1
EXHIBIT 10.2
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement"), dated as of February 1, 2000,
is made and entered into by and among Entrepreneurial Investors, Ltd., a Bahamas
company ("EIL"), Equity Services, Ltd., a Nevis company ("ESL"), and MSI
Holdings, Inc., a Utah corporation ("MSI").
RECITALS
This Agreement is entered into with reference to the following facts:
A. ESL has acted as the placement agent for the issuance of shares of four
series of preferred stock, par value $2.00 per share, and shares of common
stock, par value $0.10 per share ("Common Stock"), of MSI pursuant to Placement
Agent Agreements dated as of November 11, 1997, January 31, 1998, April 30,
1998, October 13, 1998, and March 30, 1999 (as amended, each a "Placement
Agreement" and, together, the "Placement Agreements"); and
B. As of the date hereof, five shares of MSI's Series B 5% Cumulative
Non-Voting Preferred Stock ("Series B Preferred Stock"), 19,005 shares of MSI's
Series D 6% Cumulative Non-Voting Preferred Stock ("Series D Preferred Stock")
and 6,005 shares of MSI's Series E 6% Cumulative Non-Voting Preferred Stock
("Series E Preferred Stock") remain issued and outstanding (all such shares,
collectively, the "Preferred Stock").
In consideration of the covenants and promises contained herein and for
other good and valuable consideration, the parties hereto agree as follows:
AGREEMENT
1. RECITALS. The recitals stated above are incorporated herein by reference
as though set forth in full.
2. CONVERSION OF PREFERRED. EIL and ESL have facilitated the conversion by
the holders of record of the Preferred Stock (the "Preferred Holders") of all
outstanding shares of Preferred Stock into shares of Common Stock. Attached
hereto as Annex A are accurate and complete copies of duly executed notices of
conversion of Preferred Stock. Except as set forth in Section 5 hereof, MSI, EIL
and ESL acknowledge and agree that (a) all of the Placement Agreements, together
with each Investor Subscription Agreement executed in connection with the
Placement Agreements, are hereby terminated in all respects and (b) the
compliance with all terms and conditions thereof are hereby irrevocably waived
in all respects. EIL and ESL each acknowledges and agrees that, from and after
the date hereof, MSI shall have no duties, obligations or liabilities under or
arising from such agreements.
3. DIRECTOR DESIGNEE. For a period of one year from the date hereof, MSI
shall, subject to the duties of its directors imposed by applicable law, use
commercially reasonable efforts to promote one person, designated by agreement
of the Preferred Holders holding a majority of the Deemed Preferred Votes, for
election to MSI's board of directors. For purposes hereof, each
1
2
Preferred Holder shall have one "Deemed Preferred Vote" for each series of
Preferred Stock in which such holder owns shares of record on the date hereof.
For example, if a Preferred Holder owns of record three shares of Series D
Preferred Stock and 1,000 shares of Series E Preferred Stock, then such
Preferred Holder would have two Deemed Preferred Votes, while another Preferred
Holder of 5,000 shares of Series E Preferred Stock would have one Deemed
Preferred Vote. As of the date hereof, there are one Preferred Holder of Series
B Preferred Stock, two Preferred Holders of Series D Preferred Stock, three
Preferred Holders of Series E Preferred Stock and, accordingly, six Deemed
Preferred Votes. No person may assign its right to participate in the
designation of such director, by operation of law or otherwise. MSI shall be
under no obligation under this Section 5 unless and until the holders of a
majority of the Deemed Preferred Votes notify MSI in writing of the identity of
such designee.
4. EIL WARRANT. In consideration for (a) EIL's and ESL's assistance in
facilitating (i) the conversion of the Preferred Stock and (ii) the execution
and delivery of those certain Acknowledgment and Waivers dated February 1, 2000
between MSI and each of the Preferred Holders, and (b) EIL's and ESL's execution
and delivery of this Agreement, MSI is, concurrently with its execution and
delivery hereof, executing and delivery to EIL a warrant to purchase 500,000
shares of Common Stock in the form attached hereto as Annex B.
