to any preliminary Prospectus
or Prospectus (if such Prospectus has then been amended or supplemented) to the
extent that any such loss, liability, claim, damage or expense of such Holder
arises out of a sale of Warrant Securities by such Holder to a person to whom
(a) there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus (or of the Prospectus as then amended or
supplemented) if the Company has previously furnished copies thereof to such
Holder a reasonable time in advance or (b) prior to written confirmation of such
sale, such Holder received notice from the Company pursuant to Section 7.3(j) to
discontinue disposition pursuant to such Prospectus and, in either case, the
loss, liability, claim, damage or expense of such Holder results from an untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the preliminary Prospectus (or the Prospectus) which
was corrected in the Prospectus (or the Prospectus as amended or supplemented)
or (ii) to the extent that any such loss, claim, damage, expense or liability
arises out of or is based upon any action or failure to act by such Holder that
is found in a final judicial determination (or a settlement tantamount thereto)
to constitute bad faith, willful misconduct or gross negligence on the part of
such Holder. The indemnity agreement in this subsection (1) shall be in addition
to any liability which the Company may have at common law or otherwise, to the
extent not inconsistent therewith.
The Company also agrees to indemnify or contribute
to losses of any underwriters of Warrant Securities registered under the
Registration Statement, their officers and directors and each person, if any,
who controls any such underwriter (within the meaning of the Securities Act) on
substantially the same basis as that of the indemnification of the Holders
provided in this Section 7.3(s)(1) and shall, if requested by Holders holding a
majority of the Warrant Securities sought to be registered pursuant to Section
7.2 hereof, enter into an underwriting agreement reflecting such agreement, as
provided in Section 7.3(p) hereof.
(2) Each Holder agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers and each other
person, if any, who controls the Company within the meaning of the Securities
Act, to the same extent as the foregoing indemnity from the Company to the
Holders, but only with respect to (i) statements or omissions, if any, made in
conformity with information relating to such Holder furnished in writing by or
on behalf of such Holder specifically for use in the Registration Statement, or
any preliminary Prospectus or the Prospectus or any amendment thereof or
supplement thereto, and (ii) any breach of such Holder's representations,
covenants or agreements set forth herein; provided, however, that the obligation
to indemnify will be individual to each Holder and will be limited to the amount
of net proceeds received by such Holder from the sale of Warrant Securities
pursuant to the Registration Statement.
11
12
(3) Promptly after receipt by an indemnified party
under this Section 7.3(s) of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof is to be
made against one or more indemnifying parties under this Section 7.3(s), notify
each party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to notify an indemnifying party shall not
relieve it from any liability which it may have under Sections 7.3(s)(1) or (2)
unless and to the extent that it has been prejudiced in a material respect by
such failure or from the forfeiture of substantial rights and defenses). In case
any such action, suit or proceeding is brought against any indemnified party,
and it notifies an indemnifying party or parties of the commencement thereof,
the indemnifying party or parties will be entitled to participate therein, and
to the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party, which may be the same counsel as counsel to the indemnifying
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to take charge of the defense of such action within a reasonable time
after notice of commencement of the action or (iii) such indemnified party or
parties shall have reasonably concluded, after consultation with counsel to such
indemnified party or parties, that a conflict of interest exists which makes
representation by counsel chosen by the indemnifying party not advisable (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7.3(s) to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent, which shall not be unreasonably withheld or
delayed.
(4) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7.3(s), but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of this Section 7.3(s) provide for
indemnification in such case, or (ii) contribution under the Securities Act may
be required, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions, suits, proceedings
or litigation in respect thereof) in such proportion as is appropriate to
reflect the relative fault of each of the contributing parties, on the one hand,
and the party to be indemnified, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages, expenses
or liabilities, as well as any other relevant equitable considerations. Relative
fault shall
12
13
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by a Holder,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, expenses or liabilities (or actions, suits, proceedings or litigation
in respect thereof) referred to above in this subsection (4) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, preparing or defending any such action,
claim, suit, proceeding or litigation. Notwithstanding the provisions of this
subsection (4), no Holder shall be required to contribute any amount in excess
of the amount by which the total price at which the Warrant Securities sold by
such indemnifying party and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7.3(s), each person, if any, who
controls the Company within the meaning of the Securities Act, each executive
officer of the Company and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to this subsection
(4). Any party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit, proceeding or litigation against such party
in respect to which a claim for contribution may be made against another party
or parties under this subsection (4), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have hereunder or otherwise than under this
subsection (4), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
(t) Notwithstanding the foregoing provisions of this
Section 7.3, no registration rights shall be extended pursuant to this Section 7
with respect to any Warrant Securities (i) which have been sold pursuant to and
in accordance with an effective Registration Statement, (ii) sold in accordance
with Rule 144 under the Securities Act or (iii) eligible for sale under Rule
144(k) under the Securities Act.
