NO SALE OR TRANSFER OF THIS WARRANT OR THE SECURITIES UNDERLYING THIS WARRANT
MAY BE MADE UNTIL THE EFFECTIVENESS OF A REGISTRATION STATEMENT OR OF A
POST-EFFECTIVE AMENDMENT THERETO UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), COVERING THIS WARRANT OR THE SECURITIES UNDERLYING THIS WARRANT, OR
UNTIL THE COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT.
WARRANT AGREEMENT
Warrant Agreement (the "AGREEMENT") dated August 28, 2001 between Emergent
Financial Group, Inc., a Delaware corporation (the "COMPANY"), and Starfish, LLC
and its permitted assigns (the "HOLDERS").
BACKGROUND INFORMATION
----------------------
WHEREAS, the Company agreed to grant warrants (the "Warrants") to the
Holder to induce the Holders to convert certain convertible securities held by
the Holders into the Company's common stock. Under the terms agreed upon by the
parties, the Warrants shall entitle the Holders to purchase up to 4,600,000
shares of the Company's common stock, $0.01 par value ("COMMON STOCK") at any
time prior to June 30, 2006. Each Warrant entitles the Holder to purchase one
duly authorized, fully paid and nonassessable share of Common Stock upon
exercise thereof.
WHEREAS, each Holder will be entitled to receive a certificate representing
the Warrant (each a "CERTIFICATE") and shall be dated effective as of the date
of issuance. The shares of Common Stock issued upon exercise of the Warrants,
or reserved for issuance or otherwise issuable upon exercise of the Warrants
under this Agreement, are sometimes hereinafter referred to as the "WARRANT
SHARES."
WHEREAS, the Company desires to fix the form and provisions of each
Certificate that will represent one or more issued Warrants, as well as the
terms of the Warrants themselves with respect to issuance, exercise, and
expiration, and the respective rights, limitations, obligations and duties of
the Company and each Holder which will be established upon any such issuance;
and to make each Warrant when represented by a Certificate that has been duly
executed by the Company (or by any substitute or replacement Certificate issued
under the terms set forth below), the valid, binding and legally enforceable
obligation of the Company.
Accordingly, the Company and the Holders hereby agree as follows:
OPERATIVE PROVISIONS
--------------------
1. Issuance. The Company shall issue Warrant Certificates to purchase up to
an aggregate of 4,600,000 shares of Common Stock (each applicable exercise
price shall be referred to herein as the "EXERCISE PRICE" with respect to
each Warrant Certificate, as applicable).
2. Warrant Certificates. Each Certificate to be delivered pursuant to this
---------------------
Agreement shall be in the form set forth in Exhibit A (the "WARRANT
CERTIFICATE") which is attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Agreement.
3. Warrants Governed by Agreement. This Warrant Agreement governs an issue
-------------------------------
of up to an aggregate of 4,600,000 Warrants, each of which will entitle its
Holder to purchase one Warrant Share on the terms and subject to the
conditions and possible adjustments set forth herein. The Warrants are
vested in full and may be exercised, in whole or in part, from time to
time, in accordance with the terms of this Agreement and the Warrants.
4. Execution and Date of Warrant Certificates.
-----------------------------------------------
a. General. Each Certificate shall be executed on behalf of the Company
-------
by its chief executive officer, its president or any vice president,
under its corporate seal which will be reproduced thereon, and
attested by its corporate secretary or one of its assistant
secretaries.
b. Date of Certificate. Each Certificate shall be dated as of the date of
-------------------
execution by the Company officers described above.
5. Ownership. The Company shall acknowledge each registered Holder of a
---------
Warrant Certificate as the absolute owner thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), in
connection with its sale, transfer or exercise, any distribution to the
holder thereof and for all other purposes, and, subject to the provisions
of Section 11 below, the Company shall not be affected by any notice to the
contrary.
