THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK REPRESENTED BY THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"), AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144
UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
Warrant No. PR-1
***TRAINING DEVICES INCORPORATED***
WARRANT TO PURCHASE SHARES OF COMMON STOCK
WARRANT TO PURCHASE 37,500 SHARES
(SUBJECT TO ADJUSTMENT AS SET FORTH HEREIN)
EXERCISE PRICE $4.00 PER SHARE
(SUBJECT TO ADJUSTMENT AS SET FORTH HEREIN)
VOID AFTER 3:00 P.M., MOUNTAIN TIME, ON JANUARY 2, 2001,
THIS CERTIFIES THAT Caribou Bridge Fund, LLC is entitled to purchase
from Training Devices Incorporated, a Colorado corporation (hereinafter
called the "Company") with its principal office located at 00 Xxxxxxxxx Xxxxx
Xxxx, #X, Xxxxxxxxx, Xxxxxxxx 00000, at any time commencing on October 22,
1998, but before 3:00 P.M., Colorado Time, on January 2, 2001 (the
"Termination Date"), at the purchase price of $4.00 per share (the "Exercise
Price"), the number of shares (the "Shares") of the Company's no par value
Common Stock (the "Common Stock") set forth above. The number of Shares
purchasable upon exercise of this Warrant and the Exercise Price per Share
shall be subject to adjustment from time to time as set forth in Section 5
below.
SECTION 1. DEFINITIONS.
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
THE "ACT." The Securities Act of 1933, as amended.
THE "COMMISSION." The Securities and Exchange Commission.
THE "COMPANY." Training Devices Incorporated.
"COMMON STOCK." The Company's Common Stock.
"CURRENT MARKET PRICE." The Current Market Price shall be determined as
follows:
(a) if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange
or quoted on either the National Market System or the Small Cap Market
of the automated quotation service operated by Nasdaq, the current value
shall be the last reported sale price of that security on such exchange
or system on the day for which the Current Market Price is to be
determined or, if no such sale is made on such day, the average of the
highest closing bid and lowest asked price for such day on such exchange
or system; or
(b) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the Current Market Value shall
be the average of the last reported highest bid and lowest asked prices
quoted on the Electronic Bulletin Board operated by Nasdaq, or, if not
so quoted, then by the National Quotation Bureau, Inc. on the last
business day prior to the day for which the Current Market Price is to
be determined; or
(c) if the security at issue is not so listed or quoted or admitted
to unlisted trading privileges and bid and asked prices are not
reported, the current market value shall be determined in such
reasonable
manner as may be prescribed from time to time by the Board of
Directors of the Company, subject to the objection and arbitration
procedure as described in Section 6 below.
"EXERCISE DATE." October 22, 1998.
"EXERCISE PERIOD." The period commencing on the Exercise Date and
ending on the Expiration Date.
"EXERCISE PRICE." $4.00 per Share, as modified in accordance with
Section 5, below.
"EXPIRATION DATE." January 2, 2001.
"HOLDER" or "WARRANTHOLDER." The person to whom this Warrant is
issued, and any valid transferee thereof pursuant to Section (3.1) below.
"NASDAQ." The automated quotation system operated by The Nasdaq Stock
Market, Inc.
"TERMINATION OF BUSINESS." Any sale, lease or exchange of all, or
substantially all, of the Company's assets or business or any dissolution,
liquidation or winding up of the Company.
"WARRANTS." This Warrant and such other Warrants as are issued
concurrently with this Warrant containing the same terms of this Warrant and
any Warrants issued in substitution for or replacement of such warrants,
including those evidenced by a Warrant or Warrants issued upon division,
exchange, substitution or transfer pursuant to this Warrant.
"WARRANT SHARES." The Common Stock purchasable upon exercise of a
Warrant including the Common Stock underlying unexercised portions of a
Warrant.
SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANT.
2.1. EXERCISE OF WARRANT. Subject to the terms of this Agreement, the
Holder shall have the right, at any time prior to 5:00 p.m., Denver Time, on
the Expiration Date, to purchase from the Company up to the number of fully
paid and nonassessable Shares to which the Holder may at the time be entitled
to purchase pursuant to this Warrant, upon surrender to the Company, at its
principal office, of the Warrant to be exercised, together with the purchase
form attached hereto, duly filled in and signed, and upon payment to the
Company of the Exercise Price for the number of Shares in respect of which
such Warrant is then exercised, but in no event for less than 100 Shares
(unless fewer than an aggregate of 100 shares are then purchasable under all
outstanding Warrants held by a Holder).
2.2. PAYMENT OF EXERCISE PRICE. Payment of the aggregate Exercise
Price shall be made in cash or by check, or any combination thereof.
2.3. ISSUANCE OF SHARES. Upon such surrender of the Warrants and
payment of such Exercise Price as aforesaid, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Shares so purchased upon
the exercise of the Warrant, together with cash, as provided in Section 13
hereof, in respect of any fractional Shares otherwise issuable upon such
surrender.
