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EXHIBIT 10.18
COMMON STOCK WARRANT AGREEMENT
DATED AS OF APRIL 5, 2000
BY AND AMONG
INTERNATIONAL TOTAL SERVICES, INC.
AS ISSUER,
BANK ONE, N.A.,
AND
PROVIDENT BANK
AS PURCHASERS
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COMMON STOCK WARRANT AGREEMENT
TABLE OF CONTENTS
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Page
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SECTION 1. DEFINED TERMS.............................................................................1
SECTION 2. WARRANT CERTIFICATES......................................................................4
SECTION 3. EXECUTION OF WARRANT CERTIFICATES;MUTILATED OR MISSING WARRANT CERTIFICATES...............5
SECTION 4. REGISTRATION/RESERVATION OF WARRANT SHARES................................................5
SECTION 5. WARRANTS; EXERCISE OF WARRANTS............................................................6
SECTION 6. PAYMENT OF TAXES..........................................................................7
SECTION 7. FRACTIONAL INTERESTS......................................................................7
SECTION 8. LIMITATIONS ON CERTAIN HOLDERS............................................................7
SECTION 9. ADJUSTMENT OF NUMBER OF WARRANT
SHARES ISSUABLE...........................................................................8
SECTION 10. CALL AND PUT OPTIONS......................................................................9
SECTION 11. "PIGGY BACK" REGISTRATION RIGHTS.........................................................10
SECTION 12. COVENANTS................................................................................12
SECTION 13. ACKNOWLEDGMENTS BY HOLDERS...............................................................14
SECTION 14. TRANSFERS................................................................................14
SECTION 15. STANDSTILL...............................................................................15
SECTION 16. MISCELLANEOUS............................................................................16
EXHIBITS
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Exhibit A Form of Warrant Certificate
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COMMON STOCK WARRANT AGREEMENT
THIS WARRANT AGREEMENT (as from time to time amended, supplemented,
modified or restated, this "AGREEMENT") is dated as of April 5, 2000 and entered
into by and among INTERNATIONAL TOTAL SERVICES, INC., an Ohio corporation (the
"COMPANY"), BANK ONE, N.A. ("BANK ONE"), and PROVIDENT BANK ("PROVIDENT",
collectively, the "PURCHASERS").
WITNESSETH:
A. The Company and the Purchasers wish to provide for the issuance and
sale of warrants (the "WARRANTS") to purchase, at each Purchaser's option, but
subject to the terms of Section 8 hereof, 200,000 shares of voting common stock,
$.001 par value (the "COMMON STOCK"), of the Company by Bank One and 100,000
shares of Common Stock of the Company by Provident. Such number of shares shall
be subject to adjustment as provided herein.
B. This Agreement is being entered into by the Company and the
Purchasers in consideration of, among other things, the Purchasers' agreement to
amend the Company's current credit facility.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1.
DEFINED TERMS
The following terms when used in this Agreement, including its preamble
and recitals, shall have the following meanings:
"AFFILIATE" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" has the meaning specified in the Preamble.
"APPLICABLE LAW" means all provisions of laws, statutes, ordinances,
rules, regulations, permits or certificates of any Governmental Authority
applicable to such Person or any of its assets or property, and all judgments,
injunctions, orders and decrees of all courts, arbitrators or Governmental
Authorities in proceedings or actions in which such Person is a party or by
which any of its assets or properties are bound.
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"CHANGE OF CONTROL" means (a) any Person or any two or more Persons
acting in concert (in any such case, excluding the trustees of the Voting Trust
as defined below) acquiring beneficial ownership (within the meaning of Rule
13d-3 of the Commission under the Exchange Act), directly or indirectly, of
capital stock of the Company (or other securities convertible into such capital
stock) representing 51% or more of the combined voting power of all capital
stock of the Company entitled to vote in the election of directors, other than
capital stock having such power only by reason of the happening of a
contingency, (b) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the Company's board
of directors (together with any new directors whose election by the Company's
board of directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reasons other than death or disability to constitute a majority of the
directors then in office, or (c) termination of that certain Voting Trust
Agreement dated November 1, 1999 by and among the Company, Xxxxxx X. Xxxxxxx, H.
Xxxxxxx Xxxxxxxx, J. Xxxxxxx Xxxxx and Xxxx X. X'Xxxxx ("Voting Trust").
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the 1933 Act.
"COMMON STOCK" has the meaning specified in the first Recital.
"COMPANY" has the meaning specified in the Preamble.
"CONVERTIBLE SECURITIES" means rights to subscribe for, or any rights
or options to purchase, shares of Common Stock, or any stock or other securities
convertible into or exchangeable for shares of Common Stock, either currently or
upon the happening of a specified date or event.