5. GARDERE & XXXXX. EIL and ESL each hereby agrees that EIL and ESL,
together with their owners, officers, directors, employees, affiliates and
agents, shall not hire or otherwise retain or use the services of the law firm
of Gardere & Xxxxx, L.L.P. or any attorney who has performed or may in future
perform substantial services for MSI while a partner, of counsel, associate or
employee of Gardere & Xxxxx, L.L.P., in any litigation, arbitration or other
hearing or adversarial proceeding in which EIL or ESL or any of their respective
owners, officers, directors, employees, affiliates or agents are adverse to MSI
or any of MSI's subsidiaries.
6. GENERAL RELEASE OF CLAIMS. The parties hereto, on their own behalf and
on behalf of their owners, officers, directors, employees, affiliates and
agents, hereby unconditionally release and forever discharge each other, and
their predecessors, successors, assigns, agents, officers, directors,
representatives, attorneys, employees, parent companies, subsidiaries,
affiliates, related entities, owners and all persons acting by, through, under
or in concert with any of them, from any and all liability for any and all
claims, demands, actions, causes of action, debts, liabilities, obligations,
damages, costs and expenses of every kind, known or unknown, suspected or
unsuspected, fixed or contingent, which they now have or claim to have arising
or resulting from the Placement Agreements and the Preferred Stock, all
transactions and agreements contemplated by or entered into in connection with
each of the foregoing, and any other transaction or event occurring prior to the
date hereof; provided, however, that (a) that certain Registration Rights
Agreement dated November 11, 1997 between Micro-Media Solutions, Inc. (the
predecessor to MSI) and EIL and that certain Registration Rights Agreement dated
November 11, 1997 between Micro-Media Solutions, Inc. (the predecessor to MSI)
and ESL shall remain in full force and effect pursuant to their terms and (b)
such release shall not be deemed to be a release of any liability under the
anti-fraud provisions of the Securities Act of 1933.
7. VOLUNTARY AGREEMENT. Each party hereto represents to the other parties
hereto that it has read this Agreement, that it has had an opportunity to
discuss it thoroughly with
2
3
counsel, that it understands all of its provisions, and that it is entering into
this Agreement voluntarily relying wholly upon its own judgment and any legal
advice received by counsel.
8. BINDING AGREEMENT. The provisions of this Agreement, and all documents
executed or delivered pursuant to it, shall be binding upon and inure to the
benefit of the parties hereto and thereto and their predecessors, successors
(specifically including merging and acquiring companies) and assigns.
9. AMENDMENTS. This Agreement cannot be amended or modified, in any
respect, except by a writing duly executed by the party against whom the
amendment or modification is to be charged. All prior and contemporaneous
agreements and understandings, whether written or oral, are expressly superseded
hereby and are of no further force and effect.
10. NO PRESUMPTION OR INTERPRETATION AGAINST DRAFTER. This Agreement is the
product of negotiation and mutual input by the parties hereto. In the event that
a dispute arises as to any provision of this Agreement, there shall be no
presumption or rule of interpretation applied against either party as the
drafter. Each party is aware that each was free to seek independent professional
guidance or legal counsel with respect to this Agreement. The parties to this
Agreement have either sought such guidance or legal counsel or determined after
reviewing this Agreement carefully that they waive such right.
11. CONSTRUCTION. The headings as set forth herein are inserted for
convenience of reference only and do not define, describe or limit the scope or
intent of this Agreement or any of the terms hereof.
12. ATTORNEYS' FEES. The prevailing party in any action, suit, assertion or
proceeding regarding, arising out of or in connection with this Agreement shall
be entitled to recover reasonable attorneys' fees and expenses incurred in
prosecuting, defending, researching or otherwise responding to such action,
suit, assertion or proceeding.
13. SEVERABILITY. Each provision of this Agreement is to be considered
separable and if for any reason any provision or provisions are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement which are
valid.