2.5 STATUS OF HOLDER UPON EXERCISE. Upon receipt of this Warrant by
the Company as described in Section 2.1 above, the Holder shall be deemed to
be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company may then be closed or
that certificates representing such Shares may not have been prepared or
actually delivered to the Holder.
-2-
SECTION 3. TRANSFERABILITY OF WARRANT
3.1 LIMITATION ON TRANSFER. Any assignment or transfer of a Warrant
shall be made by the presentation and surrender of the Warrant to the Company
at its principal office or the office of its transfer agent, if any,
accompanied by a duly executed Assignment Form. Upon the presentation and
surrender of these items to the Company, the Company, at its sole expense,
shall execute and deliver to the new Holder or Holders a new Warrant or
Warrants, in the name of the new Holder or Holders as named in the Assignment
Form, and the Warrant presented or surrendered shall at that time be canceled.
3.2 EXCHANGE OF WARRANT. Any Warrant may be exchanged for another
Warrant or Warrants entitling the Warrantholder to purchase a like aggregate
number of Shares as the Warrant or Warrants surrendered then entitled such
Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant
shall make such request in writing delivered to the Company, and shall
surrender, properly endorsed, with signatures guaranteed, the Warrant to be
so exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant as so requested.
3.3 MUTILATED, LOST, STOLEN, OR DESTROYED WARRANT. In case the Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall, at the
request of the Warrantholder, issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant or Warrants, or in lieu of
and substitution for the Warrant or Warrants lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft
or destruction of such Warrant and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for
such substitute Warrant shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may
prescribe.
3.4 FORM OF ELECTION. The form of election to purchase Shares shall
be substantially as set forth in Exhibit A attached hereto. The Warrants shall
be executed on behalf of the Company by its President or by a Vice President
and attested to by its Secretary or an Assistant Secretary. A Warrant bearing
the signature of an individual who was at any time the proper officer of the
Company shall bind the Company, notwithstanding that such individual shall
have ceased to hold such officer prior to the delivery of such Warrant or did
not hold such office on the date of this Agreement. The Warrants shall be
dated as of the date of signature thereof by the Company either upon initial
issuance or upon division, exchange, substitution or transfer.
SECTION 4. REDEMPTION
4.1 RIGHT TO REDEEM. The Company may, at its option, redeem the
Warrants in whole or in part on a pro rata basis for a redemption price of
$.01 per Warrant (the "Redemption Price") on 45 days prior written notice to
the Warrantholders. The right to redeem the Warrants may be exercised by the
Company only in the event (i) the Current Market for the Common Stock has
exceeded 150% of the Exercise Price during a period of at least 20 of the 30
trading days immediately preceding the date of mailing of the notice of
redemption, (ii) the Company has in effect a current registration statement
(or a post-effective amendment to an existing registration statement) with the
Commission registering the Warrant Shares, and (iii) the expiration of the 45
days notice period is within the Exercise Period. In the event the Company
exercises its right to redeem the Warrants, the Expiration Date will be
deemed to be, and the Warrants will be exercisable until the close of
business on, the date fixed for redemption in such notice (the "Redemption
Date"). If any Warrant called for redemption is not exercised by such time,
it will cease to be exercisable and the Warrantholder thereof will be
entitled only to the Redemption Price.
4.2 TERMINATION OF RIGHTS. From and after the Redemption Date, all
rights of the holders of record of redeemed Warrants (except the right to
receive the Redemption Price) shall terminate, but only if (i) no later than
one day prior to the Redemption Date the Company shall have irrevocably
deposited with the paying agent a sufficient amount to pay on the Redemption
Date the Redemption Price for all Warrants called for redemption, and (ii)
the notice of redemption shall have stated the name and address of the Paying
Agent and the intention of the company to deposit such amount with the Paying
Agent no later than one day prior to the Redemption Date.
4.3 PAYMENT OF REDEMPTION PRICE. The Paying Agent shall pay to the
holders of record of redeemed Warrants all amounts received by the Paying
Agent for the redemption of Warrants to which the holders of record of
-3-
such redeemed Warrants who shall have surrendered their Warrants are
entitled. Any amounts deposited by the Company with the Paying Agent to pay
the Redemption Price for all Warrants called for redemption that are not
required for redemption of Warrants may be withdrawn by the Company. Any
amounts deposited by the Company with the Paying Agent to pay the Redemption
Price for all Warrants called for redemption that shall be unclaimed six
months after the Redemption Date may be withdrawn by the Company, and
thereafter the holders of the Warrants called for redemption for which such
funds were deposited shall look solely to the Company for payment. The
Company shall be entitled to the interest, if any, on funds deposited with
the Paying Agent, and the Warrantholders of redeemed Warrants shall have no
right to any such interest.