8. Adjustments.
8.1 Adjustments of Number of Shares. The number of shares of
Common Stock that the holder of any Warrants shall be entitled to receive upon
each exercise thereof shall be determined by multiplying:
(a) the number of shares of Common Stock that would
otherwise (but for the provisions of this Section 8) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 4; by
(b) a fraction of which the numerator is $____ and the
denominator is the Exercise Price in effect on the date of such exercise;
13
14
provided, however that no adjustment pursuant to this Section 8 shall occur as a
result of (i) shares of Common Stock issued pursuant to the Underwriting
Agreement, (ii) shares of Common Stock issued upon the exercise of other
Warrants or (iii) shares of Common Stock issued upon the exercise of outstanding
options and warrants granted prior to the date hereof and which are described in
the Registration Statement (collectively, the "Excluded Issuances").
8.2 Adjustment of Exercise Price.
8.2.1 Initial Exercise Price. The Exercise Price, which
will initially be ____% of the public offering price with respect to the
Offering, shall be adjusted and readjusted from time to time as provided in this
Section 8 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 8;
provided, however, that there shall be no adjustment of the Exercise Price due
to Excluded Issuances.
8.2.2 Issuance of Additional Shares of Common Stock. In
case the Company, at any time or from time to time after the date on which the
Registration Statement becomes effective under the Securities Act (the
"Effective Date"), shall issue or sell Additional Shares of Common Stock (as
defined below), including Additional Shares of Common Stock deemed to be issued
pursuant to Section 8.3 or Section 8.4, without consideration or for a
consideration per share less than either the Exercise Price or the Fair Market
Value (as defined below) of the shares of Common Stock outstanding immediately
prior to such issue or sale, then, and in each such case, the Exercise Price
shall be reduced, subject to Section 8.9, concurrently with such issue or sale,
to a price (calculated to the nearest cent) determined by multiplying such
Exercise Price by a fraction of which
(a) the numerator shall be (i) the number of shares
of Common Stock outstanding immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of Additional Shares of Common Stock so
issued or sold would purchase at the lesser of such Exercise Price or Fair
Market Value immediately prior to such issue or sale, and
(b) the denominator shall be the number of shares
of Common Stock outstanding immediately after such issue or sale.
For the purposes of this Section 8.2.2, (x) immediately after any Additional
Shares of Common Stock shall be deemed to be issued pursuant to Section 8.3 or
Section 8.4, such Additional Shares of Common Stock shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed to be outstanding.