"EQUIVALENT NONVOTING SECURITY" means, with respect to any security (a
"FIRST SECURITY") issued or to be issued by any Person, a security (an
"EQUIVALENT SECURITY") of such Person that is identical in rights and benefits
to such first security, except that (a) the equivalent security shall not be
entitled to vote on any matter on which holders of voting securities of such
Person are entitled to vote, other than as required by Applicable Law or with
respect to any amendment or repeal of any provision of the Organizational
Documents of such Person or any other agreement or instrument pursuant to which
the equivalent security was issued which provision specifically affects such
equivalent security, (b) subject to such reasonable restrictions as any affected
Regulated Holder may request (including any restriction necessary to prevent the
violation by such Regulated Holder of any provision of Applicable Law with
respect to its ownership of voting securities), the equivalent security shall be
convertible in a one-to-one ratio into the first security and (c) the terms of
the equivalent security shall include such provisions requested by any affected
Regulated Holder as are reasonable and equitable to ensure that (i) the
equivalent security is treated comparably to the first security with respect to
dividends, distributions, stock splits, reclassifications, capital
reorganizations, mergers, consolidations and other similar events and
transactions, (ii) the conversion right provided in clause (b) above is
equitably protected and (iii) the acquisition of the equivalent security will
not cause such Regulated Holder to violate Applicable Law.
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"EXERCISE PRICE" means $1.41.
"EXPIRATION DATE" has the meaning specified in Section 5.
"FULLY DILUTED BASIS" means the calculation of the total number of
shares of Common Stock outstanding at any time determined in conformity with
GAAP.
"GOVERNMENTAL AUTHORITY" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any court, in each case whether of the United States of America or foreign.
"HOLDER" or "HOLDERS" means each of the Purchasers (so long as it holds
any Warrants or Warrant Shares) and any other holder of any of the Warrants or
Warrant Shares so long as such Warrant Shares constitute Registrable Securities.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any Person, each
instrument or other document that (a) defines the existence of such Person,
including its articles or certificate of incorporation, as filed or recorded
with an applicable Governmental Authority or (b) governs the internal affairs of
such Person, including its bylaws, in each case as amended, supplemented or
restated.
"PERSON" or "PERSONS" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, Joint
Ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"PURCHASERS" has the meaning specified in the Preamble.
"REGISTRABLE SECURITIES" means any share of Common Stock that is a
Warrant Share, but with respect to any share of Common Stock, only until such
time as such share (i) has been effectively registered under the 1933 Act and
disposed of in accordance with the registration statement covering it, (ii) has
been sold to the public pursuant to Rule 144 (or any similar provision then in
force) under the 1933 Act or (iii) has ceased to be outstanding.
"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with Section 11, including, without limitation, all
registration and filing fees, all fees of the New York Stock Exchange, Inc.,
other national securities exchanges or the National Association of Securities
Dealers, Inc., all fees and expenses of complying with federal securities or
blue sky laws, all word processing, duplicating and printing expenses (including
expenses of printing prospectuses and of certificates for the Registrable
Securities), messenger and delivery expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and
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compliance, any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities) and the fees and
expenses of one counsel to the Selling Holders or the Requesting Holders, as
applicable (selected by Selling Holders or the Requesting Holders, as
applicable, representing at least 50% of the Registrable Securities covered by
such registration).
"REGULATED HOLDER" has the meaning specified in Section 8.
"REQUISITE HOLDERS" means Holders holding Warrants or Warrant Shares
representing at least a majority of all Warrant Shares issued or issuable upon
exercise of Warrants outstanding on the date of determination.
"SECURITIES ACT" means the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission thereunder, all as amended
from time to time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934 and
the rules and regulations of the Securities and Exchange Commission thereunder,
all as amended from time to time.
"WARRANT CERTIFICATES" has the meaning specified in Section 2.
"WARRANT NUMBER" has the meaning specified in Section 9.
"WARRANT SHARES" means (a) the shares of Common Stock issued or
issuable upon exercise of a Warrant in accordance with Section 5 or upon
exchange of a Warrant in accordance with Section 5, (b) all other securities or
other property issued or issuable upon any such exercise or exchange in
accordance with this Agreement and (c) any securities of the Company distributed
with respect to the securities referred to in the preceding clauses (a) and (b).
As used in this Agreement, the phrase "Warrant Shares then held" by any Holder
or Holders shall mean Warrant Shares held at the time of determination by such
Holder or Holders, and shall include Warrant Shares issuable upon exercise of
Warrants held at the time of determination by such Holder or Holders.
"WARRANT DOCUMENTS" means this Agreement and the Warrant Certificates.
"WARRANTS" has the meaning specified in the first Recital.
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SECTION 2.
WARRANT CERTIFICATES
Contemporaneously herewith, in consideration of the Purchasers and
Company agreeing to amend the Company's credit facility on Company's behalf, the
Company is issuing and delivering to each of the Purchasers a certificate or
certificates evidencing the Warrants to be issued to said Purchaser
substantially in the form of Exhibit A hereto (the "WARRANT CERTIFICATES"),
which Warrant Certificates shall be dated the date of issuance by the Company.