14. NO THIRD PARTIES ARE BENEFICIARIES. This Agreement is not intended to,
and does not, confer upon any third party any rights either to seek to enforce
this Agreement or to bring any claim under this Agreement.
15. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by facsimile,
mailed by registered or certified mail (return receipt requested) or sent by
overnight courier to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
3
4
(a) If to MSI, to:
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Kane, Russell, Xxxxxxx & Xxxxx
3700 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx
Facsimile: (000)000-0000
(b) If to EIL or ESL, to:
EIL ESL
Xxxxxxxx Xxxxxxxx, 0xx Xxxxx Xx. Xxxxxxx Xxxxx
East Mall Drive Xxxxxxxxx Street Steps
P.O. Box 40643 P.O. Box N-4805
Freeport, G.B., BAHAMAS Nassau, N.P., BAHAMAS
Attn: Xxxxxx X. Xxxxxx Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
with a copy to:
Gardere & Xxxxx, L.L.P.
3000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: I. Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed given (i) on the date of delivery,
if hand delivered, (ii) on the date of receipt, if sent by facsimile, (iii)
three days after the date of mailing, if mailed by registered or certified mail,
return receipt requested, and (iv) one day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
16. COOPERATION. The parties to this Agreement shall cooperate fully in the
execution of any and all other documents and in the completion of any additional
actions that may be
4
5
necessary or appropriate to give full force and effect to the transactions
contemplated by this Agreement.
17. GOVERNING LAW. This Agreement and the interpretation hereof is governed
by and shall be construed under the laws of the state of Texas, without
application of the conflict of laws principles thereof.
18. CONSENT TO JURISDICTION AND VENUE. Each party hereto expressly consents
to the personal jurisdiction of the state and federal courts located in Xxxxxx
County in the State of Texas and agrees that any action relating to or arising
out of this Agreement shall be instituted and prosecuted only in such courts,
except that actions to enforce any judgment or writ of attachment shall be
prosecuted through the courts of the county and state in which the assets
subject to such enforcement action are located. Each party hereto waives any
right to a change of the aforesaid venue and any and all objections to the
jurisdiction of such courts over the parties hereto.
19. EFFECTIVENESS. This Agreement shall only become effective upon the
consummation of a sale of the common stock of MSI in a private placement through
Xxxxxx Xxxxxxxxxx Xxxxx, LLC and/or Tejas Securities Group, Inc., which private
placement results in the receipt by MSI of at least $25,000,000 in gross
proceeds following the date hereof and on or prior to March 31, 2000 (the
"Private Placement"). If the Private Placement is not consummated on or before
March 31, 2000, this Agreement shall be of no force or effect.
5
6
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby,
have duly executed this Agreement as of the date first above written.
MSI HOLDINGS, INC.
---------------------------------------------
By: Xxxxxxx X. Xxxxxxxx
Chief Financial Officer
ENTREPRENEURIAL INVESTORS, LTD.
---------------------------------------------
By: Xxxxxx X. Xxxxxx
Its: President
EQUITY SERVICES, LTD.
---------------------------------------------
By: Xxxx Xxxxxxxxx
Its: Director
6
7
ANNEX A
CONVERSION LETTER
January 14, 2000
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Dear Sirs:
The undersigned hereby converts all shares of preferred stock, par value
$2.00 per share ("Preferred Stock"), of MSI Holdings, Inc., a Utah corporation
(the "Company"), held beneficially or of record by the undersigned into shares
of common stock, par value $0.10 per share ("Common Stock"), of the Company.
Enclosed with this letter are certificates representing all such shares of
Preferred Stock, duly endorsed in blank for exchange and conversion.
The undersigned hereby acknowledges and agrees that (a) upon the conversion
of such shares of Preferred Stock all rights of the undersigned as a holder of
Preferred Stock and all agreements in connection therewith, including without
limitation each Investor Subscription Agreement and Placement Agent Agreement to
which the undersigned or the Company is a party, are hereby terminated in all
respects and (b) compliance with all terms and conditions thereof are hereby
irrevocably waived in all respects (provided, however, that notwithstanding the
foregoing, the Registration Rights Agreement relating to the Common Stock into
which the Preferred Stock is hereby converted shall continue in full force and
effect).