6. Exercise of Warrants.
----------------------
a. Expiration Date. Each Warrant shall expire at 5:00 p.m., Pacific
----------------
Standard Time, on June 30, 2006, and, prior thereto, may be exercised
at any time after the Effective Date, provided, however, that the
Holder of the Warrants must give not less than 90 days prior notice to
the Company prior to any exercise of such Warrant. For purposes of the
Warrant Agreement, the term "EFFECTIVE DATE" shall refer to the date
of issuance of such Warrant.
b. Exercise Price and Payment. Subject to the provisions of this
-----------------------------
Agreement, the Holder shall have the right to purchase from the
Company (and the Company shall issue and sell to such Holder) that
number of fully paid and non-assessable Warrant Shares, at the
Exercise Price (as stated in the applicable Warrant Certificate) and
as shall be designated in a completed and executed Election to
Purchase form appearing on the reverse side of each Certificate, and
upon surrender to the Company of the Certificate evidencing each such
Warrant being exercised, and payment of a monetary amount equal to the
product of the Exercise Price and the number of Warrant Shares being
purchased (the "Exercise Price Multiple"). The Exercise Price Multiple
may be paid in cash, check, or by certified or official bank check
payable to the order of the Company, or by "cashless" or "easy"
exercise, as set forth below.
c. Easy Exercise. In the event the Warrant Shares have been registered
--------------
on a then effective registration statement, or if the Warrant Shares
are otherwise not "restricted securities" under the Securities Act of
1933, as amended, and if permitted by law and applicable regulations
(including Nasdaq and NASD rules), the Holder may pay the exercise
price through a commitment from the Holder and a broker-dealer that is
a member of the National Association of Securities Dealers (a "NASD
Dealer"), whereby the Holder irrevocably elects to exercise all or a
portion of the Warrants and to sell in an orderly manner as soon as
possible the Warrant Shares issuable pursuant to such exercise and to
pay the Exercise Price Multiple. The Holder and the NASD Dealer shall
irrevocably commit upon sale of such Warrant Shares to forward the
Exercise Price Multiple directly to the Company. All proceeds of sales
of the Warrant Shares shall be assigned to the Company to secure the
obligation to pay the Exercise Price Multiple, and all such proceeds
shall be remitted directly to the Company until such Exercise Price
Multiple has been paid in full.
d. In the event the Warrant Shares then issuable upon exercise of the
Warrants are not registered as described in Section 6(c) above, or are
in any way "restricted" securities (including any restriction in the
volume and manner of sales pursuant to Rule 144), than in lieu of
exercising the Warrants or any portion thereof, the Holder or Holders,
if applicable, shall have the right to convert the Warrants, or any
portion thereof, into Warrant Shares by executing and delivering to
the Company, at its principal executive office, a duly executed
Election to Purchase Form, specifying the number of Warrants to be
converted, and accompanied by the surrender of such Warrants. The
person or persons in whose name or names the certificates for the
Warrant Shares shall be issuable upon such conversion shall be deemed
the holder or holders of record of such Warrant Shares at that time
and date. The number of Warrant Shares to be issued upon such
conversion shall be computed using the following formula:
X = (P)(Y)((A-B)/A)
X = the number of Warrant Shares to be issued to such Holder for the
percentage of Warrants being converted
P = the percentage of the Warrants being converted
Y = the total number of Warrant Shares then issuable upon exercise of
the Warrants
A = the Fair Value (as defined below) of one Warrant Share
B = the Exercise Price on the date of conversion
e. Within three (3) business days following such surrender of a
Certificate and payment of the Exercise Price Multiple (except in the
case of an "easy exercise" as described in subsection 6(d) above), the
Company shall cause to be issued and delivered promptly to the Holder,
or, upon the written order of the Holder, in such other name as the
Holder may designate, a certificate for the Warrant Shares being
purchased, as evidenced by the Election to Purchase. Such Warrant
Share certificate shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become the
Holder of such Shares as of the date of the surrender of the
applicable Certificate and payment of the Exercise Price Multiple. The
Warrants evidenced by a Certificate shall be exercisable, at the
election of the Holder, either as an entirety or from time to time for
only part of the number of Warrants specified in the Certificate. In
the event that less than all of the Warrants evidenced by a
Certificate surrendered upon the exercise of Warrants are exercised at
any time prior to the date of expiration of the Warrants, a new
Certificate shall be issued for the remaining number of Warrants
evidenced by the Certificate so surrendered. All Certificates
surrendered upon exercise of Warrants shall be canceled by the
Company.
f. No Fractional Shares to be Issued. No fraction of a Share shall be
------------------------------------
issued upon any exercise of Warrants, but, in lieu thereof, the number
of shares issuable upon exercise of the Warrants shall be rounded up
to the nearest full share of Common Stock. No fractional Warrants
shall be issued.
