THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF1933 AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION IN
REASONABLY ACCEPTABLE FORM AND SCOPE TO THE COMPANY OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS OR THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THE OFFERING OF THIS WARRANT HAS NOT BEEN REVIEWED OR
APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR BY ANY
STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT IS ALSO SUBJECT TO CERTAIN
ADDITIONAL TRANSFER RESTRICTIONS PROVIDED FOR HERE1N.
Warrant No. Dated: October 29 1999
WARRANT
THIS IS TO CERTIFY THAT, for value received, BHC INTERIM FUNDING L.P.
or registered assigns ("Holder") is entitled to purchase from TRAVELERS
INVESTMENT CORPORATION., a California corporation (the "Company"), at any time
prior to 5:00 p.m., (New York time) on October 29, 2004, such number of shares
of the Company's Common Stock, no par value per shares (the "Common Stock") as
shall equal, upon issuance, the Bested Percentage (as hereinafter defined) on
such exercise date, of the total number of shares of the Company's Common Stock
outstanding, on a fully diluted basis after giving effect to the exercise of
this Warrant and all other warrants, options and rights to acquire any shares of
the Company's Common Stock and the conversion of all convertible securities (if
any) theretofore issued by the Company (the "Aggregate Shares"), at a price (the
"Exercise Price") equal to $.01 per share, payable as provided below. The Common
Stock issuable upon exercise of this Warrant are herein called the "Warrant
Shares".
This Warrant is the Warrant referred to in the Loan Agreement between
Travelers Acquisition Corporation, a Florida corporation, and Holder, of even
date herewith, and is issued pursuant to, and entitled to the benefits of, the
Loan Agreement as amended from time to time. Capitalized terms used and not
otherwise defined in this Warrant shall have the meanings assigned to them in
the Loan Agreement.
Certain terms used in this Warrant are defined in Article VI.
For purposes of this Warrant, the "Vested Percentage" shall be
determined as follows, subject to adjustment as provided in Article IV of this
Warrant:
i. Vested Percentage on the date hereof and at all times
hereafter if the Loan is repaid in full on or prior
to April 29,2000, shall mean 4.28%.
ii. If the Loan is not paid in full prior to April 29,
2000, then from and after such date the Vested
Percentage shall be 7.41%.
iii. If the Loan is not paid in full prior to July 29,
2000, then from and after such date the Vested
Percentage shall increase at a rate of 1.0% of the
Aggregate Shares per month for each month thereafter
that the Loan is not paid in full for the first three
months (so that if the Loan is not paid in full by
January 29, 2001, the Vested Percentage shall be
13.1%), and for each and every three month period
thereafter until the Loan is paid in full, the Vested
Percentage shall increase by an additional 2.0% of
the Aggregate Shares.
ARTICLE I - EXERCISE OF WARRANT
1.1 Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver on any Business Day to the Company at its principal
place of business (a) this Warrant, (b) a written notice in substantially the
form of the Subscription Notice attached hereto, of the Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased (which shall be a whole number of shares if for less than
all the shares then issuable hereunder), and (c) payment of the Exercise Price
with respect to such shares. Such payment may be made, at the option of the
Holder, either (a) by cash, certified or bank cashier's check or wire transfer
in an amount equal to the product of (i) the Exercise Price times (ii) the
number of Warrant Shares as to which this Warrant is being exercised or (b) by a
"cashless exercise" of this Warrant, in which event the Holder shall receive
from the Company the number of Warrant Shares equal to (i) the number of Warrant
Shares as to which this Warrant is being exercised minus (ii) the number of
Warrant Shares having an aggregate value (determined by reference to the Fair
Market Value of a share of Common Stock on the Business Day immediately prior to
the date of such exercise), equal to the product of (x) the Exercise Price times
(y) the number of Warrant Shares as to which this Warrant is being exercised.