This Letter Agreement shall be binding on the undersigned and the
respective successors, heirs, personal representatives and assigns of the
undersigned.
XXXXXX XXXXXXX
8
ANNEX A
CONVERSION LETTER
January 14, 2000
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Dear Sirs:
The undersigned hereby converts all shares of preferred stock, par value
$2.00 per share ("Preferred Stock"), of MSI Holdings, Inc., a Utah corporation
(the "Company"), held beneficially or of record by the undersigned into shares
of common stock, par value $0.10 per share ("Common Stock"), of the Company.
Enclosed with this letter are certificates representing all such shares of
Preferred Stock, duly endorsed in blank for exchange and conversion.
The undersigned hereby acknowledges and agrees that (a) upon the conversion
of such shares of Preferred Stock all rights of the undersigned as a holder of
Preferred Stock and all agreements in connection therewith, including without
limitation each Investor Subscription Agreement and Placement Agent Agreement to
which the undersigned or the Company is a party, are hereby terminated in all
respects and (b) compliance with all terms and conditions thereof are hereby
irrevocably waived in all respects (provided, however, that notwithstanding the
foregoing, the Registration Rights Agreement relating to the Common Stock into
which the Preferred Stock is hereby converted shall continue in full force and
effect).
This Letter Agreement shall be binding on the undersigned and the
respective successors, heirs, personal representatives and assigns of the
undersigned.
ENTREPRENEURIAL INVESTORS, LTD.
9
ANNEX A
CONVERSION LETTER
January 14, 2000
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Dear Sirs:
The undersigned hereby converts all shares of preferred stock, par value
$2.00 per share ("Preferred Stock"), of MSI Holdings, Inc., a Utah corporation
(the "Company"), held beneficially or of record by the undersigned into shares
of common stock, par value $0.10 per share ("Common Stock"), of the Company.
Enclosed with this letter are certificates representing all such shares of
Preferred Stock, duly endorsed in blank for exchange and conversion.
The undersigned hereby acknowledges and agrees that (a) upon the conversion
of such shares of Preferred Stock all rights of the undersigned as a holder of
Preferred Stock and all agreements in connection therewith, including without
limitation each Investor Subscription Agreement and Placement Agent Agreement to
which the undersigned or the Company is a party, are hereby terminated in all
respects and (b) compliance with all terms and conditions thereof are hereby
irrevocably waived in all respects (provided, however, that notwithstanding the
foregoing, the Registration Rights Agreement relating to the Common Stock into
which the Preferred Stock is hereby converted shall continue in full force and
effect).
This Letter Agreement shall be binding on the undersigned and the
respective successors, heirs, personal representatives and assigns of the
undersigned.
XXXXXX XXXX
10
ANNEX A
CONVERSION LETTER
January 14, 2000
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Dear Sirs:
The undersigned hereby converts all shares of preferred stock, par value
$2.00 per share ("Preferred Stock"), of MSI Holdings, Inc., a Utah corporation
(the "Company"), held beneficially or of record by the undersigned into shares
of common stock, par value $0.10 per share ("Common Stock"), of the Company.
Enclosed with this letter are certificates representing all such shares of
Preferred Stock, duly endorsed in blank for exchange and conversion.
The undersigned hereby acknowledges and agrees that (a) upon the conversion
of such shares of Preferred Stock all rights of the undersigned as a holder of
Preferred Stock and all agreements in connection therewith, including without
limitation each Investor Subscription Agreement and Placement Agent Agreement to
which the undersigned or the Company is a party, are hereby terminated in all
respects and (b) compliance with all terms and conditions thereof are hereby
irrevocably waived in all respects (provided, however, that notwithstanding the
foregoing, the Registration Rights Agreement relating to the Common Stock into
which the Preferred Stock is hereby converted shall continue in full force and
effect).