g. In the event of a breach of this Agreement by the Company, or a delay
or other failure to issue, transfer or clear the Warrant Shares under
the terms hereof, or a failure of the Company to promptly authorize
the Company's transfer agent to remove restrictive legends as
permitted by law or clear any transfer permitted by law, or any other
breach of any obligation of the Company which has the effect of
delaying the ability of the Holder to sell any Warrant Shares without
restriction in an open market transaction which would otherwise be
permitted by law (a "Transfer Breach"), would result in substantial
damages to the Holder. Such damages are impracticable and extremely
difficult to ascertain under the circumstances existing as of the date
of this Agreement. In the event the Company intentionally or
negligently commits a Transfer Breach, or otherwise delays or impedes
the issuance, clearance or transfer of Warrant Shares within five
business days after a written request therefor has been delivered to
the Company (the "Certificate Request"), the Company agrees to pay to
the Holder or its assignee or designee an amount equal to the greater
of (i) $1,000 per business day for each 500,000 Warrant Shares owned
by the Holder (including, without limitation, Warrant Shares
previously issued upon exercise of Warrants (but not yet sold) or
issuable upon exercise of any then outstanding Warrants), (ii) the
product of (x) the last sale price of the Common Stock as reported on
any securities market or exchange designated by Holder (the "Last
Reported Sale Price") on the date the certificates are properly issued
and delivered to the Holder or its assignee or designee, less the Last
Reported Sales Price on the date of the Certificate Request,
multiplied by (y) the number of Warrant Shares beneficially owned by
such Holder, including, without limitation, Warrant Shares previously
issued upon exercise of Warrants (but not yet sold) or issuable upon
exercise of any then outstanding Warrants ("Warrant Shares
Beneficially Owned"), or (iii) the quotient of (x) the Last Reported
Sale Price on the day prior to the date of the Certificate Request,
multiplied by the number of Warrant Shares Beneficially Owned by the
Holder, divided by (y) 200 (the "Delay Damages"), for each business
day after the fifth business day following the delivery of the
Certificate Request to the Company through and including the day such
certificates (without legend or restriction) are delivered to the
Holder or its assignee or designee at the address set forth in such
Certificate Request or are otherwise cleared or transferred. THE
LIQUIDATED DAMAGES AS DESCRIBED HEREIN REPRESENT A REASONABLE ESTIMATE
OF DAMAGES. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES FOR THE
BREACH OF THIS PARAGRAPH IS NOT INTENDED AS A FORFEITURE OR PENALTY
WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT
IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES PURSUANT TO CALIFORNIA
CIVIL CODE SECTION 1671, 1676, AND 1677. THE LIQUIDATED DAMAGES SHALL
CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY FOR THE COMPANY'S BREACH OF
THIS AGREEMENT AS DESCRIBED HEREIN. IN THE EVENT THE COMPANY RESTRICTS
OR DELAYS THE TRANSFER OR CLEARANCE OF SUCH CERTIFICATES BY THE HOLDER
OR ITS ASSIGNEE OR DESIGNEE (WHETHER BY STOP TRANSFER ORDER,
UNREASONABLE DELAY OR OTHERWISE), THE COMPANY SHALL PAY TO THE HOLDER
OR ITS ASSIGNEE OR DESIGNEE THE DELAY DAMAGES FOR EACH BUSINESS DAY OF
SUCH RESTRICTION OR DELAY. To the extent necessary to effect the
foregoing, the Company agrees (i) to file in a timely manner and keep
current information on file with the Securities and Exchange
Commission as provided in Rule 144(c) and (ii) to keep any
registration statement pursuant to which the Warrant Shares have been
registered for resale under the Securities Act current. The parties
have set forth their initials below to indicate their agreement with
the liquidated damage provision in this paragraph.
THE COMPANY THE XXXXXX
XX GH
----------- ----------
INITIALS INITIALS
7. Payment of Taxes. The Company will pay all documentary stamp taxes
------------------
attributable to the initial issuance of Shares upon the exercise of
Warrants; provided that the Company shall not be required to pay any such
taxes which may be payable in respect of any transfer involved in the issue
of any Certificates or any certificates for Shares in a name other than
that of the Holder of a Certificate surrendered upon the exercise of a
Warrant.
8. Reservation and Issuance of Shares. The Company will at all times reserve
-----------------------------------
and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Common Stock or its authorized and
issued shares of Common Stock held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Warrant Shares upon exercise
of Warrants, the full number of Warrant Shares deliverable upon the
exercise of all outstanding Warrants. Before taking any action which would
cause an adjustment pursuant to Section 10 reducing the Exercise Price
below the then par value (if any) of the Warrant Shares issuable upon
exercise of the Warrants, the Company will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and non-assessable Warrant Shares
at the Exercise Price as so adjusted. The Company covenants that all
Warrant Shares which may be issued upon exercise of Warrants will be
validly issued, fully paid and non-assessable outstanding Warrant Shares of
the Company or any successor.