"Additional Shares of Common Stock" shall mean all shares (including treasury
shares) of Common Stock issued or sold (or pursuant to Sections 8.3 or 8.4,
deemed to be issued) by the Company after the Effective Date, whether or not
subsequently reacquired or retired by the Company, other than shares of Common
Stock issued upon the exercise of the Warrants. "Fair Market Value," with
respect to shares of Common Stock outstanding at any time shall be determined as
follows:
(a) If a public market exists for the Common Stock,
the Fair Market Value of the Common Stock shall be (i) the closing price of the
Common Stock on the Business Day (as defined below) immediately prior to such
issuance on the principal national
14
15
securities exchange on which the Common Stock is at the time traded or, if none,
the Nasdaq Stock Market ("Nasdaq") or (ii) if there is not such a sale on such
day or if Common Stock is not at that time traded on the Nasdaq or on a national
securities exchange, the average of the lowest closing bid and highest closing
asked prices on such day as reported by the National Association of Securities
Dealers (or any successor organization); or
(b) If a public market for the Common Stock does
not exist, the Fair Market Value of the Common Stock shall be determined in good
faith by the Board of Directors promptly after the issuance of any Additional
Shares of Common Stock or the occurrence of any other event or the existence of
any other circumstance as a result of which the Fair Market Value of the Common
Stock would be required for any provision of this agreement, and the Company
shall promptly deliver to each Holder a certificate of the Secretary of the
Company setting forth the amount of the Fair Market Value of the Common Stock
and certifying that the amount was determined by the Board of Directors of the
Company. If any Holder disagrees with the Fair Market Value set forth in that
certificate, such Holder may, together with any other Holders who so disagree,
engage an independent investment bank or firm of independent public accountants
to act as appraiser, the expense of which shall be borne by such Holder or
Holders, to determine the Fair Market Value of the Common Stock, and such Holder
shall deliver such appraisal to the Company within 30 days after the date of
delivery of the certificate referenced to above. Within five days after delivery
to the Company of such appraisal, the appraiser engaged by the Holder and a
person designated by the Board (the expense of which shall be borne by the
Company) shall meet in order to resolve any questions or differences with
respect to the Fair Market Value of the Common Stock. If such persons agree on a
Fair Market Value of the Common Stock, such Fair Market Value shall be the Fair
Market Value. If no such agreement is reached, the Fair Market Value shall be
determined within ten days after such meeting by an appraiser who shall be
selected by the appraiser engaged by the Holder and the person designated by the
Board (or, if they do not agree on an appraiser within ten days, another
independent investment bank or firm of independent public accountants to act as
appraiser selected by the American Arbitration Association), the expense of
which shall be shared equally by such Holder or Holders, on the one hand, and
the Company, on the other hand, and the determination of that third appraiser
shall be conclusive and binding on both the Company and the Holder. In
determining the Fair Market Value of any share of Common Stock, all Warrants
shall be treated as if they had been exercised for the number of shares of
Common Stock issuable upon their exercise, and the Fair Market Value of any
Warrants shall be equal to the Fair Market Value of the Shares of Common Stock
issuable upon the exercise of such Warrants less the exercise price of such
Warrants.
8.2.3 Dividends and Distributions. In case the Company at
any time or from time to time after the Effective Date shall declare, order, pay
or make a dividend or other distribution on Common Stock (including, without
limitation, any distribution of stock or other securities, property or options
by way of dividend, spin-off, reclassification, corporate rearrangement, or any
redemption or acquisition of stock or options or other securities), then, and in
each such case, the Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or other distribution shall be
reduced, subject to Section 8.9, effective as of the close of business on such
record date, to a price (calculated to the nearest cent) determined by
multiplying such Exercise Price by a fraction of which
15
16
(a) the numerator shall be the Exercise Price in
effect immediately prior to the close of business on such record date minus the
value of such dividends or other distributions (as determined in good faith by
the Board of Directors of the Company) applicable to one share of Common Stock,
and
(b) the denominator shall be such Exercise Price in
effect immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this Section
8.2.3 for a dividend payable in Additional Shares of Common Stock or in Options
(as defined below) for Common Stock, or a dividend payable in cash or other
property and declared out of the earned surplus (i.e., retained earnings, when
and if the Company has any) of the Company (excluding any portion thereof
resulting from a revaluation of property). For purposes of the foregoing, a
dividend payable other than in cash shall be considered payable out of earned
surplus only to the extent that such earned surplus is charged an amount equal
to the fair value of such dividend at the time of declaration as determined in
good faith by the Board of Directors of the Company. "Options" shall mean
rights, options or warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or Convertible Securities. "Convertible
Securities" shall mean any shares (other than Common Stock), evidences of
indebtedness or other securities directly or indirectly convertible into or
exchangeable for Additional Shares of Common Stock.