4.4 FAILURE TO MAKE DEPOSIT. If the Company fails to make a sufficient
deposit with the Paying Agent as provided above, the Warrantholder of any
Warrants called for redemption may at the option of the holder (i) by notice
to the Company declare the notice of redemption a nullity as to such holder,
or (ii) maintain an action against the Company for the Redemption Price. If
the Warrantholder brings such an action, the Company will pay the reasonable
attorney's fees of the Warrantholder. If the Warrantholder fails to bring an
action against the Company for the Redemption Price within 60 days after the
Redemption Date, the Warrantholder shall be deemed to have elected to declare
the notice of redemption to be a nullity as to such holder and such notice
shall be without any force or effect as to such holder.
SECTION 5. ADJUSTMENT OF NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
5.1 ADJUSTMENTS. The number of Shares purchasable upon the exercise
of the Warrants shall be subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock
or make a distribution to its stockholders in Common Stock, (ii)
subdivide its outstanding Common Stock, (iii) combine its outstanding
Common Stock into a smaller number of shares of Common Stock, or (iv)
issue by classification of its Common Stock other securities of the
Company, the number of Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of Shares or other
securities of the Company which it would have owned or would have been
entitled to receive immediately after the happening of any of the events
described above, had the Warrants been exercised immediately prior to
the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subsection 5.1.(a) shall become
effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(b) In case the Company shall issue rights, options, warrants, or
convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, entitling them to subscribe
for or purchase Common Stock at a price per share which is lower at the
record date mentioned below than the then Current Market Price, the
number of Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon exercise of the Warrants by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional shares
of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants, or
convertible securities plus the number of shares which the aggregate
offering price of the total number of shares offered would purchase at
such Current Market Price. Such adjustment shall be made whenever such
rights, options, warrants, or convertible securities are issued, and
shall become effective immediately and retroactively to the record date
for the determination of stockholders entitled to receive such rights,
options, warrants, or convertible securities.
(c) In case the Company shall distribute to all or substantially
all holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants, or convertible securities containing the right to
subscribe for or purchase Common Stock (excluding those referred to in
subsection 5.1(b) above), then in each case the number of Shares
thereafter
-4-
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise
of the Warrants by a fraction, of which the numerator shall be the then
Current Market Price on the date of such distribution, and of which the
denominator shall be such Current Market Price on such date minus the
then fair value (determined as provided in subparagraph (e) below of the
portion of the assets or evidences of indebtedness so distributed or of
such subscription rights, options, warrants, or convertible securities
applicable to one share. Such adjustment shall be made whenever any such
distribution is made and shall become effective on the date of
distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(d) No adjustment in the number of Shares purchasable pursuant to
the Warrants shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Shares
then purchasable upon the exercise of the Warrants or, if the Warrants
are not then exercisable, the number of Shares purchasable upon the
exercise of the Warrants on the first date thereafter that the Warrants
become exercisable; provided, however, that any adjustments which by
reason of this subsection 5.1(d) are not required to be made immediately
shall be carried forward and taken into account in any subsequent
adjustment.
(e) Whenever the number of Shares purchasable upon the exercise of
the Warrant is adjusted, as herein provided, the Exercise Price payable
upon exercise of the Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of Warrant Shares purchasable
upon the exercise of the Warrant immediately prior to such adjustment,
and of which the denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
(f) Whenever the number of Shares purchasable upon exercise of
the Warrants is adjusted as herein provided, the Company shall cause to
be promptly mailed to the Warrantholder by first class mail, postage
prepaid, notice of such adjustment and a certificate of the chief
financial officer of the Company setting forth the number of Shares
purchasable upon the exercise of the Warrants after such adjustment, a
brief statement of the facts requiring such adjustment and the
computation by which such adjustment was made.
(g) For the purchase of this Section 5.1, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to this Section 5, the
Warrantholder shall become entitled to purchase any securities of the
Company other than Common Stock, (y) if the Warrantholder's right to
purchase is on any other basis than that available to all holders of the
Company's Common Stock, the Company shall obtain an opinion of an
independent investment banking firm valuing such other securities and
(z) thereafter the number of such other securities so purchasable upon
exercise of the Warrants 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 Shares contained in the Section 5.
(h) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the number
of Shares purchasable upon exercise of the Warrants, to the extent the
Warrants have not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had
they been originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (i) the fact that the only
shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights, options,
warrants, or conversion privileges, and (ii) the fact that such shares
of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants, or
conversion privileges whether or not exercised; provided, however, that
no such readjustment shall have the effect of decreasing the number of
Shares purchasable upon exercise of the Warrants by an amount in excess
of the amount of the adjustment initially made in respect of the
issuance, sale, or grant of such rights, options, warrants, or
conversion rights.
-5-
5.2. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 5.1, no
adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of the Warrants or upon the exercise of the Warrants.