SECTION 3.
EXECUTION OF WARRANT CERTIFICATES;
MUTILATED OR MISSING WARRANT CERTIFICATES
Warrant Certificates shall be signed on behalf of the Company by its
Chairman of the Board or its President or a Vice President. Each such signature
upon the Warrant Certificates may be in the form of a facsimile signature of the
present or any future Chairman of the Board, President or Vice President, and
may be imprinted or otherwise reproduced on the Warrant Certificates and for
that purpose the Company may adopt and use the facsimile signature of any person
who shall have been Chairman of the Board, President or Vice President,
notwithstanding the fact that at the time the Warrant Certificates shall be
delivered or disposed of such Person shall have ceased to hold such office. Each
Warrant Certificate shall also be manually signed on behalf of the Company by
its Secretary or an Assistant Secretary.
In case any of the Warrant Certificates shall be mutilated, lost,
stolen or destroyed, the Company shall, upon request of the Holder of any such
Warrant Certificate, issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also satisfactory to the Company. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
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SECTION 4.
REGISTRATION/RESERVATION OF WARRANT SHARES
The Company shall number and register the Warrant Certificates in a
register as they are issued. The Company may deem and treat the registered
Holders of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes and shall not be affected by any notice to the
contrary. The Warrants shall be registered initially in such name or names as
the Purchasers shall designate.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock or its authorized and issued 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 maximum number of shares of Common Stock which may
then be deliverable upon the exercise of all outstanding options, warrants
(including the Warrants) or other securities convertible into or exchangeable or
exercisable for Common Stock.
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issue thereof.
SECTION 5.
WARRANTS; EXERCISE OF WARRANTS
Subject to the terms of this Agreement, each Holder shall have the
right, which may be exercised at any time or from time to time until 5:00 p.m.,
Cleveland time, on March 31, 2007 (the "EXPIRATION DATE") to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
Holder may at the time be entitled to receive on exercise of such Warrants and
payment of the Exercise Price then in effect for such Warrant Shares. Each
Warrant not exercised prior to 5:00 p.m., Cleveland time, on the Expiration Date
shall become void and all rights thereunder and all rights in respect thereof
under this Agreement shall cease as of such time; provided that the occurrence
of the Expiration Date shall not relieve the Company of any obligation to any
Holder which arose pursuant to the terms of this Agreement prior to such date.
A Warrant may be exercised upon surrender to the Company at its address
set forth on the signature pages hereto of the Warrant Certificate or Warrant
Certificates to be exercised with the form of election to purchase attached
thereto duly completed and signed, and upon payment to the Company of the
Exercise Price for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price may be
made, at the option of the applicable Holder by cash, certified or bank
cashier's check or wire transfer.
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Subject to the provisions of Section 6, upon such surrender of Warrants
and payment of the Exercise Price 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 such Holder may designate a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise of
such Warrants (and such other consideration as may be deliverable upon exercise
of such Warrants) together with, at the sole option of the Company, cash for
fractional Warrant Shares as provided in Section 7. Such certificate or
certificates shall be deemed to have been issued and the Person so named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the Exercise Price,
irrespective of the date of delivery of such certificate or certificates for
Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder
thereof, either in full or from time to time in part and, in the event that a
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new certificate evidencing the remaining Warrant or Warrants
will be issued and delivered pursuant to the provisions of this Section 5 and of
Section 2.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
SECTION 6.
PAYMENT OF TAXES
The Company will pay all taxes and other governmental charges
(including all documentary stamp taxes, but excluding all foreign, federal,
state or local income taxes payable by a Holder of a Warrant) in connection with
the issuance or delivery of the Warrants hereunder, including all such taxes
attributable to the initial issuance or delivery of Warrant Shares upon the
exercise of Warrants and payment of the Exercise Price. The Company shall not,
however, be required to pay any tax that may be payable in respect of any
subsequent transfer of the Warrants or any transfer involved in the issuance and
delivery of Warrant Shares in a name other than that in which the Warrants to
which such issuance relates were registered, and, if any such tax would
otherwise be payable by the Company, no such issuance or delivery shall be made
unless and until the Person requesting such issuance has paid to the Company the
amount of any such tax, or it is established to the reasonable satisfaction of
the Company that any such tax has been paid.
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SECTION 7.
FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Warrant Shares on
the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 7, be issuable on the exercise of any Warrants
(or specified portion thereof), such fractional Warrant Share shall be
eliminated.
SECTION 8.