8.3 Treatment of Options and Convertible Securities. In case the
Company, at any time or from time to time after the Effective Date shall issue,
sell, grant or assume, or fix a record date for the determination of holders of
any class of securities entitled to receive, any Options or Convertible
Securities, then, and in each such case, the maximum number of Additional Shares
of Common Stock issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities shall be deemed to be issued for
purposes of Section 8.2.2 as of the time of such issue, sale, grant or
assumption, or, in case such a record date shall have been fixed, as of the
close of business on such record date; provided, however, that such Additional
Shares of Common Stock shall not be deemed to be issued if the consideration per
share of such shares, as determined pursuant to Section 8.5, would be equal to
or greater than the greater of the Exercise Price and the Fair Market Value of
the shares of Common Stock on the Business Day on which such Additional Shares
of Common Stock shall be deemed to be issued; and provided further, however,
that in each such case in which Additional Shares of Common Stock would have
been deemed to be issued,
(a) no further Additional Shares of Common Stock
shall be deemed to be issued upon the subsequent issue or sale of Common Stock
or any other securities of the Company pursuant to the exercise of such Options
or the conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by
their terms shall provide in any manner for any increase in the consideration
payable to the Company, or decrease in the number of Additional Shares of Common
Stock issuable, upon the exercise, conversion or exchange thereof, the Exercise
Price computed upon the original issue, sale, grant or assumption of such
Options or Convertible Securities (or upon the fixing of the record date with
respect thereto), and any subsequent adjustments in such Exercise Price, shall,
upon any
16
17
such increase in consideration or decrease in the number of Additional Shares of
Common Stock issuable becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, as are outstanding at the time such
increase or decrease becomes effective;
(c) upon the expiration of any such Options or of
the rights of conversion or exchange under any such Convertible Securities which
shall not have been exercised, or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of any
such Convertible Securities the rights of conversion or exchange under which
shall not have been exercised, the Exercise Price computed upon the original
issue, sale, grant or assumption of such Options or Convertible Securities (or
upon the fixing of the record date with respect thereto), and any subsequent
adjustments in such Exercise Price, shall, upon such expiration, cancellation or
retirement, be recomputed as if:
(i) in the case of Options for Common Stock
or of Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities and the consideration received thereupon was
(A) in the case of Options, an
amount equal to (x) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, plus (y) the consideration actually received by the
Company upon exercise of any such Options, minus (z) the
consideration paid by the Company for any purchase of such
Options which were not exercised; or
(B) in the case of Convertible
Securities, an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or assumption
of all such Convertible Securities (unless theretofore taken into
account pursuant to clause (ii) below) which were actually
converted or exchanged, plus (y) the consideration actually
received by the Company upon such conversion or exchange, minus
(z) the consideration paid by the Company for any purchase of
such Convertible Securities the rights of conversion or exchange
under which were not exercised; and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued at
the time of the issue, sale, grant or assumption of such Options,
and the consideration received by the Company for the Additional
Shares of Common Stock deemed to have then been issued was an
amount equal to (x) the consideration actually received by the
Company for the issue, sale or grant of all such Options, plus
(y) the consideration deemed to be received by the Company
(pursuant to Section 8.5) upon the issue or sale of the
Convertible Securities with respect to which such Options were
actually exercised, minus (z) the consideration paid by the
Company for any purchase of such Options that were not exercised;
and
17
18
(d) no readjustment pursuant to subdivision (b) or
(c) above shall have the effect of increasing the Exercise Price
by an amount in excess of the amount of the adjustment thereof
originally made pursuant to the issue, sale, grant or assumption
of such Options or Convertible Securities.
"Business Day" shall mean any day of the year which is not a
Saturday, Sunday or a day on which banks are required or authorized to close in
the State of New York.
8.4 Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the Effective Date shall fix a
record date for the determination of holders of any class of securities entitled
to receive any dividend or other distribution on any class of stock of the
Company payable in Common Stock, or shall otherwise effect any subdivision of
the outstanding shares of Common Stock into a greater number of shares of Common
Stock, then, and in each such case, Additional Shares of Common Stock shall be
deemed to be issued (a) in the case of any such dividend or other distribution,
immediately after the close of business on such record date, or (b) in the case
of any such subdivision, at the close of business on the day immediately prior
to the day upon which such corporate action shall have become effective.