9. Mutilated or Missing Warrant Certificates. In case any Certificate shall
-------------------------------------------
be mutilated, lost, stolen or destroyed, the Company shall issue in
exchange and substitution for and upon cancellation of the mutilated
Certificate, or in lieu of and substitution for the Certificate lost,
stolen or destroyed, a new Certificate, of the same series 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
Certificate and indemnity, if requested, also satisfactory to it.
Applicants for such substitute Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
10. Adjustment of Exercise Price and Number of Shares Purchasable. The
--------------------------------------------------------------------
Exercise Price and the number of Warrant Shares purchasable upon the
exercise of each Warrant are subject to adjustment from time to time as set
forth in this Section 10.
a. Decrease or Increase in Exercise Price Upon Subdivision or
------------------------------------------------------------------
Combination. If the Company shall at any time subdivide or combine the
-----------
outstanding shares of its Common Stock, the Exercise Price in effect
immediately prior to such subdivision or combination shall be
proportionately increased in the case of a combination or decreased in
the case of a subdivision, effective at the close of business on the
date of such subdivision or combination, as the case may be.
b. Adjustment in Number of Shares Upon Change of Exercise Price. Upon
---------------------------------------------------------------
each adjustment of the Exercise Price pursuant to Section 10(a)
hereof, each Holder shall thereafter (until another such adjustment)
be entitled to purchase, at the adjusted Exercise Price, the number of
shares of Common Stock, calculated to the nearest full share, obtained
by multiplying the number of shares of Common Stock purchasable
hereunder immediately prior to such adjustment by the Exercise Price
in effect immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
c. Merger. If the Company, at any time while any Warrants remain
------
outstanding and unexpired, consolidates with or merges into or with
any other corporation, the Warrants shall thereafter evidence the
right of the Holder to purchase the number and kind of securities in
respect of the surviving corporation as would have been issuable or
distributable to the Holder had he, she or it exercised the
unexercised portion of the Warrants immediately prior to such
consolidation or merger.
d. Distribution of Company Assets. If the Company shall make any
---------------------------------
distribution of its assets to the holders of its Common Stock as a
partial or complete liquidating dividend, a return of capital or
otherwise, each Holder shall be entitled, after occurrence of the
record date for determining shareholders entitled to such
distribution, but before the date of such distribution, to exercise
any Warrants then owned and purchase any or all of the shares of
Common Stock then subject hereto, and thereupon to receive the amount
of such assets (or at the option of the Company a sum equal to the
value thereof at the time of such distribution to holders of Common
Stock as such value is determined in good faith by the Company's Board
of Directors) which would have been payable to such Holder had he, she
or it been the holder of record of such shares of Common Stock on the
referenced record date.
11. Transfer Restrictions. The Holder acknowledges that neither this Warrant
----------------------
nor the Warrant Shares may be offered or sold except pursuant to an
effective registration statement under the Securities Act or a written
opinion of counsel satisfactory to the Company that an exemption from
registration under the Securities Act is available. Each Holder agrees that
prior to making any disposition of the Warrant or Warrant Shares, unless a
registration statement under the Securities Act is in effect with regard
thereto, the Holder shall give written notice to the Company describing
briefly the manner in which any such proposed disposition is to be made,
along with an opinion of counsel satisfactory to the Company which provides
that no registration statement or other notification or post-effective
amendment thereto (hereinafter collectively a "REGISTRATION STATEMENT")
under the Securities Act is required with respect to such disposition.
12. Transfer - General. Subject to the terms hereof, the Warrants shall be
--------------------
transferable only on the books of the Company maintained at its principal
office upon delivery thereof duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer
by an attorney, the original power of attorney, duly approved, or a copy
thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and to remain with the
Company in its discretion. Upon any registration of transfer, the person to
whom such transfer is made shall receive a new Warrant or Warrants as to
the portion of the Warrant transferred, and the Holder of such Warrant
shall be entitled to receive a new Warrant or Warrants from the Company as
to the portion thereof retained. The Company may require the payment of a
sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any such transfer.