This Letter Agreement shall be binding on the undersigned and the
respective successors, heirs, personal representatives and assigns of the
undersigned.
XXXX XXXXXXX
11
ANNEX A
CONVERSION LETTER
January 14, 2000
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Dear Sirs:
The undersigned hereby converts all shares of preferred stock, par value
$2.00 per share ("Preferred Stock"), of MSI Holdings, Inc., a Utah corporation
(the "Company"), held beneficially or of record by the undersigned into shares
of common stock, par value $0.10 per share ("Common Stock"), of the Company.
Enclosed with this letter are certificates representing all such shares of
Preferred Stock, duly endorsed in blank for exchange and conversion.
The undersigned hereby acknowledges and agrees that (a) upon the conversion
of such shares of Preferred Stock all rights of the undersigned as a holder of
Preferred Stock and all agreements in connection therewith, including without
limitation each Investor Subscription Agreement and Placement Agent Agreement to
which the undersigned or the Company is a party, are hereby terminated in all
respects and (b) compliance with all terms and conditions thereof are hereby
irrevocably waived in all respects (provided, however, that notwithstanding the
foregoing, the Registration Rights Agreement relating to the Common Stock into
which the Preferred Stock is hereby converted shall continue in full force and
effect).
This Letter Agreement shall be binding on the undersigned and the
respective successors, heirs, personal representatives and assigns of the
undersigned.
XXXXX XXXXX
12
ANNEX B
FORM OF WARRANT
MSI HOLDINGS, INC.
(A UTAH CORPORATION)
=======================
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
=======================
Dated February 1, 2000
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT (IF AVAILABLE), AND IN EACH CASE IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
OTHER JURISDICTION.
THIS CERTIFIES THAT, for value received, Entrepreneurial Investors, Ltd., a
Bahamas company, or its registered assigns ("Holder"), is entitled to purchase,
subject to the conditions set forth below, at any time or from time to time
during the Exercise Period (as defined in subsection 1.2, below), Five Hundred
Thousand (500,000) shares ("Shares") of fully paid and non-assessable Common
Stock, par value $0.10 per share ("Common Stock"), of MSI HOLDINGS, INC., a Utah
corporation (the "Company"), at the per share purchase price (the "Warrant
Price") set forth in subsection 1.1, subject to the further provisions of this
Warrant. The term "Warrants" as used herein shall mean this Warrant and all
instruments issued by the Company which are substantially identical to this
Warrant (except for the name of the holder and the number of securities
purchasable by the holder).
1. EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised, and the
Common Stock covered hereby may be purchased, are as follows:
1.1 Warrant Price. The Warrant Price shall be equal to $12 per share,
subject to adjustment as provided in Section 4 below.
13
1.2 Method Of Exercise. The holder of this Warrant may at any time
beginning on the date this Warrant becomes effective pursuant to Section 12
below and ending on January 30, 2002 (the "Exercise Period"), exercise in whole
or in part the purchase rights evidenced by this Warrant. Such exercise shall be
effected by:
(a) the surrender of the Warrant, together with a duly executed copy of the
form of subscription attached hereto, to the Secretary of the Company at its
principal offices;
(b) the payment to the Company, by cash, check payable to its order or wire
transfer, of an amount equal to the aggregate Warrant Price for the number of
Shares for which the purchase rights hereunder are being exercised; and
(c) the delivery to the Company, if necessary, to assure compliance with
federal and state securities laws, of an instrument executed by the holder
certifying that the Shares are being acquired for the sole account of the holder
and not with a view to any resale or distribution.
1.3 Satisfaction with Requirements of Securities Act of 1933.
Notwithstanding the provisions of subsection 1.2(c) and Section 7, each and
every exercise of this Warrant is contingent upon the Company's satisfaction
that the issuance of Common Stock upon the exercise is exempt from the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and all applicable state securities laws. The holder of this Warrant agrees to
execute any and all documents deemed necessary by the Company to effect the
exercise of this Warrant.