The Company shall, as promptly as practicable and in any event within
seven days after receipt of such notice and payment, execute and deliver or
cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of shares of
Common Stock specified in said notice together with cash in lieu of any
fractions of a share as provided in Section 1.3. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and such Holder or any other Person so designated to be named
therein shall be deemed for all purposes to have become a holder of record of
shares, as of the date the aforementioned notice and payment is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant, which new Warrant shall, in all
other respects, be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder. The Company shall pay all expenses, stamp, documentary
and similar taxes and other charges payable in connection with the preparation,
issuance and delivery of share certificates and new Warrants under this
Provision.
-2-
1.2 Shares to Be Fully Paid And Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and, if such Common Stock is then quoted on NASDAQ or
listed on any national securities exchange (as defined in the Exchange Act),
such Common Stock shall, to the extent permitted under the applicable rules of
such exchange or NASDAQ, be duly quoted or listed thereon, as the case may be.
1.3 No Fractional Shares Required to Be Issued. The Company shall not
be required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section 1.3, be issuable
upon final exercise of this Warrant, in lieu of such fractional share, the
Company shall pay to the Holder in cash an amount equal to the same fraction of
the Fair Market Value of the Company per share of Common Stock Outstanding on
the Business Day immediately prior to the date of such exercise.
1.4 Legend. Each certificate for shares of Common Stock issued upon
exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"This security has not been registered under the Securities Act of 1933
and may not be sold or offered for sale unless registered or qualified
under said Act and any applicable state securities laws or unless the
Company receives an opinion in reasonably acceptable form and scope to
the Company of counsel reasonably satisfactory to the Company that
registration, qualification or other such actions are not required
under any such laws or that an exemption from such registration is
available. The offering of this security has not been reviewed or
approved by the United States Securities and Exchange Commission or by
any state's securities administrator. This security is also subject to
certain additional transfer restrictions provided for in the Warrant
the exercise of which resulted in the original issuance of this
security, a copy of which restrictions shall be furnished to the holder
hereof by the Company upon written request and without charge."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such no legend (except a new certificate issued upon
completion of a public offering pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the Holder of such certificate (who may be an employee of such
Holder) and reasonably acceptable to the Company, the securities represented
thereby need no longer be subject to restrictions on resale under the Securities
Act.
1.5 Reservation: Authorization; Capitalization. The Company has duly
reserved. and will keep available for issuance upon exercise of the Warrant, the
total number of Warrant Shares deliverable from time to time upon exercise of
his Warrant in its entirety, provided, however, that prior to September ___,
2000, the Company shall not be required to reserve for issuance a number of
Warrant Shares greater than ____% of the Aggregate Shares. . The Company will
not take any actions during the term of this Warrant that would result in any
adjustment of the number of shares of Common Stock issuable upon the exercise of
this Warrant if (i) the total number of shares of Common Stock issuable after
such action upon exercise of this Warrant, (ii) all shares of Common
-3-
Stock issued and outstanding and (iii) all shares of Common Stock then issuable
(y) upon the exercise of all outstanding options and (z) upon the exercise,
conversion or exchange of all other outstanding securities which are exercisable
for, convertible into or exchangeable for Common Stock, would exceed the total
number of shares of Common Stock then authorized for issuance by the Company.
The Company will not, for as long as this Warrant has not been exercised, change
the par value of its Common Stock. The issuance of the Warrant Shares has been
duly and validly authorized and, when issued and sold in accordance with the
Warrants, the Warrant Shares will be duly and validly issued, fully paid and
non-assessable. As of the date of issuance of this Warrant (the 'Issuance
Date"), the Company had outstanding (i) 442,132 shares of Common Stock, (ii) 0
shares of Preferred Stock, (iii) options and warrants to acquire an additional 0
shares of Common Stock, and (iv) no other shares of Capital Stock or any
securities exercisable for, convertible into or exchangeable for shares of
capital stock or any rights, options or warrants to purchase any shares of
Capital Stock or any securities exercisable for, convertible into or
exchangeable for shares of Capital Stock. Neither the issuance of this Warrant
nor the issuance of Warrant Shares upon exercise of this Warrant violates or
conflicts with the Company's certificate of incorporation or bylaws or any
agreement to which the Company is a party.