LIMITATIONS ON CERTAIN HOLDERS
Notwithstanding anything in this Agreement or any Warrant Certificate
to the contrary, no Holder which is subject to the provisions of Regulation Y
promulgated by the Board of Governors of the Federal Reserve, or any successor
regulation thereto ("REGULATION Y"), or which is affiliated with any entity
subject to the provisions of Regulation Y if such affiliate holds securities of
the Company (any such Holder being referred to herein as a "REGULATED HOLDER"),
may exercise the Warrants for a number of Warrant Shares which would permit such
Regulated Holder, together with its affiliates, to own or control a number of
Warrant Shares greater than that permitted by law, including without limitation,
Regulation Y.
SECTION 9.
ADJUSTMENT OF NUMBER OF WARRANT SHARES ISSUABLE
The number of shares of Common Stock issuable upon the exercise of each
Warrant (the "WARRANT NUMBER") is initially one. The Warrant Number is subject
to adjustment from time to time upon the occurrence of the events enumerated in,
or as otherwise provided in this Section 9.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the Company:
(i) subdivides or reclassifies its outstanding shares of
Common Stock into a greater number of shares;
(ii) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares; or
(iii) issues by reclassification of its Common Stock any
shares of its capital stock;
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then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which it would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the effective
date thereof. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) WHEN DE MINIMIS ADJUSTMENT DEFERRED. No adjustment in the Warrant
Number need be made unless the adjustment would require an increase or decrease
of greater than 10,000 shares of Common Stock. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment;
provided that no such adjustment shall be deferred beyond the date on which a
Warrant is exercised. All calculations under this Section 9 shall be made to the
nearest 1/10th of a share.
(c) WHEN NO ADJUSTMENT REQUIRED. If an adjustment is made upon the
establishment of a record date for a distribution subject to subsection (a)
hereof and such distribution is subsequently canceled, the Warrant Number then
in effect shall be readjusted, effective as of the date when the Board of
Directors determines to cancel such distribution, to that which would have been
in effect if such record date had not been fixed.
(d) NOTICE OF ADJUSTMENT. Whenever the Warrant Number is adjusted, the
Company shall provide the notices to each Holder, in accordance with subsection
16(a) hereof.
(e) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in which this
Section 9 shall require that an adjustment in the Warrant Number be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event issuing to the Holder of any Warrant
exercised after such record date the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise over and above the Warrant
Shares and other capital stock of the Company, if any, issuable upon such
exercise on the basis of the Warrant Number prior to such adjustment; PROVIDED
that the Company shall deliver to such Holder a due xxxx or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares or other capital stock upon the occurrence of the event requiring such
adjustment.
(f) FORM OF WARRANTS. Irrespective of any adjustments in the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(g) REGULATED HOLDERS. If, in the written opinion of counsel to any
Regulated Holder (which may be internal counsel), the receipt by such
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Regulated Holder of Warrant Shares (or any security included therein) upon any
exercise or exchange pursuant to this Section 9 would cause such Regulated
Holder to violate any provision of Applicable Law with respect to its ownership
of voting securities of the Company, then the Company will use its best efforts
(including using its best efforts to cause its Organizational Documents to be
amended) to create an Equivalent Nonvoting Security with respect to Warrant
Shares (or any such security included therein), and such Regulated Holder shall
be entitled to receive upon such exercise or exchange, in lieu of such number
(as it shall specify) of shares or other units of Warrant Shares (or any such
security included therein) otherwise receivable by such Regulated Holder, the
same number of shares or other units of such Equivalent Nonvoting Security.
SECTION 10.
CALL AND PUT OPTIONS
(a) PUT RIGHTS OF THE HOLDERS. From the earlier of (i) April 1, 2001 or
(ii) a Change in Control, and until the end of the term of this Agreement, each
Holder may cause the Company to redeem all, but not less than all, of the
Warrants owned by the Holder so long as at the time (i) the Company is not
prohibited by law from doing so, or (ii) the Company is not prohibited by
agreements with third parties from doing so. Such election must be exercised by
a Holder by giving written notice to the Company not less than thirty (30) days
nor more than sixty (60) days before the date specified in the notice as the
closing date for the purchase. The purchase price shall be $1.00 per Warrant.
Within thirty (30) days after the closing date for the purchase of the Warrants
by the Company, the Company shall deliver to the Holder cash in the amount equal
to the purchase price as set forth in this Section 10(a). Concurrent with the
delivery of cash by the Company, Holder shall deliver the certificate or
certificates evidencing the Warrants to be sold. At that time, the Company shall
cancel the certificate or certificates. This thirty (30) day period shall not
start to run until such time as any required approval or consent to the sale of
the Warrants is obtained.
(b) CALL RIGHT OF THE COMPANY. From and after the execution of this
Agreement, the Company will have the option, but not the obligation, to purchase
all, but not less than all of a Holder's Warrants. The purchase price for each
Warrant purchased pursuant to this Section 10(b) shall be $4.50 per Warrant
purchased from the date of this Agreement through March 31, 2001, and shall
increase $1.00 per Warrant per year thereafter on each April 1, through the end
of the term of this Agreement. Such option must be exercised by the Company by
giving written notice to a Holder not less than thirty (30) days nor more than
sixty (60) days before the date specified in the notice as the closing date for
the purchase. Within thirty (30) days after the closing date for the purchase of
the Warrants by the Company, the Company shall deliver to the Holder cash in the
amount equal to the purchase price as set forth in this Section 10(b).