13. Piggyback Registration Rights.
-------------------------------
a. In case the Company shall at any time determine to register any of its
securities under the Securities Act, other than by way of Securities
and Exchange Commission (the "COMMISSION") Forms S-4 or S-8, or any
successor form thereto, at its own initiative, the Company will give
prompt notice thereof to the Holder, and if so requested in writing by
any person to which such notice shall have been properly provided, the
Company will include among the securities which it then endeavors to
make the subject of a registration statement to be filed under the
Securities Act, or to qualify under such state securities laws, all or
any part of such previously issued shares, or of the shares then
eligible for issuance upon exercise of the Warrants as shall be
specified in such request (the "DESIGNATED SHARES"), and the Company
will use its best efforts to cause all such registrations,
qualifications or compliances to be effected and to be kept effective
for not less than 90 days.
b. Notwithstanding the foregoing, if at any time after the date hereof
the Company files a registration statement with respect to any of its
securities in connection with a bona fide underwritten public offering
of the same, then (a) any Designated Shares which shall have been made
the subject of a registration statement filed for the purpose of
qualifying shares under the Securities Act for future sale or which
are, in connection with such a registration, being or to be included
pursuant to Section 13, shall, if so requested by the managing
underwriter(s) and consented to by each applicable holder of
Designated Shares, be offered for sale through the underwriters on the
same terms and conditions under which the Company's securities are to
be distributed, provided that if the managing underwriter(s) elect to
--------
include less than all Designated Shares to be offered by selling
shareholders, those to be included in the underwritten portion of the
offering shall be, as to each holder thereof, as nearly equal in
number as is practicable; and (b) those Designated Shares which are
not being distributed by the underwriters in such public offering
shall be withheld from the market by the selling shareholders for a
period, not to exceed 180 days, measured from the effective date of
the registration statement by which such public offering is being
effected, which the managing underwriter(s) determine necessary in
order to stabilize the market for the underwritten shares.
Notwithstanding the foregoing, in the event in the written opinion of
such managing underwriter(s), the Designated Shares may not be
included in the registration statement without having a material
adverse effect on the Company's offering of it securities, the
managing underwriter(s) shall have the right to eliminate or reduce
the number of Designated Shares proportionately among the Holders.
c. All expenses incurred in connection with any registration,
qualification or compliance effected by the Company pursuant to
Section 13, including, without limitation, all registration and filing
fees, fees and expenses of complying with federal and state securities
laws, printing expenses, fees and disbursements of counsel for the
Company, and all expenses of any special audits incidental to or
required by such registration (collectively, the "REGISTRATION
EXPENSES") shall be borne by the Company, provided that each holder of
Designated Shares shall be responsible for that portion of any
underwriting commission incurred in connection with the underwritten
distribution of the securities made the subject of such registration
effort as shall bear the same ratio to such commission as the value of
the Designated Shares sold by the holder in the offering bears to the
value of all Company securities sold in such offering.
d. Indemnification by the Company: In case of each registration,
---------------------------------
qualification or compliance effected by the Company pursuant to
Section 13, the Company will indemnify and hold harmless each holder
of Designated Shares from and against all claims, losses, damages and
liabilities of such holder arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any prospectus or other document incident to such registration,
qualification or compliance or any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or the Exchange Act applicable to
the Company and relating to action or inaction required of the Company
in connection with any such registration, qualification or compliance;
provided that the Company will not be liable to any such person to the
extent that any such claim, loss, damage or liability arises out of or
is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by
such person and stated to be specifically for use therein.
e. Indemnification by the Holders. Each Holder hereby agrees, and by
---------------------------------
requesting registration of Designated Shares, each Holder agrees, that
in connection with each registration statement effected pursuant
hereto in which Common Stock issued upon exercise of all or any
portion of the Warrants (the "Holder Common Stock") is to be disposed
of, each of the participating Holders shall, severally but not
jointly, indemnify and hold harmless, to the fullest extent permitted
by law, the Company, each other selling Holder and their respective
directors, officers, agents and employees and each person who controls
the Company and each other selling Holder (within the meaning of the
Securities Act and the Exchange Act) and the managing underwriter if
any, and its directors, officers, agents, and employees and each
person who controls such underwriter (within the meaning of the
Securities Act and Exchange Act), in each case against any losses,
claims, damages, liabilities and expenses resulting from any untrue
statement of a material fact or any omission of a material fact
required to be stated in such registration statement or prospectus or
preliminary prospectus or necessary to make the statements therein not
misleading, to the extent that such untrue statement or omission is
contained in any information furnished by such Holder to the Company
expressly for inclusion in such registration statement or prospectus.
