STRATEGIC ALLIANCE AGREEMENT
This Strategic Alliance Agreement is entered into as of January 31, 2000,
between Training Devices International, Inc. ("Company") and Xxxxxxx & Xxxxx XX
("B&B").
BACKGROUND
The Company desires to engage B&B's services in contacting and setting up
meetings with potential purchasers of fractional ownership interests in flight
simulators or hours for use in the flight simulators manufactured by the
Company.
AGREEMENT
The parties agree as follows:
1. DUTIES OF B&B.
a. DUTIES. The duties of B&B under this Agreement are to use
its commercially reasonable efforts to (i) identify and
contact potential purchasers of fractional ownership
interests in flight simulators manufactured by the Company,
and/or parties interested in contracting for hours for use
in the flight simulators manufactured by the Company,
including, at a minimum, the potential purchasers listed on
SCHEDULE I, (ii) provide the Company with publicly
available information about the potential purchasers and
the target markets, (iii) arrange meetings between the
Company and senior executives of potential purchasers in
accordance, to the extent possible, with the time table set
forth on SCHEDULE I (the Company understands that B&B is
not guaranteeing meetings with all of the potential
purchasers listed on SCHEDULE I or the results of any of
those meetings), and (iv) have a representative of B&B
attend the initial meeting with any potential purchasers as
to which B&B has arranged a meeting and also attend, if
requested by the Company at reasonable places and times,
additional meetings with any such potential purchaser. B&B
potential purchasers shall include all parties listed on
Schedule I plus any parties added to Schedule I by mutual
agreement, including but not limited to parties who are
suggested as a result of meetings or contracts arranged by
B&B; provided that for any such party on Schedule I to be a
B&B potential purchaser, B&B shall have arranged a meeting
of the party with the Company or shall have made another
form of introduction of the party to the Company. B&B shall
neither contact any potential purchaser not listed on
Schedule I nor arrange any meeting with any such potential
purchaser for the purpose of discussing the Company or its
flight simulators without the prior
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written consent and approval of the Company. The term "B&B
potential purchaser" means a potential purchaser described
above as to which the Company has provided its prior
written consent and approval and with which B&B has
arranged a meeting of the Company or has made another form
of introduction of the Company. B&B shall maintain an
updated Schedule I of B&B potential purchasers.
b. INDIVIDUALS. The services to be performed by B&B as
described in paragraph 1(a) shall be directed and led by
Xxxxxx Xxxxxxxxxx. At least one of Xx. Xxxxxxxxxx, Xxxxxxx
Xxxxx or Xxxx Xxxxxx shall be present at each meeting
described in paragraph 1(a) arranged by B&B between the
Company and potential purchasers. Any of the above three
persons are authorized by the Company to contact potential
purchasers, subject to the Company's prior written approval
and consent.
2. COMPENSATION. As compensation for the services rendered hereunder,
the Company agrees to compensate B&B as follows:
a. BASE COMPENSATION. B&B shall be entitled to receive as
compensation for the duties listed in paragraph 1 above
("Base Compensation"), warrants to purchase up to 150,000
shares of the Company's common stock, at an exercise price
of $5.00 per share. Each warrant shall contain the terms
and provisions as set forth in the form of warrant attached
hereto as SCHEDULE III. The expiration date for each such
warrant in the Base Compensation shall be December 31,
2005.
Warrants for 75,000 shares issued on February 29,
2000
Warrants for 50,000 shares issued on March 31, 2000
Warrants for 25,000 shares issued on April 30, 2000
All warrants shall vest immediately following issuance.
b. INCENTIVE COMPENSATION.
i. BASIS. In addition to the Base Compensation, B&B
shall also be entitled to receive incentive
compensation ("Incentive Compensation") based upon
the number of flight simulators in which all or any
part of fractional ownership interests are sold to,
or the full amount of or any part of simulator hours
in each simulator are contracted for by, B&B
potential purchasers. For purposes of determining
Incentive Compensation, each flight simulator in the
table below shall consist of six fractional
ownership interests (1,000 hours per year for each
fractional ownership interest) or 6,000 simulator
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hours for five years for a total of 30,000 hours
(6,000 x 5) in any simulators of the Company. For
each simulator in which any fractional ownership
interests are sold to, or hours of simulator hours
are contracted for by, B&B potential purchasers
within the time period described below, B&B shall
receive warrants to purchase the following
additional shares of the Company's common stock:
Six Fractional Ownership Warrants to Maximum
Interests, or 6,000 Hours, in: Purchase: Exercise Price:
------------------------------ --------- ---------------
1st simulator 200,000 shares $5.00
2nd simulator 150,000 shares $6.00
3rd simulator 75,000 shares $8.00
4th simulator 50,000 shares $10.00
The total number of shares for which B&B may receive
warrants as Incentive Compensation shall not exceed
475,000 in the aggregate. Each warrant issued as
Incentive Compensation shall contain the terms and
provisions as set forth in the form attached as
SCHEDULE III and will be vested fully on the date of
issuance as to all shares subject to the warrant.
The expiration date of each warrant issued as
Incentive Compensation shall be five years after the
date of its issuance. Each warrant that is Incentive
Compensation regarding a simulator shall be issued
within 30 days after a binding contract has been
executed for any fractional ownership interests or
hours in the simulator from B&B potential
purchasers, and shares subject to the warrant shall
be as described below. Upon each sale of six
fractional ownership interests or 6,000 hours for
five years in regard to any simulators, warrants as
Incentive Compensation for one simulator will have
been issued by TDI to B&B. When a B&B potential
purchaser purchases any fractional ownership
interests in a simulator or contracts for any hours
in a simulator, then the number of shares subject to
the warrant issued as Incentive Compensation shall
be equal to the following:
(A) The number of shares that would be issued for
six fractional ownership interests or 6,000
hours for five years (30,000 hours), as the
case may be, for the simulator in question,
multiplied by
(B) a fraction of which (I) the numerator is the
number of fractional ownership interests
purchased by the B&B potential purchaser or
the total number of hours contracted by the
B&B potential purchaser
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(multiplying the hours per year times the
number of years), and (II) the denominator is
six fractional ownership interests or 30,000
hours, as the case may be.