Concurrent with the delivery of cash by the Company, Holder shall deliver the
certificate or certificates evidencing the Warrants to be sold. This thirty (30)
day period shall not start to run until such time as any required approval or
consent to the sale of the Warrants is obtained. Holder may exercise the Warrant
until the day before the closing date for the purchase of the Warrant.
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(c) The Company may assign all or part of its rights to purchase a
Holder's Warrants, provided that all of the Holder's Warrants are purchased in
accordance herewith.
SECTION 11.
"PIGGYBACK" REGISTRATION RIGHTS
The Company hereby grants to the Holders the "piggyback" registration
rights with respect to the Registrable Securities as set forth in this Section
11.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (except for the
registration of securities to be offered pursuant to an employee
benefit plan on Form S-8, pursuant to a registration made on Form S-4,
or any successor forms then in effect) at any time and the registration
form to be used may be used for the registration of the Registrable
Securities (a "Piggyback Registration"), it will so notify in writing
all holders of Registrable Securities not later than 30 days prior to
the anticipated filing date. Subject to the provisions of Section
11(c), the Company will include in the Piggyback Registration all
Registrable Securities with respect to which the Company has received
written requests for inclusion within 15 business days after the
applicable holder's receipt of the Company's notice. The holders of
Registrable Securities may withdraw all or any part of the Registrable
Securities from a Piggyback Registration at any time before three
business days prior to the effective date of the Piggyback
Registration. If a Piggyback Registration is an underwritten offering
effected under Section 11(c), all Persons whose securities are included
in the Piggyback Registration must sell their securities on the same
terms and conditions as apply to the securities being issued and sold
by the Company. If at any time after giving written notice of its
intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any
obligation of the Company to pay the Registration Expenses in
connection therewith) and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities.
(b) PIGGYBACK EXPENSES. The Company shall pay all Registration
Expenses in connection with any registration pursuant to this Section
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(c) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary or secondary
registration and the managing underwriters give the Company their
written opinion that the total number or dollar amount of securities
requested to be included in the registration exceeds the number or
dollar amount of securities that can
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be sold, the Company will include the securities in the registration in
the following order of priority: first, all securities the Company
proposes to sell and second, any other securities (provided they are of
the same class as the securities sold by the Company) requested to be
included, allocated among the holders of the securities on a pro rata
basis based on the total number of such securities requested to be
registered.
(d) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, the Company will select the investment
banker(s) and manager(s) that will administer the offering, and shall
enter into a customary underwriting agreement with the investment
banker(s) and manager(s).
(e) OTHER REGISTRATIONS. The Company agrees that after filing
a registration statement with respect to Registrable Securities
pursuant to this Section 11 that has not been withdrawn or abandoned,
the Company will not register any of its equity securities or
securities convertible or exchangeable into or exercisable for its
equity securities under the Securities Act, whether on its own behalf
or at the request of any holder of those securities, until at least
three months has elapsed from the effective date of the previous
registration. This three-month hiatus does not apply to registrations
of securities to be issued in connection with employee benefit plans,
to permit exercise or conversions of options, warrants, or other
convertible securities, or in connection with any contractual
obligation of the Company to register securities.
(f) FURTHER INFORMATION. The Company may require each Holder
of Registrable Securities as to which any registration is being
effected to furnish the Company such information regarding such Holder
and the distribution of such securities as the Company may from time to
time reasonably request in writing.
(g) BEST EFFORTS. A Holder shall use its best efforts to take
all steps necessary or advisable to cooperate with the Company and any
underwriter to effect the registration of the Registrable Securities
contemplated hereby. If a Holder does not so cooperate, the Company has
the option, in its sole discretion, to prohibit the Registrable
Securities of such Holder from being included in such registration.
(h) HOLDBACK. Each of the Company and each Holder holding
Registrable Securities included in a registration statement hereunder
agrees not to effect any public sale or distribution of shares of
Common Stock during the period specified by the managing underwriter or
underwriters of the underwritten offer being made pursuant to such
registration statement (which period shall not exceed seven days prior
to and 180 days following the effective date of such registration
statement), except as part of such registration, if and to the extent
reasonably requested by such managing underwriter or underwriters.
SECTION 12.
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COVENANTS
(a) RIGHTS. Nothing contained in this Agreement shall be construed as
conferring upon any Holder, prior to its exercise of any Warrant, the right to
vote or to consent or to receive notice as stockholders in respect of meetings
of stockholders or the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company, except as expressly
provided hereunder or under applicable law.
(b) REGULATED HOLDERS.