5.3. NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section 5 hereof in connection with the issuance of the Common
Stock upon exercise of the Warrants. No adjustments shall be made pursuant to
Section 5 hereof in connection with grant or exercise of presently authorized
or outstanding options to purchase, or the issuance of shares of Common Stock
under the Company's director or employee benefit plan.
5.4. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or
merger of the Company into another corporation, or in case of any sale or
conveyance to another corporation of the property, assets, or business of the
Company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, as the case may be, shall execute with
the Warrantholder an agreement that the Warrantholder shall have the right
thereafter upon payment of the Exercise Price in effect immediately prior to
such action to purchase, upon exercise of the Warrants, the kind and amount
of shares and other securities and property which it would have owned or have
been entitled to receive after the happening of such consolidation, merger,
sale, or conveyance had the Warrants been exercised immediately prior to such
action. In the event of a merger described in Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, in which the Company is the surviving
corporation, the right to purchase Shares under the Warrants shall terminate
on the date of such merger and thereupon the Warrants shall become null and
void, but only if the controlling corporation shall agree to substitute for
the Warrants, its warrants which entitle the holder thereof to purchase upon
their exercise the kind and amount of shares and other securities and
property which it would have owned or been entitled to receive had the
Warrants been exercised immediately prior to such merger. Any such agreements
referred to in this Section 5.4 shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
Section 5 hereof. The provisions of this Section 5.4 shall similarly apply to
successive consolidations, mergers, sales, or conveyances.
5.5. PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action
which would cause an adjustment effectively reducing the portion of the
Exercise Price allocable to each Share below the par value per share of the
Common Stock issuable upon exercise of the Warrants, the Company will take
any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable Common Stock upon exercise of the Warrants.
5.6. INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this Section 5, and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section 5.
5.7. STATEMENT ON WARRANTS. Irrespective of any adjustments in the
number of securities issuable upon exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same number of
securities as are stated in the similar Warrants initially issuable pursuant
to this Agreement. However, the Company may, at any time in its sole
discretion (which shall be conclusive), make any change in the form of
Warrant that it may deem appropriate and that does not affect the substance
thereof; and any Warrant thereafter issued, whether upon registration of
transfer of, or in exchange or substitution for, an outstanding Warrant, may
be in the form so changed.
5.8. TREASURY STOCK. For purposes of this Section 5, shares of Common
Stock owned or held at any relevant time by, or for the account of, the
Company, in its treasury or otherwise, shall not be deemed to be outstanding
for purposes of the calculations and adjustments described.
-6-
SECTION 6. NOTICE TO HOLDERS.
If, prior to the expiration of this Warrant either by its terms or by
its exercise in full, any of the following shall occur:
(a) the Company shall declare a dividend or authorize any other
distribution on its Common Stock; or
(b) the Company shall authorize the granting to the shareholders of its
Common Stock of rights to subscribe for or purchase any securities or any
other similar rights; or
(c) any reclassification, reorganization or similar change of the
Common Stock, or any consolidation or merger to which the Company is a party,
or the sale, lease, or exchange of any significant portion of the assets of
the Company; or
(d) the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) any purchase, retirement or redemption by the Company of its Common
Stock;
then, and in any such case, the Company shall deliver to the Holder or
Holders written notice thereof at least 30 days prior to the earliest
applicable date specified below with respect to which notice is to be given,
which notice shall state the following:
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights, or, if a record is not to be taken, the
date as of which the shareholders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined;
(y) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up
or purchase, retirement or redemption is expected to become effective, and
the date, if any, as of which the Company's shareholders of Common Stock of
record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up,
purchase, retirement or redemption; and
(z) if any matters referred to in the foregoing clauses (x) and (y) are
to be voted upon by shareholders of Common Stock, the date as of which those
shareholders to be entitled to vote are to be determined.
SECTION 7. OFFICERS' CERTIFICATE.
Whenever the Exercise Price or the aggregate number of Warrant Shares
purchasable pursuant to this Warrant shall be adjusted as required by the
provisions of Section 5 above, the Company shall promptly file with its
Secretary or an Assistant Secretary at its principal office, and with its
transfer agent, if any, an officers' certificate executed by the Company's
President and Secretary or Assistant Secretary, describing the adjustment and
setting forth, in reasonable detail, the facts requiring such adjustment and
the basis for and calculation of such adjustment in accordance with the
provisions of this Warrant. Each such officers' certificate shall be made
available to the Holder or Holders of this Warrant for inspection at all
reasonable times, and the Company, after each such adjustment, shall promptly
deliver a copy of the officers' certificate relating to that adjustment to
the Holder or Holders of this Warrant. The officers' certificate described in
this Section 7 shall be deemed to be conclusive as to the correctness of the
adjustment reflected therein if, and only if, no Holder of this Warrant
delivers written notice to the Company of an objection to the adjustment
within 30 days after the officers' certificate is delivered to the Holder or
Holders of this Warrant. The Company will make its books and records
available for inspection and copying during normal business hours by the
Holder so as to permit a determination as to the correctness of the
adjustment. If written notice of an objection is delivered by a Holder to the
Company and the parties cannot reconcile the dispute, the Holder and the
Company shall submit the dispute to arbitration pursuant to the provisions of
Section 20 below. Failure to prepare or provide the officers' certificate
shall not modify the parties' rights hereunder.