As an example, if two B&B potential purchasers
purchase at the same time a total of 2.5 fractional
ownership interests in a simulator and B&B potential
purchasers have previously purchased a total of six
fractional ownership interests or 30,000 total hours
in one or more simulators, then the Company will
issue for a "second simulator" to B&B a warrant for
the purchase of the following number of shares:
150,000 shares (for the second simulator) x (2.5 divided by
6) = 62,500 shares.
As a second example, if one B&B potential purchaser
contracts for the use of a simulator for 1,000 hours
for three years and another B&B potential purchaser
contracts for 1,000 hours for five years in a
simulator and if B&B potential purchasers have
previously purchased a total of 12 fractional
ownership interests or a total of 60,000 hours
(calculated on the basis of hours per year times the
number of years), then the Company will issue for a
"third simulator" to B&B a warrant for the purchase
of the following number of shares:
75,000 shares (for the third simulator) x [(1,000 x 3)
+(1,000 x 5)] = 30,000
8,000 =
------
30,000
20,000 shares
The parties acknowledge that the Company intends to
sell full fractional ownership interests entitling
the owner to use a simulator for 1,000 hours per
year or contract for not less than 1,000 hours of
use per year for five years and that TDI may decline
to accept any proposed purchase of fractional
ownership interests or contracts for hours.
ii. THREE YEAR PERIOD. B&B shall be entitled to receive
a vested warrant as Incentive Compensation with
respect to any fractional ownership interests sold
to, or hour increments contracted by, a B&B
potential purchaser for a simulator within three
years of the date of the initial meeting or
introduction of the B&B potential purchaser, as
arranged by
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B&B, with or to the Company. B&B will enter on
SCHEDULE I the date of the initial meeting or
introduction, as mutually agreed by the parties.
iii. EXERCISE PRICE. The per share exercise price under
each warrant granted to B&B as Incentive
Compensation shall be the lesser of: the amount per
share set forth in the table in paragraph 2.b.i
above or the fair market value per share on the date
that the contract, resulting in the issuance of the
warrant, is executed by both the B&B potential
purchaser and the Company. For purposes of this
paragraph 2, fair market value shall be (A) the
preceding business day's closing (last traded) price
for common stock of the Company, if the Company's
common stock is traded on an established trading
market in the United States of America, or (B) if
not so traded, then either (I) the price at which
each share of the Company's common stock was
actually sold in the most recent private equity
offering by the Company, or, if either the Company
or B&B so elects, (II) the fair market value
(excluding any minority or private company
discounts) established by an independent valuation
of the Company. The fair market value established by
an independent valuation shall be determined as of
the end of the month preceding the date of the
contract executed by the B&B potential purchaser and
the Company. If the Company or B&B chooses an
independent valuation, the parties shall mutually
select an independent appraiser or investment
banker, and the cost of such valuation shall be
borne equally by the parties.
c. ADJUSTMENTS. The number and type of shares which may be
purchased pursuant to each warrant shall be adjusted to
reflect appropriately the effect of any stock split,
reverse stock split, stock dividend, extraordinary dividend
or distribution, reorganization, recapitalization or other
change with respect to the Company's capital stock
occurring or having a record date after the date hereof and
prior to the issuance of the relevant Warrant.
3. EXPENSE REIMBURSEMENT. Out-of-pocket expenses incurred by B&B in
connection with services rendered by it hereunder shall be paid (whether or not
any efforts by B&B result in success for the Company) as follows:
a. EXPENSES UP TO $15,000. B&B shall pay all of its own
out-of-pocket expenses incurred in connection with services
rendered by it up to a cap of $15,000. B&B shall provide
copies of receipts or other documentation for such expenses
to the Company on a monthly basis.
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b. EXPENSES BETWEEN $15,000 AND $25,000. Thereafter, the
Company shall reimburse B&B for all of B&B's reasonable
out-of-pocket expenses incurred in excess of $15,000 up to
a cap of $25,000. The Company shall reimburse B&B for such
expenses and any out-of-pocket expenses incurred by B&B on
behalf of the Company on a monthly basis for all reasonable
amounts timely submitted to the Company in writing and
accompanied by receipts or other documentation.
c. EXPENSES IN EXCESS OF $25,000. Responsibility for payment
of out-of-pocket expenses which exceed the $25,000 cap will
be negotiated by the parties at that time.
d. LIMITATIONS ON EXPENSES. B&B agrees that it shall fly coach
class (frequent flyer upgrades permitted) on all domestic
flights and shall lodge in medium class range hotels (e.g.
Hilton, Marriot, Westin, etc.). All unusual costs (i.e.,
costs not associated with travel or entertainment of B&B
potential purchasers) in excess of $200 shall be approved
in advance by the Company.
4. TERMINATION OR RESIGNATION ("TERMINATION"). Either party may
terminate this Agreement at any time and for any reason upon thirty (30) days
advance written notice to the other party. Regardless of any termination, B&B
shall be deemed to have earned the Base Compensation set forth in paragraph 2.a
unless and to the extent that it fails to perform the services described in
paragraph 1 (unless such failure was due to the actions or inaction of the
Company). B&B's Incentive Compensation and expense reimbursement shall be
limited to warrants actually issued as Incentive Compensation under this
Agreement prior to the date of termination, expenses incurred through the date
of termination, and any Incentive Compensation that is subsequently earned
during any applicable three-year period. The confidentiality and indemnity
provisions of this Agreement shall survive termination.
5. CASH-OUT PROVISION:
a. CASH OUT RIGHTS. In the event that the Company has not
closed within four years of the date of this Agreement a
public offering of common stock of the Company made
pursuant to a Registration Statement filed by the Company
and effective under the Securities Act of 1933 or any
successor law, then B&B shall have rights as provided below
to be cashed out of up to all shares of Company stock held
by B&B as a result of the exercise of warrants issued under
this Agreement as well as all shares of Company stock
underlying unexercised warrants held by B&B (together, the
"B&B Shares").
b. EXERCISE OF RIGHTS. On and after the fourth anniversary of
this Agreement until the seventh anniversary of this
Agreement, B&B shall have four put rights that each require
the Company to purchase for cash up to 25% of the aggregate
B&B Shares. To exercise each
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put, B&B shall provide written notice to the Company,
stating the specific number of B&B Shares to be cashed out
(the "cash-out notice"). No put right may be exercised
within six months of the exercise of any other put right.