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(i) Notwithstanding any other provision of this Agreement to
the contrary, except as provided in this subsection 12(b), without the
prior written consent of any Regulated Holder, the Company shall not,
directly or indirectly, redeem, purchase or otherwise acquire, convert
or take any action (including any amendment to an Organizational
Document) with respect to the voting rights of, or undertake any other
action or transaction (including any merger, consolidation or
recapitalization) affecting, any shares of its capital stock or other
voting securities if the result of the foregoing would be to cause the
ownership of the capital stock of any Person by such Regulated Holder,
or the ownership of voting securities of any Person (or any class
thereof) by such Regulated Holder, to exceed the quantity of such
capital stock or voting securities (or any class thereof) that such
Regulated Holder is permitted under Applicable Law to own. Any action
or transaction referred to in the preceding sentence shall be referred
to herein as a "SECTION 12(B) TRANSACTION." The Company shall be
permitted to undertake any Section 12(b) Transaction which would
otherwise result in the ownership by any Regulated Holder of voting
securities (or any class thereof in excess of the quantity permitted by
Applicable Law if, in a manner reasonably satisfactory to such
Regulated Holder, the Company shall provide or cause to be provided for
such Regulated Holder (i) to receive in connection with any such action
or transaction a number of shares or other units of Equivalent
Nonvoting Securities equal to such excess in lieu of the same number of
shares or other units of the voting securities it would otherwise have
received or (ii) if it would not otherwise have received voting
securities in connection with such action or transaction, to exchange a
number of shares or other units of voting securities then held by such
Regulated Holder equal to such excess for the same number of shares or
other units of Equivalent Nonvoting Securities. If the Company proposes
to undertake any action or transaction which could constitute a Section
12(b) Transaction, it shall provide the Holders at least 15 days prior
written notice thereof. If, in the written opinion of counsel to any
Regulated Holder (which may be internal counsel) delivered within 10
days following receipt of such notice, such action or transaction
constitutes a Section 12(b) Transaction with respect to such Regulated
Holder, then the Company shall delay undertaking such Section 12(b)
Transaction for the purpose of using its best efforts to agree on a
manner in which to restructure such action or transaction in a manner
reasonably satisfactory to the Company and such Regulated Holder so
that it no longer would constitute a Section 12(b) Transaction. If the
Company and such Regulated Holder are unable to agree, within 20 days
of the delivery of such written opinion, upon a manner in which to so
restructure such Section 12(b) Transaction, and such Section 12(b)
Transaction is a bona fide action or transaction proposed by the
Company in good faith, then the Company shall be permitted to undertake
such Section 12(b) Transaction if prior to or concurrently with doing
so it purchases from such Regulated Holder, at a purchase price per
share of Common Stock equal to the then applicable call price as
specified in Section 10(b) above, a number (specified by such Regulated
Holder) of Warrants (based on the number of Warrant Shares represented
thereby) or Warrant Shares sufficient, in the written opinion of
counsel to such Regulated Holder (which may be internal counsel), to
prevent such Section 12(b) Transaction from causing the ownership of
the capital stock of any Person by such Regulated Holder to
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exceed the quantity of such capital stock that such Regulated Holder is
permitted under Applicable Law to own.
(ii) If it becomes unlawful for any Regulated Holder to
continue to hold some or all of the Warrants or Warrant Shares held by
it, or restrictions are imposed on any Regulated Holder by Applicable
Law which, in the reasonable judgment of such Regulated Holder, make it
unduly burdensome to continue to hold such Warrants or Warrant Shares,
the Company shall (i) cooperate with such Regulated Holder in any
efforts by such Regulated Holder to dispose of some or all of such
Warrants or Warrant Shares in a prompt and orderly manner, including
providing (and authorizing such Regulated Holder to provide) financial
and other information concerning the Company to any prospective
purchaser of such Warrants or Warrant Shares and (ii) at the request of
such Regulated Holder, take all steps (including using its best efforts
to cause its Organizational Documents to be amended) necessary to
create an Equivalent Nonvoting Security with respect to the Warrant
Shares then held by such Regulated Holder and permit such Regulated
Holder to exchange Warrant Shares for the same number of shares or
other units of such Equivalent Nonvoting Security; PROVIDED, that
nothing in this subsection 12(b) shall require the Company to register
or qualify such Warrants or Warrant Shares under any federal or state
securities laws.
(c) PUBLIC DISCLOSURES. The Company will not disclose any Holder's name
or identity as an investor in the Company in any press release or other public
announcement or in any written consent of such Holder, unless such disclosure is
required by applicable law or governmental regulations or by order of a court of
competent jurisdiction in which case prior to making such disclosure the Company
will give written notice to such Holder describing in reasonable detail the
proposed content of such disclosure and will permit the Holder to review and
comment upon the form and substance of such disclosure.
SECTION 13.