-7-
SECTION 8. RESERVATION OF WARRANT SHARES.
There has been reserved, and the Company shall at all times keep
reserved so long as the Warrants remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be
subject to purchase under the Warrants. Every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants will be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite
for such purpose. The Company will keep a copy of this Agreement on file with
every transfer agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Warrants. The Company will supply every
such transfer agent with duly executed stock and other certificates, as
appropriate, for such purpose and will provide or otherwise make available
any cash which may be payable as provided in Section 13 hereof.
SECTION 9. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
9.1. RESTRICTIONS ON TRANSFER. The Warrantholder agrees that prior to
making any disposition of the Warrants or the Shares, the Warrantholder shall
give written notice to the Company describing briefly the manner in which any
such proposed disposition is to be made; and no such disposition shall be
made if the Company has notified the Warrantholder that in the opinion of
counsel reasonably satisfactory to the Warrantholder a registration statement
or other notification or post-effective amendment thereto (hereinafter
collectively a "Registration Statement") under the Act is required with
respect to such disposition and no such Registration Statement has been filed
by the Company with, and declared effective, if necessary, by the Commission.
9.2. PIGGY-BACK REGISTRATION RIGHT. This Warrant is subject to the
terms of a Registration Rights Agreement and a Mandatory Lock-Up Agreement,
which are incorporated by reference herein.
9.3. INCLUSION OF INFORMATION. In the event that the Company registers
or qualifies the Warrant Shares pursuant to Section 9.2 above, the Company
shall include in the registration statement or qualification, and the
prospectus included therein, all information and materials necessary or
advisable to comply with the applicable statutes and regulations so as to
permit the public sale of the Warrant Shares or the Warrant Shares underlying
the unexercised portion of this Warrant. As used in Section 9.2, reference to
the Company's securities shall include, but not be limited to, any class or
type of the Company's securities or the securities of any of the Company's
subsidiaries or affiliates.
9.4. CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section 9 shall be conditioned upon a timely receipt by the Company in
writing of the following:
(a) Information as to the terms of the contemplated public
offering furnished by and on behalf of each Holder or holder intending
to make a public distribution of the Warrant Shares; and
(b) Such other information as the Company may reasonably require
from such Holders or holders, or any underwriter for any of them, for
inclusion in the registration statement or offering statement.
9.5. RECIPROCAL INDEMNIFICATION. In each instance in which pursuant
to this Section 9 the Company shall take any action to register or qualify
the Warrant Shares, prior to the effective date of any registration statement
or offering statement the Company and each Holder or holder of Warrants or
Warrant Shares being registered or qualified shall enter into reciprocal
indemnification agreements, in the form customarily used by reputable
investment bankers with respect to public offerings of securities, containing
substantially the same terms as described in Section 11. These indemnification
agreements also shall contain an agreement by the Holder or shareholder at
issue to indemnify and hold harmless the Company, its officers and directors
from and against any and all losses, claims, damages and liabilities,
including, but not limited to, all expenses reasonably incurred in
investigating, preparing, defending or settling any claim, directly resulting
from any untrue statements of material facts, or omissions to state a
material fact necessary to make a statement not misleading, contained in a
registration statement or offering statement to which this Section 9 applies,
if, and only if, the untrue statement or omission directly resulted from
information provided in writing to the Company by the indemnifying Holder or
shareholder expressly for use in the registration statement or offering
statement at issue.
-8-
9.6. SURVIVAL. The Company's obligations described in this Section 9
shall continue in full force and effect regardless of the exercise,
surrender, cancellation or expiration of this Warrant.
SECTION 10. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Warrants or the securities comprising the
Shares; provided, however, the Company shall not be required to pay any tax
which may be payable in respect of any transfer of the Warrants or the
securities comprising the Shares.
SECTION 11. INDEMNIFICATION AND CONTRIBUTION
11.1. INDEMNIFICATION BY COMPANY. In the event of the filing of a
registration statement with respect to the Warrant Shares pursuant to Section
9 hereof, the Company agrees to indemnify and hold harmless the holder of
Warrant Shares and each person, if any, who controls the holder of Warrant
Shares within the meaning of the Act, against any and all loss, claim, damage
or liability, joint or several (which shall, for all purposes of this
Agreement include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which such holder of Warrant
Shares may become subject, under the Act or otherwise, insofar as such loss,
claim, damage, or liability (or action with respect thereto) arises out of or
is based upon (a) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus, or the Final Prospectus or any
amendment or supplement thereto; or (b) the omission or alleged omission to
state in the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus or the Final Prospectus or any amendment or supplement
thereto a material fact required to be stated therein or necessary to make
the statements therein not misleading; except that the Company shall not be
liable in any such case to the extent, but only 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
reliance upon and in conformity with written information furnished to the
Company by the holder of such Warrant Shares specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus and the Final Prospectus or any amendment or supplement
thereto. This indemnity will be in addition to any liability which the
Company may otherwise have.