After the exercise of a put right, the Company will
cash-out the B&B Shares on a date which is six months from
the date of the Company's receipt of the cash-out notice.
However, the Company may choose at any time and in its sole
election to cash-out the B&B Shares subject to an exercised
put at an earlier time. Upon the payment of the fair
market value of the B&B Shares subject to the exercised
put, those B&B Shares shall be returned to the Company,
free and clear of any liens, claims or security interests,
and canceled. B&B may withdraw and terminate the exercise
of any put at any time with respect to B&B Shares for which
payment has not yet been made by the Company, and B&B may,
in that event, re-exercise the put as to such B&B Shares as
if it had not been previously exercised. The cash-out
price shall be paid by certified or cashier's check or by
wire transfer to an account designated by B&B.
c. CASH-OUT PRICE. The price per B&B share at which B&B shall
be entitled to be cashed out upon the exercise of a put
shall be the fair market value on the date that the Company
receives the cash-out notice for that put. For purposes of
this paragraph 5, fair market value will be as determined
by agreement of the parties, or failing mutual agreement of
the parties within 30 days of the cash-out notice, by an
independent valuation of the fair market value at the end
of the month preceding the Company's receipt of the
cash-out notice (excluding any minority or private company
discounts), and less in any event the exercise price for
all unexercised warrants. The parties shall mutually select
an independent appraiser or investment banker, and the cost
of such valuation shall be borne equally by the parties.
d. TRANSFERABILITY. Xxxxxxx & Xxxxx may transfer its rights
under this paragraph 5 in conjunction with the transfer of
any of its B&B Shares or the warrants issued under this
Agreement.
6. INDEMNITY. The Company agrees to indemnify B&B, and B&B agrees to
indemnify the Company, as set forth in SCHEDULE II hereto, which is incorporated
herein by reference.
7. CONFIDENTIALITY. Except to the extent authorized by the Company or
required by any federal or state law, rule or regulation or any decision or
order of any court or regulatory authority, B&B, including its agents,
employees, officers and directors, agrees that it will refrain from
(i) disclosing to any person, other than to any agents, attorneys, accountants,
employees, officers, and directors of B&B who need to know the information in
connection with B&B's engagement hereunder, or (ii) using, except in connection
with its performance of services hereunder, any confidential information which
has not become
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public about the Company received by B&B from the Company or its agents,
employees, attorneys or accountants in connection with the services rendered
hereunder, except for the purposes contemplated by this agreement.
8. NOTICES. Notices to be given under this Agreement shall be in
writing and mailed or delivered to the parties at the following addresses:
To Company: Training Devices International, Inc.
0000 X. Xxxxxx Xxxxxxx, Xxxx 0X
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxxx
To B&B: Xxxxxxx & Xxxxx XX
0 Xxxxxxxx Xx., 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxx III
With required copy to: General Counsel
9. THIRD PARTY BENEFICIARIES. This Agreement has been and is made
solely for the benefit of the Company, B&B and, in the case of Schedule II only,
also each of the Indemnified Persons defined in SCHEDULE II hereto, and their
respective successors and permitted assigns, and, except as provided in
paragraphs 5.d and 14, no other person shall acquire or have any right hereunder
by virtue of this Agreement.
10. ASSIGNMENT. This Agreement may not be assigned by either party
without first obtaining the written consent of the other party. The terms of
this Agreement shall be binding upon the successors and permitted assigns of the
respective parties hereto.
11. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of Colorado.
12. ENTIRE AGREEMENT. This Agreement, along with the schedules
attached hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof.
13. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
14. PARTY TO RECEIVE WARRANTS. B&B may designate in writing a party
other than itself to receive any warrant issued as Base or Incentive
Compensation under this Agreement by the Company, and the Company will issue
warrants to that designated party; provided, however, any such designation must
be accompanied by an opinion of counsel reasonably satisfactory to the Company
that the designation of that party will not result in any requirement to
register any warrants or securities issuable upon the exercise of warrants under
any applicable securities laws. Concurrent with the designation of a party to
receive a warrant, B&B may assign any rights under this Agreement relating to
the warrant to the designated party; and, upon acceptance of the warrant, the
receiving party
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shall be deemed to have assumed all obligations under this Agreement of B&B
relating to the warrant. No such designation or issuance of a warrant shall
relieve B&B of any obligations under this Agreement.
The parties have executed this Strategic Alliance Agreement as of the
date set forth in the first paragraph.
TRAINING DEVICES INTERNATIONAL, INC.
By:
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman of the Board of Directors
and Chief Executive Officer
XXXXXXX & XXXXX XX
By: XXXXXXX & XXXXX XX LLC, its general
partner
------------------------------------------
By:
Its:
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SCHEDULE I
TO STRATEGIC ALLIANCE AGREEMENT
LIST OF POTENTIAL PURCHASERS AND INITIAL MEETINGS AND INTRODUCTIONS
NAME OF PURCHASER; MEETING OR ACTUAL DATE OF INITIAL MEETING
INTRODUCTION DATE GOAL OR INTRODUCTION
January 31, 2000 to February 5, 2000: *
1. Mesa Air Group
2. Great Lakes Airlines
3. Air Wisconsin January 31, 2000
4. Delta Airlines (Delta
connection management to
be targeted)
5. SkyWay Airlines February 1, 2000
ACTUAL DATE OF INITIAL MEETING
NAME OF PURCHASER; MEETING OR OR INTRODUCTION
INTRODUCTION DATE GOAL
February 14 to February 25, 2000: *
6. Comair
7. Airbus
8. Bombardier
9. Continental (Both
Continental and
Continental Express to be
targeted)
10. Dornier
11. U.S. Airways (regional
group head to be targeted)
NAME OF PURCHASER; MEETING OR ACTUAL DATE OF INITIAL MEETING
INTRODUCTION DATE GOAL OR INTRODUCTION
March 13, 2000 to March 22, 2000: *
12. Atlantic Coast (ACA)
13. United Airlines (regional
group head to be targeted)
14. Express One
15. Midwest Express
16. Mesaba
NAME OF PURCHASER; MEETING OR ACTUAL DATE OF INITIAL MEETING
INTRODUCTION DATE GOAL OR INTRODUCTION
Other B&B Potential Purchasers:
17. PSA Airlines, Inc.
* DATES ARE APPROXIMATE ONLY.