1.4 Issuance Of Shares and New Warrant. In the event the purchase rights
evidenced by this Warrant are exercised in whole or in part, one or more
certificates for the purchased Shares shall be issued as soon as practicable
thereafter to the person exercising such rights. Such holder shall also be
issued at such time a new Warrant representing the number of Shares (if any) for
which the purchase rights under this Warrant remain unexercised and continuing
in force and effect.
1.5 Payment with Sales Proceeds. If the Common Stock is traded in the
over-the-counter market or upon any securities exchange, the Company may permit
the Holder, to the extent permitted by applicable law, to exercise this Warrant
by delivering to the Company a properly executed exercise notice together with
irrevocable instructions to a securities broker to sell that number of Shares
necessary to pay, and to promptly deliver to the Company cash or a check (or a
combination of cash or check) payable and acceptable to the Company to pay, the
Warrant Price; provided that the Holder and the broker shall comply with such
procedures, and enter into such agreements of indemnity and other agreements, as
the Company shall prescribe as a condition of such payment procedure.
2. TRANSFERS
2.1 Transfers. Subject to Section 7 hereof, this Warrant and all rights
hereunder are transferable in whole or in part by the holder. The transfer shall
be recorded on the books of the Company upon the surrender of this Warrant,
properly endorsed, to the Secretary of the Company at its principal offices and
the payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer. In the event of a partial transfer, the Company shall
issue to the several holders one or more appropriate new Warrants, as
appropriate.
14
2.2 Registered Holder. Each holder agrees that until such time as any
transfer pursuant to subsection 2.1 is recorded on the books of the Company, the
Company may treat the registered holder of this Warrant as the absolute owner;
provided that nothing herein affects any requirement that transfer of any
Warrant or share of Common Stock issued or issuable upon the exercise thereof be
subject to compliance with the Securities Act and all applicable state
securities laws.
2.3 Form Of New Warrants. All Warrants issued in connection with transfers
of this Warrant shall bear the same date as this Warrant and shall be
substantially identical in form and provision to this Warrant except for the
number of Shares purchasable thereunder.
3. FRACTIONAL SHARES
Notwithstanding that the number of Shares purchasable upon the exercise of
this Warrant may have been adjusted pursuant to the terms hereof, the Company
shall nonetheless not be required to issue fractions of Shares upon exercise of
this Warrant or to distribute certificates that evidence fractional shares nor
shall the Company be required to make any cash payments in lieu thereof upon
exercise of this Warrant. Holder hereby waives any right to receive fractional
Shares.
4. ANTIDILUTION PROVISIONS
4.1 Stock Splits And Combinations. If the Company shall at any time
subdivide or combine its outstanding shares of Common Stock, this Warrant shall,
after that subdivision or combination, evidence the right to purchase the number
of shares of Common Stock that would have been issuable as a result of that
subdivision or combination with respect to the Shares of Common Stock that were
purchasable under this Warrant immediately before that subdivision or
combination. If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased.
Any adjustment under this section shall become effective at the close of
business on the date the subdivision or combination becomes effective.
4.2 Reclassification, Exchange and Substitution. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares provided for above), the holder of this Warrant shall,
on its exercise, be entitled to purchase for the same aggregate consideration,
in lieu of the Common Stock that the holder would have become entitled to
purchase but for such change, a number of shares of such other class or classes
of stock equivalent to the number of shares of Common Stock that would have been
subject to purchase by the holder on exercise of this Warrant immediately before
that change.