11.2. INDEMNIFICATION BY HOLDERS OF WARRANT SHARES. The holders of
Warrant Shares agree that they, severally, but not jointly, shall indemnify
and hold harmless the Company, each other person referred to in subparts (1),
(2) and (3) of Section 11(a) of the Act in respect of the Registration
Statement and each person, if any, who controls the Company within the
meaning of the Act, against any and all loss, claim, damage or liability,
joint or several (which shall, for all purposes of this Agreement include,
but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which the Company may become subject under the Act or
otherwise, insofar as such loss, claim, damage, liability (or action in
respect thereto) arises out of or are based upon (a) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Effective Prospectus or the Final
Prospectus or any amendment or supplement thereto; or (b) the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment
or supplement thereto a material fact required to be stated therein or
necessary to make the statements therein not misleading; except that such
indemnification shall be available in each such 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 reliance upon information and in
conformity with written information furnished to the Company by the
Warrantholder or the holder of Warrant Shares specifically for use in the
preparation thereof. This indemnity will be in addition to any liability
which such Warrantholder or holder of Warrant Shares may otherwise have.
11.3. RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under Section 11.1 or 11.2 above of written notice of the commencement
of any action, the indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such section, notify the
indemnifying party in writing of the claim or the commencement of that
action; the failure to notify the indemnifying party shall not relieve it of
any liability which it may have to an indemnified party, except to the extent
that the indemnifying party did not otherwise have knowledge of the
commencement of the action and the indemnifying party's ability to defend
against the action was prejudiced by such failure. Such failure shall not
relieve the indemnifying party from any other liability which it
-9-
may have to the indemnified party. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that the holders
of Warrant Shares shall have the right to employ counsel to the holders of
Warrant Shares who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by such persons against the Company
under such section if, in such holders reasonable judgment, it is advisable
for those holders of Warrant Shares to be represented by separate counsel,
and in that event the fees and expenses of such separate counsel shall be
paid by the Company.
11.4. CONTRIBUTION. If the indemnification provided for in Sections
11.1 and 11.2 of this Agreement is unavailable or insufficient to hold
harmless an indemnified party, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages, or liabilities referred to in Sections 11.1 or 11.2
above in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the holders of Warrant Shares in connection
with the statements or omissions which resulted in such losses, claims,
damages, or liabilities, as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among
other things, whether the untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the Company or
the holder of Warrant Shares and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such untrue
statement or omission. For purposes of this Section 11.4, the term "damages"
shall include any counsel fees or other expenses reasonably incurred by the
Company or the holders of Warrant Shares in connection with investigating or
defending any action or claim which is the subject of the contribution
provisions of this Section 11.4. No person adjudged guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall promptly
give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 11.4 hereof).
SECTION 12. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933
This Warrant, the Warrant Shares, and all other securities issued or
issuable upon exercise of this Warrant, may not be offered, sold or
transferred, in whole or in part, except in compliance with the Act, and
except in compliance with all applicable state securities laws. The Company
may cause substantially the following legends, or their equivalents, to be
set forth on each certificate representing the Warrant Shares, or any other
security issued or issuable upon exercise of this Warrant, not theretofore
distributed to the public or sold to underwriters, as defined by the Act, for
distribution to the public pursuant to Section 8 above:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR
TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE AGREEMENT
PURSUANT TO WHICH THEY WERE ISSUED."
(b) Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Act"), or the securities
represented thereby) shall also bear the above legends unless, in the opinion
of the Company's counsel, the securities represented thereby need no longer
be subject to such restrictions.
-10-
SECTION 13. FRACTIONAL SHARES
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of all or any part of this Warrant. With respect to
any fraction of a share of any security called for upon any exercise of this
Warrant, the Company shall pay to the Holder an amount in money equal to that
fraction multiplied by the Current Market Price of that share.
SECTION 14. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained in this Agreement or in the Warrants shall be
construed as conferring upon the Warrantholder or its transferees any rights
as a stockholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a stockholder in respect to any
meeting of stockholders for the election of directors of the Company or any
other matter. The Company covenants, however, that for so long as this
Warrant is at least partially unexercised, it will furnish any Holder of this
Warrant with copies of all reports and communications furnished to the
shareholders of the Company. In addition, if at any time prior to the
expiration of the Warrants and prior to their exercise, any one or more of
the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 5.1 (except subsections 5.1(e) and 5.1(h) or 5.4; or
(b) a dissolution, liquidation, or winding up of the Company
(other than in connection with a consolidation, merger, or sale of its
property, assets, and business as an entirety or substantially as an
entirety) shall be proposed;
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 16 hereof, at least 20 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 any relevant dividend,
distribution, subscription rights or other rights or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation, or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive notice or
any defect therein shall not affect the validity of any action taken with
respect thereto.