SCHEDULE II
TO STRATEGIC ALLIANCE AGREEMENT
INDEMNIFICATION BY COMPANY
A. INDEMNIFICATION BY COMPANY. If, in connection with services performed
under this Agreement, B&B or its affiliates become involved in any capacity in
any action or legal proceeding (pending or threatened), the Company agrees to
indemnify and hold harmless B&B and B&B's directors, officers, agents and
employees (together, the "B&B Indemnified Persons"), from and against any
losses, claims, damages or liabilities (or legal actions in respect thereof)
related to or arising out of such services, and will reimburse B&B Indemnified
Persons for all expenses (including reasonable out-of-pocket expenses and
reasonable counsel fees) incurred in connection with such pending or threatened
legal actions in which B&B is named as a party. The Company will not, however,
be responsible for any claims, liabilities, losses, damages or expenses which
are finally judicially determined to have resulted primarily from any of B&B
Indemnified Persons' willful misconduct, gross negligence or breach of this
Agreement. The Company also agrees that the B&B Indemnified Persons shall have
not any liability to the Company for or in connection with such engagement
except for any such liability for losses, claims, damages, liabilities or
expenses incurred by the Company that results primarily from the willful
misconduct or gross negligence of B&B Indemnified Persons or a breach of this
Agreement by a B&B Indemnified Person. If the foregoing indemnity is unavailable
or insufficient to hold the B&B Indemnified Persons harmless, then the Company
shall contribute to the amount paid or payable by the B&B Indemnified Persons in
respect of the B&B Indemnified Persons' losses, claims, damages, liabilities and
expenses in such proportion as appropriately reflects the relative benefits
received by, and fault of, the Company, on the one hand, and the B&B Indemnified
Persons, on the other, in connection with the matters as to which such losses,
claims, damages, liabilities or expenses relate and other equitable
considerations; provided, however, the Company agrees that B&B's contribution
shall in all cases be not more than the value of the compensation actually
received by B&B for its services hereunder.
B. INDEMNIFICATION BY B&B. If, in connection with services performed under
this Agreement, the Company or its affiliates become involved in any capacity in
any action or legal proceeding (pending or threatened), B&B agrees to indemnify
and hold harmless the Company and the Company's directors, officers, agents and
employees (together, the "Company Indemnified Persons"), from and against any
losses, claims, damages or liabilities (or legal actions in respect thereof)
related to or arising out of B&B Indemnified Persons' willful misconduct, gross
negligence or breach of this Agreement, and will reimburse the Company
Indemnified Persons for all expenses (including reasonable out-of-pocket
expenses and reasonable counsel fees) incurred in connection with such pending
or threatened legal actions in which the Company is named as a party.
C. OTHER. No party who may seek indemnification hereunder shall settle any
matter without the prior written consent of the other party, which consent will
not be unreasonably withheld. The foregoing agreements shall be in addition to
any rights that either party may have at common law or otherwise.
SCHEDULE III
TO STRATEGIC ALLIANCE AGREEMENT
FORM OF WARRANT
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"), AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE144 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._____
***TRAINING DEVICES INTERNATIONAL, INC.***
WARRANT TO PURCHASE SHARES OF COMMON STOCK
WARRANT TO PURCHASE ______________ SHARES
(SUBJECT TO ADJUSTMENT AS SET FORTH HEREIN)
EXERCISE PRICE $ [PRICE] PER SHARE
(SUBJECT TO ADJUSTMENT AS SET FORTH HEREIN)
VOID AFTER 3:00 P.M., MOUNTAIN TIME, ON [END DATE]
THIS CERTIFIES THAT [NAME], [ADDRESS] is entitled to purchase from
Training Devices Inc., a Colorado corporation (hereinafter called the "Company")
with its principal office located at 0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxxxxx #0,
Xxxxxxxxx, Xxxxxxxx 00000, at any time after 9:00 AM, on the date of issuance
but before 3:00 P.M., Mountain Time, on [five years after issuance] (the
"Termination Date"), at the purchase price of [PRICE] per share (the "Exercise
Price"), the number of shares (the "Shares") of the Company's Common Stock (the
"Common Stock") set forth above; provided that the Shares are vested. 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 4 below.
This Warrant concerns the [BASE COMPENSATION SECTION OF] [(FIRST-FOURTH)
SIMULATOR DESCRIBED IN THE INCENTIVE COMPENSATION SECTION OF] the Strategic
Alliance Agreement referenced in Section 2.1(b) below.
SECTION 1 DEFINITIONS.
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1 THE "ACT." The Securities Act of 1933, as amended.
1.2 THE "COMMISSION." The Securities and Exchange Commission.
1.3 THE "COMPANY." Training Devices Inc.
1.4 "COMMON STOCK." The Company's Common Stock.
1.5 "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, Inc. ("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
NASDAQ Electronic Bulletin Board, 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 19
below.
1.6 "EXERCISE DATE." [____].
1.7 "EXERCISE PRICE." $[____] per Share, as modified in accordance
with Section (4), below.
1.8 "EXPIRATION DATE." [___]
1.9 "HOLDER " OR "WARRANTHOLDER." The person to whom this Warrant is
issued, and any valid transferee thereof pursuant to Section (3.1) below.
1.10 "NASD." The National Association of Securities Dealers, Inc.
1.11 "NASDAQ." The automated quotation system operated by Nasdaq Stock
Market, Inc.
1.12 "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.
2
1.13 "WARRANTS." The warrants issued in accordance with the terms of
this Agreement and any Warrants issued in substitution for or replacement of
such warrants, including those evidenced by a certificate or certificates
originally issued or issued upon division, exchange, substitution or transfer
pursuant to this Agreement.