8.5 Computation of Consideration. For the purposes of this
Section 8:
(a) The consideration for any Additional Shares of Common
Stock actually issued or sold or for the issue, sale, grant or assumption of any
Options or Convertible Securities, irrespective of the accounting treatment of
such consideration, shall
(i) insofar as it consists of cash, be computed as
the amount of cash actually received by the Company, after
deducting any expenses paid or incurred by the Company, or any
commissions or compensation paid or concessions or discounts
allowed by the Company to underwriters, dealers or others
performing similar services in connection with any such issue or
sale;
(ii) insofar as it consists of consideration
(including securities as defined in the Securities Act) other
than cash, be computed as the market value thereof at the time of
any such issue, sale, grant or assumption as determined in good
faith by the Board of Directors of the Company (which
determination shall be evidenced in a certificate delivered
promptly to each Holder and which determination shall be subject
to the procedures for disagreement as provided in item (b) of the
definition of "Fair Market Value" in Section 8.2.2), after
deducting any expenses paid or incurred by the Company, or any
commissions or compensation paid or concessions or discounts
allowed by the Company to underwriters, dealers or others
performing similar services in connection with any such issue or
sale; and
(iii) insofar as Additional Shares of Common Stock
are issued or sold, Options or Convertible Securities are issued,
sold, granted or assumed together with other stock or securities
or other assets of the Company for a
18
19
consideration that covers both, be the proportion of such
consideration (computed as provided in clauses (i) and (ii)
above) allocable to such Additional Shares of Common Stock or
Convertible Securities as determined in good faith by the Board
of Directors of the Company (which determination shall be
evidenced in a certificate delivered promptly to each Holder and
which determination shall be subject to the procedures for
disagreement as provided in item (b) of the definition of "Fair
Market Value" in Section 8.2.2).
(b) The following shall be deemed to be issued without
consideration: (i) all Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other distribution on any class
of stock of the Company; and (ii) all Additional Shares of Common Stock issued
to effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock otherwise than by payment of a dividend in
Common Stock. Additional Shares of Common Stock, Options or Convertible
Securities issued to directors, management, employees and related parties shall
be deemed to be issued (i) without consideration if not issued for cash or
property and (ii) for less than either the Exercise Price or the Fair Market
Value to the extent that any cash or the fair value of property, as determined
in good faith by the Board of Directors, received for such securities is less
than either the Exercise Price or the Fair Market Value of such securities.
(c) Additional Shares of Common Stock deemed to have been
issued for consideration pursuant to Section 8.3 shall be deemed to have been
issued for a consideration per share determined by dividing
(i) the total amount, if any, actually received by
the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in question,
plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon the exercise of
all such Options or the conversion or exchange of all such
Convertible Securities or, in the case of Options for Convertible
Securities, the exercise of all such Options for Convertible
Securities and the conversion or exchange of all such Convertible
Securities, in each instance computing such consideration as
provided in the foregoing subdivision (a), by
(ii) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities or, in the
case of Options for Convertible Securities, the exercise of such
Options and the conversion or exchange of such Convertible
Securities.
8.6 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such
19
20
combination or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be increased proportionately.
8.7 Merger or Consolidation. In the event of (i) any
reclassification (including, without limitation, a reclassification effected by
means of an exchange or tender offer by the Company or any Subsidiary) or change
of outstanding Common Stock (other than a change relating to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive securities or other assets
(including cash) with respect to or in exchange for Common Stock or (iii) any
sale or conveyance of the assets of the Company as, or substantially as, an
entirety to any other corporation as a result of which holders of Common Stock
shall be entitled to receive securities or other assets (including cash) with
respect to or in exchange for Common Stock, then the Company or the successor or
purchasing corporation, as the case may be, shall execute and deliver to the
Holder upon surrender of the Warrant Certificate held by such Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon full exercise of such Warrant, the
kind and amount of shares of stock and/or other securities and/or property
receivable upon such consolidation or merger, by a holder of the number of
shares of Common Stock for which such Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance. Such supplemental warrant agreement shall
provide for adjustments which shall be as nearly equivalent as practicable to
the adjustments provided for in this Section 8. The above provision of this
subsection shall similarly apply to successive events of the type described in
this Section 8.7.
8.8 Dilution in Case of Other Securities. In case any Other
Securities (as defined below) shall be issued or sold, or shall become subject
to issue or sale upon the conversion or exchange of any Common Stock or Other
Securities of the Company (or any issuer of Other Securities or any other person
referred to in Section 8.7), or shall become subject to subscription, purchase
or other acquisition pursuant to any Options issued, sold, granted or assumed by
the Company (or any such other issuer or person) for a consideration that
dilutes, in accordance with the standards established in the other provisions of
this Section 8 or otherwise, the purchase rights granted by the Warrants, then,
and in each such case, the computations, adjustments and readjustments provided
for in this Section 8 with respect to the Exercise Price shall be made and
applied as nearly as possible in the manner so provided, to determine the amount
of Other Securities that the Holder of such Warrants shall be entitled to
receive upon the exercise of such Warrants, in order to protect such Holder
against such dilution of purchase rights. "Other Securities" shall mean any
stock (other than Common Stock) of the Company or of any other person that the
Holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or that at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
this Section 8 or otherwise.