SECTION 15. CHARGES DUE UPON EXERCISE.
The Company shall pay any and all issue or transfer taxes, including,
but not limited to, all federal or state taxes, that may be payable with
respect to the transfer of this Warrant or the issue or delivery of Warrant
Shares upon the exercise of this Warrant.
SECTION 16. WARRANT SHARES TO BE FULLY PAID
The Company covenants that all Warrant Shares that may be issued and
delivered to a Holder of this Warrant upon the exercise of this Warrant and
payment of the Exercise Price will be, upon such delivery, validly and duly
issued, fully paid and nonassessable.
SECTION 17. NOTICES
Any notice pursuant to this Agreement by the Company or by a
Warrantholder or a holder of Warrant Shares shall be in writing and shall be
deemed to have been duly given if delivered or mailed by certified mail,
return receipt requested:
(i) If to a Warrantholder or a holder of Warrant Shares, addressed to
the address set forth above.
(ii) If to the Company addressed to it at 00 Xxxxxxxxx Xxxxx Xxxx, #X,
Xxxxxxxxx, Xxxxxxxx 00000, Attention: President.
-11-
Each party may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in accordance herewith
to the other party.
SECTION 18. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 5.4 are complied with.
SECTION 19. APPLICABLE LAW
This Warrant shall be governed by and construed in accordance with the laws
of the State of Colorado, and courts located in Colorado shall have exclusive
jurisdiction over all disputes arising hereunder.
SECTION 20. ARBITRATION.
The Company and the Holder, and by receipt of this Warrant or any Warrant
Shares, all subsequent Holders or holders of Warrant Shares, agree to submit
all controversies, claims, disputes and matters of difference with respect to
this Warrant, including, without limitation, the application of this Section
20 to arbitration in Denver, Colorado, according to the rules and practices
of the American Arbitration Association from time to time in force; provided,
however, that if such rules and practices conflict with the applicable
procedures of Colorado courts of general jurisdiction or any other provisions
of Colorado law then in force, those Colorado rules and provisions shall
govern. This agreement to arbitrate shall be specifically enforceable.
Arbitration may proceed in the absence of any party if notice of the
proceeding has been given to that party. The parties agree to abide by all
awards rendered in any such proceeding. These awards shall be final and
binding on all parties to the extent and in the manner provided by the rules
of civil procedure enacted in Oregon. All awards may be filed, as a basis of
judgment and of the issuance of execution for its collection, with the clerk
of one or more courts, state or federal, having jurisdiction over either the
party against whom that award is rendered or its property. No party shall be
considered in default hereunder during the pendency of arbitration
proceedings relating to that default.
SECTION 21. ACCEPTANCE OF TERMS; SUCCESSORS.
By its acceptance of this Warrant, the Holder accepts and agrees to comply
with all of the terms and provisions hereof. All the covenants and provisions
of this Warrant by or for the benefit of the Company or the Holder shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 22. MISCELLANEOUS PROVISIONS
(a) Subject to the terms and conditions contained herein, this
Warrant shall be binding on the Company and its successors and shall inure to
the benefit of the original Holder, its successors and assigns and all
holders of Warrant Shares and the exercise of this Warrant in full shall not
terminate the provisions of this Warrant as it relates to holders of Warrant
Shares.
(b) If the Company fails to perform any of its obligations hereunder,
it shall be liable to the Holder for all damages, costs and expenses
resulting from the failure, including, but not limited to, all reasonable
attorney's fees and disbursements.
(c) This Warrant cannot be changed or terminated or any performance
or condition waived in whole or in part except by an agreement in writing
signed by the party against whom enforcement of the change, termination or
waiver is sought; provided, however, that any provisions hereof may be
amended, waived, discharged or terminated only upon the written consent of
the Company and all of the holders of Warrants.
(d) If any provision of this Warrant shall be held to be invalid,
illegal or unenforceable, such provision shall be severed, enforced to the
extent possible, or modified in such a way as to make it enforceable, and the
invalidity, illegality or unenforceability shall not affect the remainder of
this Warrant.
-12-
(e) The Company agrees to execute such further agreements,
conveyances, certificates and other documents as may be reasonably requested
by the Holder to effectuate the intent and provisions of this Warrant.
(f) Paragraph headings used in this Warrant are for convenience only
and shall not be taken or construed to define or limit any of the terms or
provisions of this Warrant. Unless otherwise provided, or unless the context
shall otherwise require, the use of the singular shall include the plural and
the use of any gender shall include all genders.