1.14 "WARRANT SECURITIES." 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; FULLY VESTED.
(a) 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 Agreement, upon surrender to the Company, at its principal office, of the
Warrant to be exercised, together with the purchase form on the reverse thereof,
or the Warrant Conversion Exercise Form in the case of a warrant conversion
pursuant to Section (2.3) herein, 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 Warrants are 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).
(b) As stated in the Strategic Alliance Agreement dated as of
January 31, 2000 between the Company and Xxxxxxx & Xxxxx, XX, as it may be
amended from time to time, all Shares subject to this Warrant are fully vested.
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 (12) hereof, in respect of
any fractional Shares otherwise issuable upon such surrender.
2.4 CONVERSION RIGHT. In addition to and without limiting the rights
of the Warrantholder under the terms of the Warrant, the Holder shall have the
right (the "Conversion Right") to convert the Warrant evidenced by this
certificate or any portion thereof into Shares as provided in this Section 2.4
at any time or from time to time prior to its expiration.
(a) Upon exercise of the Conversion Right with respect to a
particular number of Shares (the "Conversion Shares"), the Company shall deliver
to the Holder,
3
without payment by the Holder of any Exercise Price or any cash or other
consideration, that number of Shares equal to the quotient obtained by dividing
the Net Value (as hereinafter defined in this paragraph 2.4(a)) of the Converted
Shares by the Current Market Price of a single Share, determined in each case as
of the close of business on the Conversion Date (as hereinafter defined). The
"Net Value" of the Converted Shares shall be determined by subtracting the
aggregate Exercise Price of the Converted Shares from the aggregate Current
Market Price of the Converted Shares. No fractional securities shall be
issuable upon exercise of the Conversion Right, and if the number of securities
to be issued in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Holder an amount in cash equal to the
Current Market Price of the resulting fractional Share.
(b) The Conversion Right may be exercised by the Holder by the
surrender of the Warrant at the principal office of the Company or at the office
of the Company's stock transfer agent, if any, together with a written statement
specifying that the Holder thereby intends to exercise the Conversion Right and
indicating the number of Shares subject to the Warrant which are being
surrendered (referred to in subparagraph 2.3(a) above as the Converted Shares),
on the reverse side of the Warrant, in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of the Warrant, or on
such later date as is specified therein (the "Conversion Date"), but not later
than the Expiration Date. Certificates for the Converted Shares issuable upon
exercise of the Conversion Right, together with a check in payment of any
fractional Warrant Share and, in the case of a partial exercise a new Warrant
evidencing the Warrant Shares remaining subject to the Warrant, shall be issued
as of the Conversion Date and shall be delivered to the Holder within seven (7)
days following the Conversion Date.
2.5 Upon receipt of the Warrant by the company as described in
Sections 2.1 or 2.4 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.
SECTION 3 TRANSFERABILITY AND FORM 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 CERTIFICATE. Any Warrant may be exchanged for another
certificate or certificates entitling the Warrantholder to purchase a like
aggregate number
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of Shares as the certificate or certificates 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 certificate
evidencing 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 CERTIFICATE. In case the
certificate or certificates evidencing the Warrants 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 certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant or
certificates 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 CERTIFICATE. The text of the Warrant and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit A
attached hereto. The number of Shares issuable upon exercise of the Warrants is
subject to adjustment upon the occurrence of certain events, all as hereinafter
provided. 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 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:
4.1 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
5
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 (4.1.(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 (4.1(b))
above), then in each case the number of Shares thereafter 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 (f)
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) If the Company shall issue "Additional Stock" (as defined
below) for a consideration per share less than the Exercise Price in effect on
the date and
6
immediately prior to such issue, then and in such event, the Exercise Price
shall be reduced concurrently with such issue, to a price (calculated to three
decimal places) determined by multiplying such Exercise Price by a fraction (i)
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue, plus the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number of
Additional Stock so issued (or deemed to be issued) would purchase at such
Exercise Price; and (ii) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issue plus the number of
shares of Additional Stock so issued. For purposes of this subsection,
"Additional Stock" shall mean all Common Stock issued by the Company after the
date hereof, except that, notwithstanding any other provision, the term
"Additional Stock" shall exclude any and all of the following:
i. Shares, or options or other rights to acquire Common
Stock, issued to employees other than directors or executive officers (as
defined in Rule 3b-7 of the Securities and Exchange Commission on January 31,
2000) of the Company or any of its Affiliates (as defined in Rule 12b-2 of the
Securities and Exchange Commission on January 31, 2000) as incentives or
compensation;
ii. Shares issued to satisfy options or other rights which
are issued to employees as described in clause i above or which were issued
prior to the date of this Warrant;
iii. Shares issued in consideration for the purchase by the
Company or any of its Affiliates of all or a material portion of a business or
50% or more of the outstanding voting securities of an entity;
iv. Shares, or options or other rights to acquire Common
Stock issued upon the conversion of any debt of the Company or any of its
Affiliates into shares of Common Stock, and shares issued to satisfy such
options or other rights; and
v. Any shares, options or other rights to acquire Common
Stock issued to any lender and considered for purposes of the Company's
financial statements as part of the interest or cost of funds for amounts
borrowed by the Company or any of its Affiliates from the lender.
For the purpose of making any adjustment in the Exercise price as
provided above, the consideration received by the Company for any issue or sale
of Common Stock will be computed:
i. to the extent it consists of cash, as the amount of
cash received by the Company before deduction of any offering expenses payable
by the Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issue or
sale;
7
ii. to the extent it consists of property other than cash,
at the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
iii. if Common Stock is issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Common Stock.
If the Company (1) grants any right or options to subscribe for,
purchase, or otherwise acquire shares of Common Stock, or (2) issues or sells
any security convertible into shares of Common Stock, then, in each case, the
price per share of Common Stock issuable on the exercise of the rights or
options or the conversion of the securities will be determined by dividing the
total amount, if any, received or receivable by the Company as consideration for
the granting of the rights or options or the issue or sale of the convertible
securities, plus the minimum aggregate amount of additional consideration
payable to the Company on exercise or conversion of the securities, by the
maximum number of shares of Common Stock issuable on the exercise of conversion.