ARTICLE II - TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
2.1 Ownership of Warrant. The Company shall deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer as provided in this Article II.
2.2 Transfer of Warrant. The Company agrees to maintain at its
principal office the books for the registration of transfers of the Warrants,
and transfer of this Warrant and all rights hereunder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the Company,
together with (i) a written assignment of this Warrant duly executed by the
Holder or its duly authorized agent or attorney, with (if the Holder is a
natural person) signatures guaranteed by a bank or trust company or a broker or
dealer registered with the NASD, (ii) funds sufficient to pay any transfer taxes
payable upon such transfer. Upon surrender and. if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in the instrument of
assignment (which shall be whole numbers of shares only) and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be canceled. The Company shall permit the
Warrant Securityholders to inspect the warrant registration books from time to
time during normal business hours at the Company. Holder shall pay all fees
(including reasonable attorneys fees), costs and expenses associated with any
transfer of this Warrant requested by Holder.
2.3 Division or Combination of Warrants. This Warrant may be divided or
combined with other Warrants upon presentment to the Company of this Warrant and
of any Warrant or Warrants with which this Warrant is to be combined, together
with a written notice specifying the names and denominations (which shall be
whole numbers of shares only) in which the new Warrant or Warrants are to be
issued, signed by the holders hereof and thereof or their respective duly
authorized agents
-4-
or attorneys. Subject to compliance with Section 2.2 as to any transfer or
assignment which may be involved in the division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
2.4 Expenses of Delivery of Warrants. The Company shall pay all
expenses, stamp, documentary and similar taxes (other than transfer taxes) and
other charges payable in connection with the preparation, issuance and delivery
of the Warrants.
ARTICLE III - CERTAIN RIGHTS
3.1 Put Rights.
(a) Holder shall have the right, but not the obligation, once
only, to put 25% of the Warrants to the Company upon the earlier to occur of the
repayment of the Obligations of the Maturity Date, by delivery of written notice
to the Company, as follows. If the repayment of the Obligations or the Maturity
Date occurs between (i) the Closing Date and 180 days thereafter, the Put Price
will be $105,000; (ii) 181 days after the Closing Date and 270 days after the
Closing Date, the Put Price will be $172,000; and (iii) 271 days after the
Closing Date to the Maturity Date, the Put Price will be $240,000.
(b) Effective from the second anniversary of the Closing Date,
Holder shall have the right, but not the obligation to put all of the Warrants
it then holds to Finantra Capital, Inc. ("Finantra") for the higher of (i)
92,000 for each 1% of the Aggregate Shares to which Holder is entitled under the
Warrants, or (ii) exchange the Warrants valued at Fair Market Value, for
registered Common Stock of Finantra valued at the lower of the Fair Market Value
as of the Closing Date or the Fair Market Value as of the Holder exercises its
put rights hereunder, or (iii) cash, representing the Fair Market Value of the
Warrants.
(c) Holder shall also be entitled to exercise its tag along
and put rights set forth in that certain Stockholders Agreement of even date
herewith, By and among the Holder, the Company, Finantra, Amer-Cap Consumer
Finance Group, Inc. and Travelers Acquisition Corporation.
3.2 Determination of Fair Market Value. Subject to Section 3.2 hereof,
each determination of Fair Market Value shall be made by the Company in
accordance with the definition of the term Fair Market Value set forth in
Article VI hereof. Upon each determination of Fair Market Value, the Company
shall promptly give written notice thereof to all Warrant Securityholders,
setting forth in reasonable detail (i) the transaction giving rise to the
necessity for such determination (ii) the calculation of such Fair Market Value
and the (iii) method and basis of determination thereof (the "Company
Determination"). In the event Fair Market Value is determined with reference to
subsection (i)(C) or (ii) of the definition Fair Market Value, the Company's
Board of Directors shall make such initial determination within twenty-one (21 )
days of the event giving rise to the necessity for such determination.