Dated January 13, 1998
---------------------------
TRAINING DEVICES INCORPORATED
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx, CEO
-13-
SCHEDULE 10.7
The following persons and entities executed Warrants, the form of which is
attached as EXHIBIT 10.7 in the Company's October 1997 private offering:
NAME DATE SHARES WARRANTS
---- ---- ------ --------
Caribou Bridge Fund LLC 10/14/97 25,000 12,500
Kiawah Capital Partners 10/14/97 8,333 4,167
Delaware Charter TTEE 10/14/97 40,000 20,000
FBO Xxxxxx X. Xxxxxxxx, XXXXX
Delaware Charter TTEE FBO 10/14/97 6,667 3,333
Xxxxxxxx Xxxxxxxx XXX
Xxxx X. Xxxxxxxx 10/14/97 3,333 1,667
Xxxxxxx Xxxxx Xxxxxxxxx 10/16/97 8,333 4,167
Xxxxx Xxxxx XxXxxxxx, Trustee 10/16/97 13,333 6,667
Xxxxx Xxxxx XxXxxxxx Revocable
Living Trust
Xxxxxxxx Xxxxxxx XxXxxxxx, Trustee 10/16/97 13,333 6,667
Xxxxxxxx Xxxxxxx XxXxxxxx Revocable
Trust
Xxxxxx X. XxXxxxxx 10/18/97 8,333 4,167
Xxxxxxx Xxxxxx TTEE 10/14/97 3,333 1,667
FBO Xxxxxx Xxxxxx XXX
Xxxxx X. Xxxxxxx 10/17/97 3,333 1,667
Xxxxxx X. Xxxxxx 10/21/97 2,500 1,667
Xxxx X. Xxxxxxxxx 10/22/97 3,333 1,667
Schedule 10-7 Page 1
NAME DATE SHARES WARRANTS
---- ---- ------ --------
Xxxxxx X. Nice 10/22/97 2,500 1,250
Xxxx X. Xxxxxxx 10/27/97 833 417
Xxxx Xxxxxxx 10/28/97 1,667 833
Xxxxxxx X. XxXxxx 10/29/97 1,667 833
The Xxxx Family Trust, X. X. Xxxx 10/31/97 8,333 4,167
and/or M.A. Xxxx, Trustees
McDonald & Co. Sec. 10/31/97 5,000 2,500
FBO Xxxxx X. Xxxxxxxxxxxx XXX
Xxxxxxx X. Xxxxxx 10/31/97 1,667 833
Xxxxxxx Xxxxxx 10/31/97 3,333 1,667
FBO Xxxx Xxxxx XXX
Xxxxx X. Xxxxxxxx 11/3/97 5,000 2,500
Xxxxxxxx X. Xxxx TTEE 11/6/97 3,333 1,667
FBO Xxxxxxxx X. Xxxx Trust
Xxxxx X. Xxxxxxxx Trust 11/6/97 5,000 2,500
Xxxxxx X. Xxxxxx 11/6/97 3,333 1,667
Xxxxxxxxxx Family Partnership 11/6/97 833 417
Xxxxxx X. Xxxxxx 11/10/97 833 0
Schedule 10-7 Page 2
NAME DATE SHARES WARRANTS
---- ---- ------ --------
Xxxxxxx Xxxxxxxx & Tenanbaum, 11/10/97 3,333 1,667
P.C. 401(k) P/S Plan FBO Xxxxxx
Xxxxxxx
Xxxxxxx Xxxxxxxx & Tenanbaum, 11/10/97 1,667 833
P.C. 401(k) P/S Plan
FBO A. Xxxxxx Xxxxxxxxx
Xxxxxx X. Xxxxxx 11/10/97 5,000 2,500
J. Xxxxx Xxxxxx 11/10/97 1,667 833
Xxxxx & Xxxx Sasald 11/10/97 1,667 833
Xxxxxx X. Xxxxxxx 11/13/97 1,667 833
Xxxx Xxxxxxxx 11/14/97 3,333 1,667
Xxxxxx X'Xxxxxxx 11/18/97 3,333 1,667
Xxxx X. Xxxxx 11/19/97 1,667 833
Xxxxx X. Xxxxxx 11/21/97 3,333 1,667
Gorge Investments LLC 11/26/97 3,333 1,667
Xxxxxxx Xx 12/10/97 3,333 1,667
Xxxxxxx X. Xxxxxxx 12/22/97 1,667 833
Xxxxxxx X. Xxxxxx 12/23/97 833 417
Schedule 10-7 Page 3
NAME DATE SHARES WARRANTS
---- ---- ------ --------
Southwest Securities 12/23/97 3,333 1,667
FBO Xxxxxxx Xxxxxxxxx XXX
Xxxxxxx X. Xxxxxxx 12/30/97 6,667 3,333
Xxxxxx X. Xxxxxxx 12/30/97 8,333 4,167
Skyline Real Estate Management 1/9/98 1,667 833
Defined Benefit pension Plan ------- -------
TOTAL 238,333 119,167
Schedule 10-7 Page 4