Such granting or issue or sale will be considered to be an issue or sale for
cash of the maximum number of shares of Common Stock issuable on exercise or
conversion at the price per share determined under this subsection, and the
Exercise Price will be adjusted as above provided to reflect (on the basis of
that determination) the issue or sale. No further adjustment of the Exercise
Price will be made as a result of the actual issuance of shares of Common Stock
on the exercise of any such rights or options or the conversion of any such
convertible securities.
Upon the redemption or repurchase of any such securities or the
expiration or termination of the right to convert into, exchange for, or
exercise with respect to, Common Stock, the Exercise Price will be readjusted to
such price as would have been obtained had the adjustment made upon their
issuance been made upon the basis of the issuance of only the number of such
securities as were actually converted into, exchanged for, or exercised with
respect to, Common Stock. If the purchase price or conversion or exchange rate
provided for in any such security changes at any time, then, upon such change
becoming effective, the Exercise Price then in effect will be readjusted
forthwith to such price as would have been obtained had the adjustment made upon
the issuance of such securities been made upon the basis of (x) the issuance of
only the number of shares of Common Stock theretofore actually delivered upon
the conversion, exchange or exercise of such securities, and the total
consideration received therefor, and (y) the granting or issuance, at the time
of such change, of any such securities then still outstanding for the
consideration, if any, received by the Company therefor and to be received on
the basis of such changed price or rate.
(e) 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
8
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 (4.1(e)) are not required to be made immediately shall be
carried forward and taken into account in any subsequent adjustment.
(f) 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.
(g) 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.
(h) For the purpose of this Section (4.1), 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 (4), 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 this Section (4).
(i) 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
9
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.
4.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section (4.1),
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.
4.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section (4) hereof in connection with the issuance of the Common
Stock upon exercise of the Warrants. No adjustments shall be made pursuant to
Section (4) 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.
4.4 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 (4.4) shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section (4) hereof. The provisions of this Section
(4.4) shall similarly apply to successive consolidations, mergers, sales, or
conveyances.
4.5 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,
10
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.
4.6 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 (4), and a certificate signed by such firm shall be
conclusive evidence of the correctness of any computation made under this
Section (4).
4.7 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.
4.8 TREASURY STOCK. For purposes of this Section (4), 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.
SECTION 5 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;
11
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 6 OFFICERS' CERTIFICATE.
Whenever the Exercise Price or the aggregate number of Warrant Securities
purchasable pursuant to this Warrant shall be adjusted as required by the
provisions of Section (4) 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 (6) 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 19 below. Failure to prepare or provide the officers'
certificate shall not modify the parties' rights hereunder.
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SECTION 7 RESERVATION OF WARRANT SECURITIES.
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 12 hereof.
SECTION 8 RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
8.1 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.
8.2 PIGGY-BACK REGISTRATION RIGHT. If at any time prior to the
Expiration Date the Company files a registration statement with the Commission
pursuant to the Act, or pursuant to any other act passed after the date of this
Agreement, which filing provides for the sale of securities by the Company to
the public, or files a Regulation A offering statement under the Act, the
Company shall offer to the Holder or Holders of this Warrant and the holders of
any Warrant Securities the opportunity to register or qualify the Warrant
Securities at the Company's sole expense, regardless of whether the Holder or
Holders of this Warrant or the holders of Warrant Securities or both may have
previously availed themselves of any of the registration rights described in
this Section (8); provided, however, that in the case of a Regulation A
offering, the opportunity to qualify shall be limited to the amount of the
available exemption after taking into account the securities that the Company
wishes to qualify. Notwithstanding anything to the contrary, this Section (8.2)
shall not be applicable to a registration statement registering securities
issued pursuant to an employee benefit plan or as to a transaction subject to
Rule 145 promulgated under the Act or which a form S-4 registration statement
could be used; nor shall it be applicable to the first underwritten registered
public offering of the Company.
13
The Company shall deliver written notice to the Holder or Holders of this
Warrant and to any holders of the Warrant Securities of its intention to file a
registration statement or Regulation A offering statement under the Act at least
60 days prior to the filing of such registration statement or offering
statement, and the Holder or Holders and holders of Warrant Securities shall
have 30 days thereafter to request in writing that the Company register or
qualify the Warrant Securities or the Warrant Securities underlying the
unexercised portion of this Warrant in accordance with this Section (8.2). Upon
the delivery of such a written request within the specified time, the Company
shall be obligated to include in its contemplated registration statement or
offering statement all information necessary or advisable to register or qualify
the Warrant Securities or Warrant Securities underlying the unexercised portion
of this Warrant for a public offering, if the Company does file the contemplated
registration statement or offering statement; provided, however, that neither
the delivery of the notice by the Company nor the delivery of a request by a
Holder or by a holder of Warrant Securities shall in any way obligate the
Company to file a registration statement or offering statement. Furthermore,
notwithstanding the filing of a registration statement or offering statement,
the Company may, at any time prior to the effective date thereof, determine not
to offer the securities to which the registration statement or offering
statement relates, other than the Warrant, Warrant Securities and Warrant
Securities underlying the unexercised portion of this Warrant. Notwithstanding
the foregoing, if, as a qualification of any offering in any state or
jurisdiction in which the Company (by vote of its Board of Directors) or any
underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above.
If the registration for which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise as part of the written notice given pursuant to this Section. In such
event, the right of any Warrantholder or holder of Shares to registration
pursuant to this Section (8.2) shall be conditioned upon such holder's
participation in such underwriting, and the inclusion of Shares in the
underwriting shall be limited to the extent provided herein. All holders
proposing to distribute their Shares through such underwriting shall (together
with the Company and the other holders distributing their Shares through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section, if the managing underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, such underwriter may limit the amount of securities to be
included in the registration and underwriting by the holders of Company
securities exercising "piggyback" registration rights (including the
Warrantholder and each holder of Warrants and Shares). The Company shall so
advise all such holders, and the number of shares of such securities that may be
included in the registration and underwriting shall be allocated among all of
such holders, in proportion, as nearly as practicable, to the respective amounts
of securities requested to be included in such registration held by such holders
at the time of filing the registration statement, provided, however, that no
14
security holder other than one exercising a demand registration right shall have
superior rights with respect to inclusion in a registration than those of the
Warrantholder and each holder of Warrants and Shares and if any party is granted
such superior rights hereafter the Warrantholder and each holder of Warrants and
Shares shall be deemed to be automatically granted similar rights. The Company
shall advise all such holders of any such limitations and of the number or
securities that may be included in the registration. Any securities excluded or
withdrawn from such underwriting shall not be transferred prior to one hundred
twenty (120) days after the effective date of the registration statement
relating thereto, or such shorter period of time as the underwriters may
require.