-5-
3.3 Contest And Appraisal Rights
(a) If a Warrantholder disagrees with the Company
Determination (an "Objecting Holder") and by notice to the Company given within
20 days after receipt of notice of the Company Determination (an "Appraisal
Notice") elects to dispute the Company Determination, such dispute shall be
resolved as set forth in subsection (b) of this Section 3.3.
(b) For a period of 10 days after the Appraisal Notice, the
Company and the Objecting Holder shall negotiate in good faith to resolve their
differences as to the determination of Fair Market Value. In the absence of a
mutually satisfactory resolution within such 10 day period, the Company shall
within 5 days after the last day of such 10 day period engage an investment bank
or other qualified appraisal firm reasonably acceptable to the Objecting Holder
(the "Appraiser') to make an independent determination of Fair Market Value (the
"Appraiser Determination"). The Appraiser Determination shall be made within 20
days of the engagement of such Appraiser and shall be final and binding on the
Company and the Objecting Holder. The costs of conducting the appraisal shall be
borne solely by the Company.
(c) If the Company does not determine the Fair Market Value of
a share of Common Stock, or property or service, as applicable, within the
period specified in Section 3. 2, then any Warrantholder shall have the right to
determine the Fair Market Value (the "Holder Determination") which determination
shall be final and binding upon the Company and the Warrantholder(s). Upon each
such determination, the Warrantholder which has determined the Fair Market Value
shall promptly give written notice ofthe Holder Determination to the Company
setting forth in reasonable detail (i) the transaction giving rise to the
necessity for such determination, (ii) the calculation of such Fair Market Value
and (iii) the method and basis of determination thereof. Upon its receipt of the
Holder Determination and related notice, the Company shall promptly send such
determination and notice to all other Warrantholders. The costs of making the
Holder Determination shall be borne solely by the Company.
3.4 Financial Statements And Other Information. Promptly upon
transmission thereof, the Company will deliver to each Warrant Securityholder
copies of any and all financial statements, proxy statements. notices and other
reports as it may send to its public stockholders and copies of all registration
statements and all reports which it files with the Commission (or any
governmental body or agency succeeding to its functions).
ARTICLE IV - REORGANIZATION, RECLASSIFICATION AND LIQUIDATION
4.1 Reorganization, Reclassification and Liquidation.
(a) In the case of any reorganization or reclassification of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision of combination) or in the case of any consolidation of
the Company with, or merger of the Company with, another corporation, or in the
case of any sale, lease or conveyance of all, or substantially all, of the
property, assets, business and goodwill of the Company as an entity, the holder
of this Warrant shall thereafter have the right upon
-6-
exercise to purchase the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification,
consolidation, merger or sale by a holder of the number of shares of Common
Stock which the holder of this Warrant would have received has all Warrant
Shares issuable upon exercise of this Warrant been issue immediately prior to
such reorganization, reclassification, consolidation, merger of sale, at a price
equal to the Exercise Price then in effect pertaining to this Warrant (the kind,
amount and price of such stock and other securities to be subject to adjustment
as herein provided).
(b) In case the Company shall, at any time prior to the
expiration of this Warrant and prior to the exercise thereof, dissolve,
liquidate or wind up its affairs, the Warrantholder shall be entitled, upon the
exercise thereof, to receive, in lieu of the Warrant Shares of the Company which
it would have been entitled to receive, the same kind and amount of assets as
would have been issued, distributed or paid to it upon such Warrant Shares of
the Company, had it been the holder of record of shares of Common Stock
receivable upon the exercise of this Warrant on the record date for the
determination of those entitled to receive any such liquidating distribution.
After any such dissolution, liquidation or winding up which shall result in any
distribution in excess of the Exercise Price provided for by this Warrant, the
Warrantholder may at its option exercise the same without making settlement to
said Warrantholder, shall deduct from the amount payable to such Warrantholder
an amount equal to the aggregate Exercise Price.