4.3 Reorganizations, Mergers, Consolidations Or Sale Of Assets. If at any
time there shall be a capital reorganization of the Company's Common Stock
(other than a stock split, combination, reclassification, exchange, or
subdivision of shares provided for elsewhere above) or
15
merger or consolidation of the Company with or into another corporation, then,
as a part of such reorganization, merger or consolidation, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified in this
Warrant and upon payment of the Warrant Price then in effect, the number of
shares of Common Stock or other securities or property of the Company, or of the
successor corporation resulting from such merger or consolidation, to which a
holder of the Common Stock deliverable upon exercise of this Warrant would have
been entitled in such capital reorganization, merger or consolidation if this
Warrant had been exercised immediately before that capital reorganization,
merger or consolidation. In any such case, appropriate adjustment (as determined
in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the holder of this Warrant after the reorganization, merger or
consolidation to the end that the provisions of this Warrant (including
adjustment of the Warrant Price then in effect and number of Shares purchasable
upon exercise of this Warrant) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant. The Company shall, within thirty (30)
days after making such adjustment, give written notice (by first class mail,
postage prepaid) to the registered holder of this Warrant at the address of that
holder shown on the Company's books. That notice shall set forth, in reasonable
detail, the event requiring the adjustment and the method by which the
adjustment was calculated and specify the Warrant Price then in effect after the
adjustment and the increased or decreased number of Shares purchasable upon
exercise of this Warrant. When appropriate, that notice may be given in advance
and be included as part of the notice required under other provisions of this
Warrant.
4.4 Common Stock Dividends; Distributions. In the event the Company should
at any time prior to the expiration of this Warrant fix a record date for the
determination of the holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock (hereinafter
referred to as the "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or Common
Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such distribution, split or subdivision if no record date is fixed), the Warrant
Price shall be appropriately decreased and the number of shares of Common Stock
issuable upon exercise of the Warrant shall be appropriately increased in
proportion to such increase of outstanding shares.
4.5 Adjustments of Other Distributions. In the event the Company shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4.4, then, in each
such case for the purpose of this subsection 4.5, upon exercise of this Warrant
the holder hereof shall be entitled to a proportionate share of any such
distribution as though such holder was the holder of the number of shares of
Common Stock of the Company into which this Warrant may be exercised as of the
record date fixed for the determination of the holders of Common Stock of the
Company entitled to receive such distribution.
4.6 Certificate as to Adjustments. In the case of each adjustment or
readjustment of the Warrant Price pursuant to this Section 4, the Company will
promptly compute such adjustment or
16
readjustment in accordance with the terms hereof and cause a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, to be delivered to the holder of this
Warrant. The Company will, upon the written request at any time of the holder of
this Warrant, furnish or cause to be furnished to such holder a certificate
setting forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Common Stock issuable upon exercise of the
Warrant and the amount, if any, of other property at the time receivable upon
the exercise of the Warrant.
4.7 Reservation of Stock Issuable Upon Exercise. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, in addition to such other remedies as shall
be available to the holder of this Warrant, the Company will use its best
efforts to take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
5. RIGHTS PRIOR TO EXERCISE OF WARRANT
This Warrant does not entitle the holder to any of the rights of a
stockholder of the Company, including without limitation, the right to receive
dividends or other distributions, to exercise any preemptive rights, to vote, or
to consent or to receive notice as a stockholder of the Company. If, however, at
any time prior to the expiration of this Warrant and prior to its exercise, any
of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities upon
its shares of Common Stock or make any distribution (other than a regular cash
dividend) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common Stock
any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe for or
purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger, sale, transfer or lease of all or
substantially all of its property, assets, and business as an entirety) shall be
proposed and action by the Company with respect thereto has been approved by the
Company's Board of Directors,
then in any one or more of said events the Company shall give notice in writing
of such event to the holder at his last address as it shall appear on the
Company's records at least twenty (20) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of
17
the stockholders entitled to such dividends, distribution, or subscription
rights, or for the determination of stockholders entitled to vote on such
proposed dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may be.
Failure to publish, mail or receive such notice or any defect therein or in the
publication or mailing thereof shall not affect the validity of any action taken
in connection with such dividend, distribution or subscription rights, or such
proposed dissolution, liquidation or winding up. Each person in whose name any
certificate for shares of Common Stock is to be issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
this instrument was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such stock certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares of Common Stock at the close of business on the next succeeding
date on which the stock transfer books are open.
6. SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit of, and
be binding upon, the Company and the holder thereof and their respective
successors and permitted assigns.