ACKNOWLEDGMENTS BY HOLDERS
Each Holder acknowledges the following:
(a) The Common Stock of the Company is not trade on any national
exchange as defined by the Securities Act or the Securities Exchange Act and the
rules and regulations adopted by the Commission.
(b) There is no orderly market or readily available market for the
Company's Common Stock.
(c) The information and disclosures required to be made by the Company
to the Commission is not current and the Company is delinquent in its filings
with the Commission and may be for the foreseeable future.
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SECTION 14.
TRANSFERS
Each Holder, subject to the requirements of either the Securities Act
or the Securities Exchange Act and the rules and regulations adopted by the
Commission thereunder, shall be permitted to transfer not less than 50,000
Warrants or Warrant Shares (and the rights relating thereto under this Agreement
and the other Warrant Documents), to any Person other than a competitor of the
Company or any affiliate of such competitor; PROVIDED that:
(i) such transfer is made pursuant to a registration statement
under the Securities Act (it being acknowledged that the Company shall
not be obligated to assist in any manner in any such registration) or
pursuant to an exemption from the registration requirements of the
Securities Act;
(ii) if such transfer is being made pursuant to an exemption
from such registration requirements and if requested by the Company,
counsel for such Holder (which counsel shall be reasonably acceptable
to the Company) furnishes to the Company an opinion to the effect that
such transfer is being made pursuant such an exemption;
(iii) the applicable transferee (or, in the case of an account
manager, the managed account on behalf of which the account manager is
acting) is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act;
(iv) such transferee represents to the Company in writing that
it is acquiring such Warrant or Warrant Share solely for its own
account and not as nominee or agent for any other Person and not with a
view to, or for offer or sale in connection with, any distribution
thereof (within the meaning of the Securities Act) that would be in
violation of the securities laws of the United States of America or any
state thereof, without prejudice, however, to its right at all times to
sell or otherwise dispose of all or any part of said Warrant or Warrant
Share pursuant to a registration statement under the Securities Act or
pursuant to an exemption from the registration requirements of the
Securities Act, and subject, nevertheless, to the disposition of its
property being at all times within its control. Such transferee shall
also agree in writing to be party to and bound by the terms of this
Agreement.
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SECTION 15.
STANDSTILL
Each Holder agrees that as long as it is a Holder, and for the twelve
(12) months following the date it is no longer a Holder, neither it nor any of
its Affiliates will, without the prior written consent of the Company acting
through its board of directors (it being acknowledged, however, that the
Purchasers may take such actions as are otherwise provided for in the Company's
current credit facility, as the same may be amended in accordance therewith,
without such actions being deemed to be a breach of this Section 15):
(a) make, or in any way participate, directly or indirectly, in
any solicitation of proxies or consents (as such terms are
used in the rules of the Commission), or seek to advise or
influence any person or entity, with respect to the voting of
any voting securities of the Company;
(b) initiate or propose any stockholder proposal with respect to
the Company as described in Rule 14a-8 under the Securities
Exchange Act;
(c) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any
extraordinary transaction involving the Company or any
subsidiary or division thereof or any of their securities or
assets;
(d) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting securities of
the Company, other than the Warrant Shares;
(e) act alone, or in concert with others, to seek to control or
influence the management, board of directors or policies of
the Company; or
(f) form, join or in any way participate in a "group" as defined
in the Securities Exchange Act, or advise, assist or encourage
any other persons in connection with any of the foregoing.
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SECTION 16.
MISCELLANEOUS
(a) NOTICES. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and shall be made by personal service, confirmed telecopy transmission,
United States Mail or reputable courier service:
(i) if to Purchaser or subsequent Holder, at the address or
telecopy number set forth on the signature pages to this Agreement, or
such other address as shall be designated in a written notice delivered
to the Company; and
(ii) if to the Company, at the address or telecopy number set
forth on the signature pages to this Agreement, or such other address
as shall be designated in a written notice delivered to the other
parties hereto.
Unless otherwise specifically provided herein, any notice or other
communication shall be deemed to have been given when delivered in person or by
courier service, upon receipt of the confirmed telecopy transmission, or three
business days after depositing it in the United States mail with postage prepaid
and properly addressed.
(b) FAILURE OR DELAY NOT WAIVER, REMEDIES CUMULATIVE. No failure or
delay on the part of any Holder in the exercise of any power, right or privilege
hereunder or under any other Warrant Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Warrant Documents are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
(c) SEVERABILITY. In case any provision in or obligation under this
Agreement or the Warrant Certificates shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
(d) HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
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(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto and the successors and assigns of the
Purchasers (including each Holder and its successors and assigns).