The Company shall comply with the requirements of this Section (8.2) and
the related requirements of Section (8.6) at its own expense. That expense
shall include, but not be limited to, legal, accounting, consulting, printing,
federal and state filing fees, NASD fees, out-of-pocket expenses incurred by
counsel, accountants and consultants retained by the Company, and miscellaneous
expenses directly related to the registration statement or offering statement
and the offering. However, this expense shall not include the portion of any
underwriting commissions, transfer taxes and the underwriter's accountable and
nonaccountable expense allowances attributable to the offer and sale of the
Warrant, Warrant Securities and the Warrant Securities underlying the
unexercised portion of this Warrant, all of which expenses shall be borne by the
Holder or Holders of this Warrant and the holders of the Warrant Securities
registered or qualified.
8.3 INCLUSION OF INFORMATION. In the event that the Company registers
or qualifies the Warrant Securities pursuant to Section (8.2) 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 Securities or the Warrant Securities underlying the unexercised
portion of this Warrant. As used in Section (8.2), 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.
8.4 REQUEST FOR REGISTRATION ON FORM S-3. If a Holder or Holders of
the outstanding Warrant Securities request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of 100,000 shares of Warrant Securities (subject to adjustment in the same
manner as provided in Section 4.1(a) in the event of a stock dividend, a
subdivision of the outstanding Common Stock, a combination of outstanding Common
Stock, or reclassification of the Common Stock), and the Company is a registrant
entitled to use Form S-3 to register the Warrant Securities for such an
offering, the Company shall use all reasonable efforts to file and cause to be
effective a registration statement for the resale of the Warrant Securities on
such form; provided, however, that the Company shall not be required to effect
more than one registration pursuant to this Section 8.4 in any 12 month period.
The substantive provisions of Section 8 shall be applicable to each registration
initiated under this Section 8.4. Notwithstanding any other provisions of this
Section 8, the Company
15
shall maintain the effectiveness of any registration statement, filed pursuant
to this Section 8.4 and made effective by the SEC, for a period of 90 days.
In addition, notwithstanding any other provisions of this Section 8, any
holder of Warrant Securities wishing to sell Warrant Securities pursuant to the
registration statement, shall notify the Company two business days prior to
selling any Warrant Securities. Anything in this Agreement to the contrary
notwithstanding, the Company shall be entitled to postpone for a period of time
in its reasonable judgment, but not to exceed 120 days (a "Blackout Period"),
the filing of any registration statement in accordance with this Section 8.4,
and the preparation and/or filing of any prospectus or any amendments or
supplements to any registration statement or prospectus, if Company reasonably
determines that any such filing or the offering of any Warrant Securities would
(i) impede, delay or otherwise interfere with any financing, offer or sale of
securities, acquisition, corporate reorganization or other significant
transaction involving Company or any of its Affiliates, or (ii) require
disclosure of material information which, if disclosed at that time, would be
harmful to the interests of Company and its stockholders; PROVIDED, HOWEVER,
that, in the Blackout Period pursuant to (ii) above, the Blackout Period shall
earlier terminate upon public disclosure by Company or public admission by
Company of such material information. Upon notice by Company to any Holder of
such determination, the Holder covenants that the Holder shall (i) keep the fact
of any such notice strictly confidential, (ii) promptly halt any offer or sale
of the Warrant Securities for the duration of the Blackout Period set forth in
such notice (or until earlier terminated in writing by Company) and
(iii) promptly halt any use, publication, dissemination or distribution of the
registration statement, each prospectus included therein, and any amendment or
supplement thereto by the Holder or Affiliates for the duration of the Blackout
Period set forth in such notice (or until earlier terminated in writing by
Company).
8.5 PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any
such Registration Statement is utilized for a public offering of any of the
Shares to be received upon exercise of the Warrants pursuant to this Section
(8), the Warrantholder may elect to pay the exercise price of the Warrants to
the Company out of the proceeds of the sale of the Shares pursuant to the
Registration Statement concurrently with the closing of such sale of the Shares;
provided that if such sale is not closed within 90 days of the effective date of
such Registration Statement, then the Warrantholder shall be obligated to pay
the exercise price of the Warrants to the Company on such 90 day.
8.6 CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section (8) 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 Securities or Warrant Securities underlying
the unexercised portion of the Warrant; and
16
(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.
8.7 ADDITIONAL REQUIREMENTS. In each instance in which the Company
shall take any action to register or qualify the Warrant Securities or the
Warrant Securities underlying the unexercised portion of this Warrant, if any,
pursuant to this Section (8), the Company shall do the following:
(a) supply to the holders of Warrant Securities whose Warrant
Securities are being registered or qualified, two (2) manually signed copies of
each registration statement or offering statement, and all amendments thereto,
and a reasonable number of copies of the preliminary, final or other prospectus
or offering circular, all prepared in conformity with the requirements of the
Act and the rules and regulations promulgated thereunder, and such other
documents as the holders shall reasonably request;
(b) cooperate with respect to (i) all necessary or advisable
actions relating to the preparation and the filing of any registration
statements or offering statements, and all amendments thereto, arising from the
provisions of this Section (8), (ii) all reasonable efforts to establish an
exemption from the provisions of the Act or any other federal or state
securities statutes, (iii) all necessary or advisable actions to register or
qualify the public offering at issue pursuant to federal securities statutes and
the state "blue sky" securities statutes of each jurisdiction that the Holders
of the Warrant or holders of Warrant Securities shall reasonably request, and
(iv) all other necessary or advisable actions to enable the Holders of the
Warrant Securities to complete the contemplated disposition of their securities
in each reasonably requested jurisdiction; and
(c) keep all registration statements or offering statements to
which this Section (8) applies, and all amendments thereto, effective under the
Act for a period of at least 9 months after their initial effective date and
cooperate with respect to all necessary or advisable actions to permit the
completion of the public sale or other disposition of the securities subject to
a registration statement or offering statement.