7. RESTRICTED SECURITIES
In order to enable the Company to comply with the Securities Act and
applicable state laws, the Company may require the holder as a condition of the
transfer or exercise of this Warrant, to give written assurance satisfactory to
the Company that the Warrant, or in the case of an exercise hereof the Shares
subject to this Warrant, are being acquired for his own account, for investment
only, with no view to the distribution of the same, and that any disposition of
all or any portion of this Warrant or the Shares issuable upon the due exercise
of this Warrant shall not be made, unless and until:
(a) There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The holder has notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) the holder has furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such securities under the
Securities Act and applicable state law.
The holder acknowledges that this Warrant is, and each of the shares of
Common Stock issuable upon the due exercise hereof will be, a restricted
security, that he understands the provisions of Rule 144 of the Securities and
Exchange Commission, and that the certificate or certificates evidencing such
shares of Common Stock will bear a legend substantially similar to the
following:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or under the securities laws of any
state. They may not be sold, transferred or otherwise disposed of in the
absence of an effective registration statement covering these securities
under the said Act or laws, or an
18
opinion of counsel satisfactory to the Company and its counsel that
registration is not required thereunder."
8. LOSS OR MUTILATION
Upon receipt by the Company of satisfactory evidence of the ownership of
and the loss, theft, destruction, or mutilation of any Warrant, and (i) in the
case of loss, theft, or destruction, upon receipt by the Company of indemnity
satisfactory to it, or (ii) in the case of mutilation, upon receipt of such
Warrant and upon surrender and cancellation of such Warrant, the Company shall
execute and deliver in lieu thereof a new Warrant representing the right to
purchase an equal number of shares of Common Stock.
90 ACCREDITED INVESTOR
The Holder hereby represents and warrants that he is an "accredited
investor" as that term is defined in Regulation D promulgated pursuant to the
Securities Act. Holder hereby acknowledges that but for the aforesaid
representation the Company would not issue this Warrant to Holder.
100 NOTICES
All notices, requests, demands and other communications under this Warrant
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the date of mailing if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and properly
addressed as follows: if to the holder, at his address as shown in the Company
records; and if to the Company, at its principal office. Any party may change
its address for purposes of this subsection by giving the other party written
notice of the new address in the manner set forth above.
110 GOVERNING LAW
This Warrant and any dispute, disagreement or issue of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the laws of the State of Texas without regard to
conflicts of law.
120 EFFECTIVENESS
This Warrant shall only become effective upon the consummation of a sale of
the common stock of MSI in a private placement through Xxxxxx Xxxxxxxxxx Xxxxx,
LLC and/or Tejas Securities Group, Inc., which private placement results in the
receipt by MSI of at least $25,000,000 in gross proceeds following the date
hereof and on or prior to March 31, 2000 (the "Private Placement"). If the
Private Placement is not consummated on or before March 31, 2000, this Warrant
shall be of no force or effect.
19
DATED AS OF February 1, 2000.
MSI HOLDINGS, INC.
By:
--------------------------------
Xxxxxxx X. Xxxxxxxx
Chief Financial Officer
20
SUBSCRIPTION
MSI Holdings, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
Gentlemen:
The undersigned, _______________________, hereby elects to purchase, pursuant to
the provisions to the foregoing Warrant held by the undersigned,
______________________ (________) shares of the Common Stock, $0.10 par value
("Common Stock"), of MSI Holdings, Inc.
Payment of the purchase price per Share required under such Warrant accompanies
this subscription.
The undersigned hereby represents and warrants that absent an effective
registration statement covering the Warrants, the undersigned is acquiring such
stock for the account of the undersigned and not for resale or with a view to
distribution of such Common Stock or any part hereof; that the undersigned is
fully aware of the transfer restrictions affecting restricted securities under
the pertinent securities laws and the undersigned understands that the shares
purchased hereby are restricted securities and that the certificate or
certificates evidencing the same will bear a legend to that effect.
DATED: .
--------------
Signature:
------------------------------