f. Conduct of Indemnification Proceedings. Any person entitled to
-----------------------------------------
indemnification hereunder shall give prompt notice to the indemnifying
party of any claim with respect to which it shall seek indemnification
and shall permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any person entitled to indemnification
--------
hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of
such counsel shall be at the expense of such person unless (i) the
indemnifying party shall have agreed to pay such fees or expenses, or
(ii) the indemnifying party shall have failed to assume the defense of
such claim and to employ counsel reasonably satisfactory to such
person or (iii) such assumption would constitute an actual conflict of
interest (in which case, if the person notifies the indemnifying party
in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such claim on behalf of such
person). If such defense is not assumed by the indemnifying party, the
indemnifying party shall not be subject to any liability for any
settlement made without its consent (but such consent shall not be
unreasonably withheld). No indemnified party shall be required to
consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a written release
in form and substance reasonably satisfactory to such indemnified
party from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees and
expenses of more than one firm of counsel (and, if necessary, local
counsel) for all parties indemnified by such indemnifying party with
respect to such claim, unless a conflict of interest as to the subject
matter exists between such indemnified party and another indemnified
party with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of additional
counsel for such indemnified party.
g. Contribution. If for any reason the indemnification provided for
------------
herein is unavailable to an indemnified party or is insufficient to
hold it harmless as contemplated hereby, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified
party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying party, but also
the relative fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable considerations,
provided that in no event shall the liability of any Holder for such
contribution and indemnification exceed, in the aggregate, the dollar
amount of the proceeds received or to be received by such Holder upon
the sale of securities giving rise to such indemnification and
contribution obligation.
h. The Company may require each selling Holder to furnish to the Company
such information and documents regarding such selling Holder and the
distribution of such securities as the Company may from time to time
reasonably request in writing in order to comply with the Securities
Act.
i. Each of the selling Holders agrees that, upon receipt of any notice
from the Company of the happening of any event which would cause any
then effective registration statement to be inaccurate, no longer
effective, subject to a stop order issued by the Securities and
Exchange Commission, or which would otherwise require by law or
regulation that such selling Holders to discontinue sales of
securities under such registration statement, it will forthwith
discontinue disposition pursuant to such registration statement of any
shares of Common Stock covered by such registration statement or
prospectus until its receipt of the copies of a supplemented or
amended prospectus relating to such registration statement or
prospectus or until it is advised in writing by the Company that the
use of the applicable prospectus may be resumed and, if so directed by
the Company, will deliver to the Company all copies, other than
permanent file copies then in their possession, of the prospectus
covering such securities in effect at the time of receipt of such
notice.
j. The obligations of the Company to use its reasonable efforts to cause
the Holder Common Stock to be registered under the Securities Act are
subject to each of the following limitations, conditions and
qualifications:
i. The Company shall be entitled to abandon, discontinue, withdraw
or postpone for any period of time the filing or effectiveness
of, or suspend the rights of selling Holders to make sales
pursuant to, any registration statement otherwise required to be
prepared, filed and made and kept effective by it hereunder if
the Board of Directors of the Company reasonably determines in
good faith that (i) there is a material undisclosed development
in the business or affairs of the Company (including any pending
or proposed financing, recapitalization, acquisition or
disposition), the disclosure of which at such time would be
adverse to the Company's interests or (ii) such filing or
effectiveness would be disadvantageous to the Company or its
shareholders.
ii. The Company's obligations shall be subject to the obligations of
the selling Holders, which each of the Holders hereby
acknowledges, to furnish all information and materials and to
take any and all actions as may be required under applicable
federal and state securities laws and regulations to permit the
Company to comply with all applicable requirements of the SEC and
state securities regulations and to obtain any acceleration of
the effective date of such registration statement or maintain the
effectiveness or currency thereof.
iii. If requested by an underwriter in an underwritten offering,
each Holder agrees not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act,
of any Common Stock within 30 days before or 60 days after the
effective date of a registration statement filed pursuant to
Section 13.
14. Miscellaneous Provisions.
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a. Limitation of Rights Conferred. This Warrant Agreement does not
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confer upon any Holder of a Warrant Certificate any right as a
shareholder of the Company, nor shall anything contained herein be
deemed to affect the right or power of the Company to make
adjustments, reclassifications, reorganizations other changes in and
to its capital stock or business organization or to limit its right to
merge or consolidate or to sell, transfer or liquidate all or any part
of its business or assets.
b. Notices: All notices or other communications required or permitted to
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be given pursuant to this Agreement shall be in writing and shall be
considered as properly given or made if hand delivered, mailed from
within the United States by certified or registered mail, or sent by
prepaid telegram:
if to the Company:
Emergent Financial Group, Inc.