8.9 Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Section 8 would be
less than $0.01, such amount shall be carried forward, and adjustment with
respect thereto shall be made at the time of and
20
21
together with any subsequent adjustment that, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least $0.01.
8.10 Certificate of Adjustment. After each adjustment of the
Exercise Price or the amount of Warrant Securities purchasable upon exercise of
Warrants pursuant to this Section 8, the Company will promptly prepare a
certificate signed by the Chairman, President, Treasurer or Secretary of the
Company setting forth: (i) the Exercise Price, as so adjusted; (ii) the amount
of Warrant Securities purchasable upon exercise of each Warrant after such
adjustment; and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly file such certificate with its records and
cause a brief summary thereof to be sent by ordinary first class mail to each
Holder at such Holder's last address as it shall appear on the registry books of
the Company.
8.11 Validity of Warrant Certificate. Notwithstanding any
adjustments or changes in the Exercise Price or the amount of Warrant Securities
purchasable upon exercise of Warrants, Warrant Certificates theretofore and
thereafter issued shall continue to express the Exercise Price per share and the
amount of Warrant Securities purchasable thereunder as of the date such Warrant
Certificates were originally issued; provided, the Holders shall be entitled to
exercise Warrants represented by such Warrant Certificates after giving effect
to each such adjustment and change, and such Warrant Certificate shall be deemed
to incorporate each such adjustment and change as if new Warrant Certificates
reflecting each such adjustment and change had been issued to the Holders.
8.12 No Dilution or Impairment. The Company shall not, by
amendment of its certificate of incorporation or bylaws or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue,
sale, grant or assumption of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
agreement or the Warrants, but will at all times, whether or not requested to do
so, in good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of the Warrants against dilution or other impairment.
Without limiting the generality of the foregoing, the Company take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Shares upon the exercise of all
Warrants from time to time outstanding.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable, without expense, upon the surrender thereof by the
Holder at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Securities in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such Warrant
Certificates, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor in lieu thereof.
21
22
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants to purchase Common Stock, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized capital stock, solely for
the purpose of issuance upon the exercise of the Warrants, such number of shares
of Common Stock or other securities, property or rights as shall be issuable
upon exercise thereof. The Company covenants and agrees that, upon exercise of
the Warrants and payment of the Exercise Price therefor, all shares of Common
Stock and other securities issued by the Company upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any security holder of the Company. As long as the Warrants
shall be outstanding, the Company shall use its reasonable best efforts to cause
the Common Stock issuable upon the exercise of the Warrants to be listed
(subject to official notice of issuance) on all securities exchanges on which
the Common Stock may then be listed and/or quoted by NASDAQ if the Common Stock
issued to the public is so quoted.
12. Notices to Holders. Nothing contained in this Agreement shall be
construed as conferring upon the Holders the right to receive dividends or to
vote or to consent or to receive notice as a stockholder with respect to any
meetings of stockholders for the election of directors or any other matter or as
having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall set a record date for the purpose of
entitling holders of shares of Common Stock to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company;
(b) the Company shall offer to all the holders of shares
of Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event to each Holder at least 15 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such dividend, distribution or offer, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be.
22
23
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with any of the events described in this
Section 12.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to a Holder, to the address of such Holder as shown
on the books of the Company; or
(b) If to the Company, to the address set forth in Section
3 hereof or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. The Company and the Underwriters may
from time to time supplement or amend this Agreement without the approval of any
Holders (other than the Representative) in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Representative may deem necessary or desirable and which the Company and the
Representative deem shall not adversely affect the interests of the Holders in
any material respect.
15. Successors. All the covenants and provisions of this Agreement shall
be binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of business
on February ___, 2006. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on February ___, 2011.
17. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT AND EACH
WARRANT CERTIFICATES ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT GIVING EFFECT TO THE RULES OF
SAID STATE GOVERNING THE CONFLICT OF LAWS.
The Company, the Underwriter and the Holders hereby agree that
any action, proceeding or claim against it arising out of, or relating in any
way to, this Agreement shall be brought and enforced in the courts of the State
of New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum and also
hereby irrevocably waive any right or claim to trial by jury in connection with
any such action, proceeding or claim. Any such process or summons to be served
upon any of the Company, the Underwriter and the Holders (at the option of the
party bringing such action, proceeding or claim) may be served by transmitting a
copy thereof, by registered or certified mail, return
23
24
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 13 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
17. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof. Except as set forth in Section 14 hereof, this Agreement
may not be modified or amended except by a writing duly signed by the Company,
Holders of Warrants or Warrant Securities representing a majority of the shares
of Common Stock issuable or issued hereunder and the party against whom
enforcement of the modification or amendment is sought.
18. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only, and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person, corporation or entity other than the Company,
the Underwriter and any other Holders of Warrants and/or Warrant Securities any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Underwriter and any other Holders of Warrants and/or Warrant Securities.
21. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original and such counterparts shall together constitute but one and the
same instrument.
24
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
XXXXXXX.XXX CORPORATION
By:
------------------------------
Name:
Title:
Attest:
-----------------------------------
Name:
Title:
XXXXXX XXXXXX & CO., LLC
By:
------------------------------
Name:
Title: A Member
25
26
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, FEBRUARY ___, 2005
No. W- __________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _________________, or registered
assigns, is the registered holder of _______ Warrants to purchase initially, at
any time from February ___, 2001 until 5:30 p.m. New York time on
_______________, 2005 (the "Expiration Date"), up to __________ fully paid and
nonassessable shares of Common Stock, no par value (the "Common Stock"), of
Xxxxxxx.xxx Corporation, a Washington corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $__________ per share upon surrender of this Warrant Certificate and
payment of the Exercise Price, at an office or agency of the Company, but
subject to the conditions set forth herein and in the Underwriter's Warrant
Agreement dated as of February ___, 2000 by and between the Company and Xxxxxx
Xxxxxx & Co, LLC (the "Warrant Agreement"). Payment of the Exercise Price, shall
be made by certified or official bank check in New York Clearing House funds
payable to the order of the Company and by surrender of this Warrant
Certificate.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the amount the type and/or number of the Company's
securities issuable hereunder may, subject to certain conditions, be adjusted.
Subject to Section 8.6 of the Warrant Agreement, in such event, the Company
will, at the request of the holder, issue a new Warrant Certificate evidencing
the adjustment in the Exercise Price and the number and/or type of
26
27
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter or otherwise impair the rights of the holder as set forth
in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of February ___,2000
XXXXXXX.XXX CORPORATION
[SEAL] By:
--------------------------------
Name:
Title:
Attest:
-----------------------------------
Name:
Title:
28
ANNEX A
TO WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______________________
shares of Common Stock and herewith tenders in payment for such securities a
certified or official bank check payable in New York Clearing House Funds to the
order of ___________________________________ in the amount of
$_________________, all in accordance with the terms of Section 3 of the
Underwriter's Warrant Agreement dated as of February ___, 2000 by and between
Xxxxxxx.xxx Corporation and Xxxxxxx and Company Securities, Inc. The undersigned
requests that a certificate for such securities be registered in the name of
________________________________ whose address is _____________________________
__________________________________________________and that such certificate be
delivered to _________________________ whose address is ________________________
____________________________________________________________________________.
Dated: Signature
----------------- -------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
29
ANNEX B
TO WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______________ shares of
Common Stock all in accordance with the terms of Section 3.2 of the
Underwriter's Warrant Agreement dated as of February ___, 2000 by and between
Xxxxxxx.xxx Corporation and Xxxxxx Xxxxxx & Co., LLC. The undersigned requests
that a certificate for such securities be registered in the name of
_______________________ whose address is _____________________________ and that
such certificate be delivered to _____________________________ whose address is
____________________________________________________________________.
Dated: Signature
----------------- -------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
30
ANNEX C
TO WARRANT CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
(Please print name and address of transferee)
the within Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_____________________________ Attorney to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: Signature
----------------- -------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