(g) COUNTERPARTS. This Agreement and any amendments, waivers, consents
or supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
(h) AMENDMENTS. No amendment, modification, termination or waiver of
any provision of this Agreement (including the terms of any agreement
incorporated by reference) and the Warrant Certificates or consent to any
departure by the Company therefrom, shall in any event be effective without the
written concurrence of the Holders.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
INTERNATIONAL TOTAL SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------
Name: Xxxx X. Xxxxxxxx
----------------------
Title: President & CEO
-----------------------
Notice Address:
--------------
ITS
---------------------------------------------
X.X. Xxx 000000
---------------------------------------------
Xxxxxxxxx Xxxx 00000
---------------------------------------------
Attention: President
---------------------------------------------
BANK ONE, N.A.
By: /s/ T. Xxxxxx Xxxxx
----------------------
Name: T. Xxxxxx Xxxxx
Title: First Vice President
Notice Address:
--------------
Bank One N.A.
---------------------------------------------
000 Xxxxxxxx Xxx XX
---------------------------------------------
Xxxxxxxxx Xxxx 00000
---------------------------------------------
Attention: Managed Assets
---------------------------------------------
PROVIDENT BANK
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------
Name: Xxxxxxx X. Xxxxxxx, Xx
-----------------
Title: Vice President
-------------------------
Notice Address:
--------------
The Provident Bank
---------------------------------------------
0000 Xxxxxxxx Xxx
---------------------------------------------
Xxxxxxxxx Xxxx 00000
---------------------------------------------
Attention: Regional President
---------------------------------------------
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON APRIL
5, 2000, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE (AND THE SHARES ISSUABLE
UPON EXERCISE OF SUCH SECURITIES) ARE SUBJECT TO A WARRANT AGREEMENT, DATED
APRIL 5, 2000, BY AND BETWEEN THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND
THE PURCHASERS REFERRED TO THEREIN. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT
TO THE CONDITIONS SPECIFIED IN SUCH WARRANT AGREEMENT AND THE COMPANY RESERVES
THE RIGHT TO REFUSE THE TRANSFER OF THIS CERTIFICATE UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
Warrants to Purchase at the Holders Option:
Common Stock, .001 par value, of International Total Services, Inc.
Xx. 0 __Xxxxxxxx
Xxxxx 0, 0000
XXXXXXX CERTIFICATE
This Warrant Certificate certifies that ______________________________
or registered assigns is the registered owner of ________________ Warrants, each
Warrant entitling such owner to purchase initially, at such owner's option,
subject to the provisions of Section 8 of the Warrant Agreement, one share of
Common Stock, $.001 par value ("COMMON STOCK"), of International Total Services,
Inc. (the "COMPANY") at the Exercise Price, as defined in Section 1 of the
Warrant Agreement hereinafter referred to, at any time or from time to time
until 5:00 p.m., Cleveland time, on March 31, 2007 and, subject to the terms and
conditions hereof and of the Warrant Agreement. The number of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, as set forth in the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Agreement, dated as of April 5, 2000 (the "WARRANT AGREEMENT"), duly
executed and delivered by the Company and the Purchasers referred to therein,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants. A copy of the Warrant Agreement
may be obtained by the holder hereof upon written request to the Company.
The holder of Warrants evidenced by this Warrant Certificate may
exercise such Warrants under and pursuant to the terms and conditions of the
Warrant Agreement by surrendering this
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Warrant Certificate, with the purchase form attached hereto (and by this
reference made a part hereof) properly completed and executed, together with
payment of the Exercise Price in accordance with the terms of the Warrant
Agreement. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less that the total number of Warrants
evidenced hereby, there shall be issued by the Company to the holder hereof or
its registered assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrants set forth on the face hereof may, subject to
certain conditions, be adjusted.
Warrant Certificates, when surrendered with the assignment form
attached hereto (and by this reference made a part hereof) properly completed
and executed at the office of the Company by the registered holder thereof in
person or by a legal representative or attorney duly authorized in writing, may
be exchanged, in the manner and subject to the limitations provided in the
Warrant Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its Chairman of the Board, President or Vice President and attested
to by its Secretary or Assistant Secretary.
INTERNATIONAL TOTAL SERVICES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ATTEST:
By:
--------------------------------
Name:
Title:
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PURCHASE FORM
To:
The undersigned, pursuant to the provisions set forth in the attached
Warrant Certificate (Certificate No. W__), hereby elects to exercise for the
purchase of _____ Warrant Shares covered by such Warrant Certificate and makes
payment herewith in full therefor at the price per share provided by such
Warrant Certificate, and directs that the Warrant Shares deliverable upon such
exercise be registered in the name and at the address specified below and
delivered thereto.
[HOLDER]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Notice Address:
--------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Date: ,
--------- -----
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ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, pursuant to the provisions set
forth in the attached Warrant Certificate (Certificate No. W__), hereby sells,
assigns and transfers all of its rights under such Warrant Certificate with
respect to the number of Warrant Shares covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
----------------- ------- -------------
[HOLDER]
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Notice Address:
--------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Date: ,
--------- -----
24