0000 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: President
if to a Holder, in care of the address set forth in the
Company's records established at the time of the Holder's receipt
of a Certificate,
or to such other address as any such party may have
designated by like notice forwarded to the other party hereto.
Notwithstanding the foregoing, notices of change of address shall
be furnished only when received.
15. Governing Law and Jurisdiction. This Agreement and the rights and
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obligations of the parties under this Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
California, without regard to the principles of conflicts of laws thereof.
In the event of litigation, the prevailing party shall be entitled to
reasonable attorneys fees and costs. Any controversy arising hereunder
shall be resolved in the state or federal courts sitting in Los Angeles
County, California. In the event a Holder alleges in any complaint that the
Company has committed or permitted to exist a Transfer Breach, the Company
shall, within 30 days following service of such complaint on the Company,
provide a bond, which shall be payable to the plaintiffs in the event
judgment is entered in their favor, up to the amount of such judgment. Such
bond shall be in an amount equal to the product of the Last Reported Sales
Price on the date of the applicable Certificate Request (or the date of the
filing of the complaint, if no Certificate Request was delivered),
multiplied by the number of Warrant Shares Beneficially Owned by the
Holders who are plaintiffs in such complaint. The Holders shall not be
required to post any bond.
WAIVER OF JURY TRIAL. THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR FOR ANY COUNTERCLAIM THEREIN.
16. Supplements and Amendments. The Company may from time to time supplement
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or amend this Agreement in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the
Company may deem necessary or desirable and which shall not be inconsistent
with the provisions of the Warrants and which shall not adversely affect
the interests of the Holders.
17. Successors and Assigns. This Agreement shall be binding upon and inure to
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the benefit of the Company and the Holders and their respective successors
and assigns.
18. Merger or Consolidation of the Company. So long as the Warrant remains
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outstanding, the Company will not merge or consolidate with or into, or
sell, transfer or lease all or substantially all of its property to, any
other corporation unless the successor or purchasing corporation, as the
case may be (if not the Company), shall expressly assume, by supplemental
agreement, the due and punctual performance and observance of each and
every covenant and condition of this Agreement to be performed and observed
by the Company.
19. Benefits of this Agreement. Nothing in this Agreement shall be construed
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to confer upon any person other than the Company, the Holders and any
successors, assignees, transferees or designees of the Holders, any legal
or equitable right, remedy or claim under this Agreement and this Agreement
shall be for the sole and exclusive benefit of the Company, the Holders and
any successors, assignees, transferees or designees of the Holders.
20. Captions. The captions of the Sections of this Agreement have been
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inserted for convenience only and shall have no substantive effect.
21. Counterparts. This Agreement may be executed in any number of
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counterparts (including by telecopy) each of which when so executed shall
be deemed to be an original; and all of which counterparts together shall
constitute one and the same instrument.
22. Limitation of Liability. No provision hereof, in the absence of
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affirmative action by any Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of any Holder of a Warrant,
shall give rise to any liability of such Holder for the purchase price of
any Common Stock or as a shareholder of the Company, whether such liability
is asserted by the Company or by the creditors of the Company.
23. No Waiver; Cumulative Remedies. No failure to exercise and no delay in
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exercising, on the part of any Holder or the Company, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise or any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
24. Compliance with Governmental Regulations. The Holder acknowledges that
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none of the Warrants or Warrant Shares have been registered under the
Securities Act, and therefore may be sold or disposed of only pursuant to
an effective registration statement under the Securities Act, or an
exemption from such registration, and in accordance with this Agreement.
The Warrant Shares will bear a legend to the following effect:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR WITH THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND ARE SUBJECT TO THE
WARRANT AGREEMENT, DATED AS XX XXXXXX 00, 0000, XXXXX XXXXXXXX
FINANCIAL GROUP, INC. AND THE ORIGINAL HOLDER HEREOF (A COPY OF EACH
SUCH AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY AND MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE COMPANY). THE SECURITIES
REPRESENTED HEREBY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THOSE SECURITIES LAWS AND
UPON PROVISION OF AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE
COMPANY."
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMERGENT FINANCIAL GROUP, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, President
STARFISH, LLC
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Managing Member
EXHIBIT A
Form of Warrant Certificate
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR WITH
THE SECURITIES COMM ISSION OF ANY STATE UNDER ANY APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS AND ARE SUBJECT TO THE WARRANT AGREEMENT, DATED AS XX XXXXXX 00,
0000, XXXXX XXXXXXXX FINANCIAL GROUP, INC. AND THE ORIGINAL HOLDER HEREOF (A
COPY OF EACH SUCH AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY AND MAY
BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY). THE SECURITIES REPRESENTED
HEREBY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THOSE SECURITIES LAWS AND UPON PROVISION OF AN OPINION OF
COUNSEL IN FORM SATISFACTORY TO THE COMPANY.