8.8 RECIPROCAL INDEMNIFICATION. In each instance in which pursuant to
this Section (8) the Company shall take any action to register or qualify the
Securities or the Warrant Securities underlying the unexercised portion of this
Warrant, prior to the effective date of any registration statement or offering
statement, the Company and each Holder or holder of Warrants or Warrant
Securities 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 (10) . 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
17
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 (8) 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 SURVIVAL. The Company's obligations described in this Section (8)
shall continue in full force and effect regardless of the exercise, surrender,
cancellation or expiration of this Warrant.
SECTION 9 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 10 INDEMNIFICATION AND CONTRIBUTION.
10.1 INDEMNIFICATION BY COMPANY. In the event of the filing of any
Registration Statement with respect to the Warrant Shares pursuant to Section
(8) hereof, the Company agrees to indemnify and hold harmless the Warrantholder
or any holder of Warrant Shares and each person, if any, who controls the
Warrantholder or any 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
Warrantholder or any 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 such Warrantholder or 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.
18
10.2 INDEMNIFICATION BY WARRANTHOLDERS. The Warrantholders and 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.
10.3 RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an
indemnified party under Section (10.1) or (10.2) 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 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
indemnified parties shall have the right to employ counsel to represent them and
the other Warrantholders or holders of 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
19
if, in reasonable judgment of counsel of the Company, it is advisable for those
Warrantholders or holders of 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.
10.4 CONTRIBUTION. If the indemnification provided for in Sections
(10.1) and (10.2) 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 (10.1) or (10.2) above
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Warrantholders on the other; or
(b) if the allocation provided by clause (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect the relative
benefits referred to in clause (a) above but also the relative fault of the
Company on the one hand and the Warrantholders on the other in connection with
the statements or omissions which resulted in such losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Warrantholders shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and un-itemized expenses received by the Underwriters, in
each case as set forth in the table on the cover page of the Final Prospectus.
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 Underwriter 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 (10.4), the term "damages" shall include any counsel fees or other
expenses reasonably incurred by the Company or the Underwriters in connection
with investigating or defending any action or claim which is the subject of the
contribution provisions of this Section (10.4). 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 (10.4) hereof).
SECTION 11 TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
This Warrant, the Warrant Securities, 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 Securities,
20
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.
SECTION 12 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 13 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 (4.1) (except subsections (4.1(f)) and (4.1(i)) or (4.4); 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:
21
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 14 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 Securities upon
the exercise of this Warrant.
SECTION 15 WARRANT SECURITIES TO BE FULLY PAID.
The Company covenants that all Warrant Securities 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 16 NOTICES.
Any notice pursuant to this Agreement by the Company or by a
Warrantholder or a holder of 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 Shares, addressed
to the address set forth above. address set forth above.
ii. If to the Company addressed to it at 0000 X. Xxxxxx
Xxxxxxx, #0X, Xxxxxxxxx, XX 00000-0000, Attention: President.
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 17 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 (4.4) are complied with.
22
SECTION 18 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 19 ARBITRATION.
The Company and the Holder, and by receipt of this Warrant or any Warrant
Securities, all subsequent Holders or holders of Warrant Securities, agree to
submit all controversies, claims, disputes and matters of difference with
respect to this Warrant, including, without limitation, the application of this
Section (19) 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
Colorado. 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 20 ACCEPTANCE OF TERMS; SUCCESSORS.
By its acceptance of this Warrant Certificate, the Holder accepts and
agrees to comply with all of the terms and provisions hereof. All the covenants
and provisions of this Warrant Certificate 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 21 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 Securities and the exercise of this Warrant in full shall not
terminate the provisions of this Warrant as it relates to holders of Warrant
Securities.
(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.
23
(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.
(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.
(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.
24
(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
---------------------
TRAINING DEVICES INC.
By:
-----------------------------------
Xxxxxx X. Xxxxxxxxx, CEO
25
PURCHASE FORM
Dated _________, ____
The undersigned hereby irrevocably elects to exercise the Warrant
represented by this Warrant Certificate to the extent of purchasing Shares
of Training Devices Inc. and hereby tenders payment of the exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
-------------------------------------------------------------------
(please type or print in block letters)
Address
----------------------------------------------------------------
-----------------------------------------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________, hereby sells, assigns and
transfers unto
Name
-------------------------------------------------------------------
(Please type or print in block letters)
Address
----------------------------------------------------------------
the right to purchase Shares of MERGEFIELD Company < < Company > >
represented by this Warrant Certificate to the extent of Shares as to
which such right is exercisable and does hereby irrevocably constitute and
appoint attorney, to transfer the same on the books of the Company
with full power of substitution in the premises.
Signature Dated ,
------------------- ------------- ----
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS IT
APPEARS UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
...............................................................................
WARRANT CONVERSION EXERCISE FORM
Pursuant to Section 2.4 of the Warrant Agreement, the Holder hereby
irrevocably elects to convert Warrants with respect to Shares of the Company
into Shares of the Company. A conversion calculation is attached hereto
as Exhibit B-1.
The undersigned requests that certificates for such Shares be issued as
follows:
26
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
Deliver to:
------------------------------------------------------------
and that a new Warrant Certificate for the balance remaining of the Warrants, if
any, subject to the Warrant be registered in the name of, and delivered to, the
undersigned at the address stated above.
Signature Dated ,
------------------- --------------- ----
27
Exhibit B-1
CALCULATION OF WARRANT CONVERSION
Converted Securities = Net Value
FMV
FMV = $
Net Value = Aggregate FMV - Aggregate
Exercise Price
= $ -
= $
Converted Shares =
Fractional Converted Shares = (1)
(1) TDI to pay for fractional
Shares in cash @ $ per Share.
28