(c) In case the Company, at any time prior to the expiration
of the Warrant and prior to the exercise thereof make a distribution of assets
(other than cash) or securities of the Company to its stockholders (the
"Distribution") the Warrantholder shall be entitled, upon the exercise thereof,
to receive, in addition to the Warrant Shares it is entitled to receive, the
same kind and amount of assets or securities as would have been distributed to
it in the Distribution had it been the holder of record of shares of Common
Stock receivable upon exercise of this Warrant on the record date for
determination of those entitled to receive the Distribution.
(d) Irrespective of any adjustments in the kind of shares
purchasable upon exercise of this Warrant, this Warrant may continue to express
the kind of shares as originally issued.
ARTICLE V - REGISTRATION RIGHTS
5.1 Registration on Request.
(a) Subject to Section 5.1 (g), at any time or from time to
time, upon the written request of the holder or holders of a majority of the
outstanding Warrant Shares and Warrants (such majority determined, for purposes
of this Section 5.1, by calculating the number of Warrant Shares for which such
Warrants are then exercisable) (the "Initiating Holders"), requesting that the
Company effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all holders of Registrable Securities (who shall have
the right to request that their Registrable Securities be included in the
registration statement requested pursuant to this Section 5.1 upon written
notice to the Company made within 20 days after receipt of the Company's written
notice. Thereupon, the Company will use its best
-7-
efforts to effect the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register for disposition
in accordance with the intended method of disposition stated in the Initiating
Holder's request; all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid), of the Registrable
Securities and the additional shares of Common Stock, if any, to be so
registered, provided that the holders of Registrable Securities as a class shall
be entitled to not more than two registrations upon request pursuant to this
Section 5.1.
(b) Registrations under this Section 5.1 shall be on such
appropriate registration form of the Commission (i) as shall be selected by the
Company and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
the Initiating Holders' their request for such registration. The Company agrees
to include in any such registration statement all information which holders of
Registrable Securities being registered shall reasonably request.
(c) The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to this Section 5.1.
(d) The Initiating Holders will be entitled to request two
registrations pursuant to this Section 5.1 for which the Company will pay all
registration expenses. A registration requested pursuant to this Section 5.1
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective and closes; provided that a
registration which does not become effective after being filed by the Company
pursuant to Section 5.1 solely by reason of the refusal to proceed by the
Initiating Holders (other than a refusal to proceed based upon the advice of
counsel relating to a matter with respect to the Company) shall be deemed to
have been effected by the Company at the request of the Initiating Holders
unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration is subject to a stop order, injunction or other
order of the Commission or other governmental agency or court suspending the
effectiveness of such registration statement for any reason, other than by
reason of misstatements or omissions made or not made in the registration
statement in reliance upon and in conformity with written information furnished
to the Company by a Holder of Registrable Securities specifically for use in the
preparation of such registration statement, or (iii) the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied, other than by reason of
some act or omission by any Holder of Registrable Securities participating in
the offering. Except as provided in Section 5.1(d)(i) above, whether or not the
registration becomes effective and closes, the Company will pay all registration
expenses in connection with any registration so initiated.
(e) If a registration requested pursuant to this Section 5.1
involves an underwritten offering, the underwriter or underwriters thereof shall
be selected by the holders of at least a majority (by a number of shares) of the
Registrable Securities as to which registration has been requested and shall be
reasonably acceptable to the Company.
(f) If a requested registration pursuant to this Section 5.1
involves an
-8-
underwritten offering, and the managing underwriter shall advise the Company
(with a copy of any such notice to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration (including securities proposed be
sold for the account of the Company) exceeds the number which can be sold in
such offering within a price range acceptable to the Initiating Holders, the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i) first, Registrable
Securities requested to be included in such registration by the holder or
holders of Registrable Securities, pro rata among such holders requesting such
registration on the basis of the number of such securities requested to be
included by such holders, (ii) second, all shares proposed to be included by the
Company in such registration and (iii) third, all shares other than Registrable
Shares (any such shares with respect to any registration, "Other Securities")
requested to be included in such registration by the holder or holders thereof.