Certificate No. B2801-1
CERTIFICATE REPRESENTING
COMMON STOCK PURCHASE WARRANTS
For the purchase of Common Stock, Par Value $.01 per share, of
EMERGENT FINANCIAL GROUP, INC.
4,600,000 WARRANTS
______________________________
THIS CERTIFIES THAT, for value received, STARFISH, LLC, the registered
holder of this Common Stock Purchase Warrant (the "Warrant") or permitted
assigns (the "Holder"), is entitled to purchase from Emergent Financial Group,
Inc., a Delaware corporation (the "Company"), at any time and from time to time,
upon 90 days prior notice, until 5:00 p.m. Pacific Time on June 30, 2006 (the
"Expiration Date"), up to 4,600,000 fully paid and nonassessable shares of the
common stock of the Company, $0.01 par value per share (the "Shares") at a price
per share of $0.25 (the "Exercise Price"). The number of shares purchasable
upon exercise of this Warrant and the Purchase Price per share shall be subject
to adjustment from time to time as set forth in the Warrant Agreement referred
to below.
This Warrant is issued under and in accordance with a Warrant Agreement, dated
as of August 28, 2001, between the Company and Starfish, LLC (the "Warrant
Agreement") and is subject to the terms and provisions contained in the Warrant
Agreement, all of which are incorporated herein by reference. A copy of the
Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Company.
The Warrants represented by this Certificate may be exercised by the Holder
as to all or any lesser number of Shares upon surrender of this Certificate,
together with a completed and executed Election to Purchase in the form attached
1
to this Certificate, on or before the date above designated, at the principal
office of the Company (or at such other address as is designated in writing by
the Company); and upon payment, by cash, check or cashier's check, payable to
the Company, of a sum equal to the product of the Exercise Price multiplied by
the number of Shares being purchased, or upon conversion of the Warrant under
the cashless exercise or easy exercise provisions set forth in Sections 6(c) and
(d) of the Warrant Agreement; provided, that no fractional share shall be
issuable upon any such exercise and the Company shall issue one full share in
lieu of any fractional share. If this Certificate shall be exercised with
respect to less than all of the Shares, the Holder shall be entitled to receive
a new Certificate covering the number of Shares with respect to which this
Certificate shall not have been exercised (if such shares are then purchasable
hereunder).
This Certificate is issued subject to the condition, and the Holder, by
accepting the same, agrees with every subsequent holder and with the Company
that title hereto and all rights hereunder shall be transferable (subject to the
provisions of the Warrant Agreement) only by delivery of this Certificate to the
Company, together with the assignment form attached hereto completed and duly
executed by the Holder; and that the Company and all persons dealing with this
Certificate may treat the registered owner hereof as its absolute owner for all
purposes, until notified in writing by such owner of a transfer.
EMERGENT FINANCIAL GROUP, INC.
By: /s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx, President
DATED: As of August 28, 2001
2
ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase ________________ Shares and herewith
tenders in payment for such Shares cash, check or a certified or official bank
check, payable to the order of Emergent Financial Group, Inc., in the amount of
$____________________, all in accordance with the terms hereof. The undersigned
requests that a certificate of such Shares be registered in the name of
_____________________whose address is ________________________________________
and that such certificate be delivered to _________________ whose address is
_________________ __________________________________________. If the number of
Shares being acquired is less than all purchasable hereunder, the undersigned
requests that a new Certificate representing the remaining balance of the
Warrants be registered in the name of and delivered to
_____________________whose address is ________________________________.
Dated:__________________________ Signature:_________________________________
(Insert Social Security or Other (Signature must conform in all respects
Identifying Number of Holder) to name of holder as specified on the
Face of the Warrant Certificate)
__________________________________________
(Printed Name)
ASSIGNMENT
(To be executed if Holder desires to
transfer the Warrant Certificate)
For Value Received, the undersigned hereby sells, assigns and transfers to
(please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and hereby irrevocably constitutes and appoints ___________________________
_______________________________ as attorney-in-fact to transfer the same on the
books of the Company, with full power of substitution.
Dated:__________________________ Signature:_________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
________________________________ ___________________________________________
(Insert Social Security or Other (Printed Name)
Identifying Number of Holder)