(g) The Company may suspend any registration requested
pursuant to this Section 5.1 one time per registration for a single period of up
to 90 days upon notice to the holders of Registrable Securities whose Securities
are covered by the registration Statement requesting pursuant to this Section
5.1 that, in the good faith determination of the Board of Directors of the
Company, the registration and sale at such time of the Registrable Securities
requested to be so registered would not be in the best interests of the Company,
provided that notwithstanding such suspension, the Company shall continue to
diligently process the preparation of the documentation required for such
registration. No registration shall be requested pursuant to this Section 5.1
during the period from the date of the notice to the Warrant Securityholders
pursuant to Section 5.1 (a) of the Company's intention to register securities
until the expiration of the lockup period specified in Section 5.4(b), or, if
earlier, the date of the Company's notice pursuant to the proviso to the second
sentence of Section 5.2(a).
5.2 Incidental Registration.
(a) If the Company at any time proposes to register any of its
securities under the Securities Act (other than (x) by a registration on Form
S-4 or S-8 or any successor or similar forms) or (y) pursuant to Section 5.1 )
whether for its own account or for the account of the holder or holders of any
other Shares, it will each such time give prompt written notice to all holders
of Registrable Securities of its intention to do so and of such holders' rights
under this Section 5.2. Upon the written request of any such holder made within
20 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register, by inclusion of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register; provided that 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 either 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, thereupon, (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 its obligation
-9-
to pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder of Registrable Securities entitled to
request that such registration be effected as a registration under Section 5.1,
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. No registration effected under this
Section 5.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 5.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 5.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities pursuant to this Section 5.2.
(b) If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 5.2 and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by any holder of Registrable Securities as provided
in this Section 5.2, use its best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters, provided that if
the managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration and all
other holders of any Other Securities in respect of such underwritten offering,
by letter of its belief that inclusion in such distribution of all or a
specified number of the securities proposed to be distributed by such
underwriters would interfere with the successful marketing of the securities
being distributed by such underwriters (such letter to state the basis of such
belief and the approximate number of such Registrable Securities and such Other
Securities which may be distributed without such effect), then the Company may,
upon written notice to all holders of such Registrable Securities and holders of
such Other Securities, reduce pro rata (if and to extent stated by such managing
underwriter to be necessary to eliminate such effect) first the number of Other
Securities that have been requested be included in such registration statement
and second the number of Registrable Securities that have been requested be
included in such registration statement so that the resultant aggregate number
of such Registrable Securities and Other Securities so included in such
registration, together with the number of securities to be included in the
registration for the account of the Company, shall be equal to the number of
shares stated in such managing underwriter's letter.
5.3 Registration Procedures.
(a) If and whenever the Company is required to effect the
registration of anyRegistrable Securities under the Securities Act as provided
in Section 5.1 or Section 5.2, the Company shall, as expeditiously as possible:
(i) prepare and (within the later of 45 days after the end
of the fiscal quarter of the Company within which requests for registration may
be given to the Company or the date the Company files its quarterly report on
Form 10-Q for such period provided that such 10-Q is filed on a timely basis
taking into account all possible extension periods, except in the case (A) where
requests for registration may be given in the Company's fourth fiscal quarter,
in which case the filing shall be within the later of 90 days after the end of
such quarter or the date the Company files its annual report on Form 1 0-K for
the fiscal year then ended, provided that such 1 0-K is filed on a timely basis
taking into account all possible extension periods, or (B) a registration
pursuant
-10-
to Section 5.1, in which case the filing shall be made as soon as possible after
the initial request of an Initiating Holder of Registrable Securities or in any
event within sixty (60) days after such request), unless such request is made
during the Company's fourth fiscal quarter, in which case the filing shall be
within the later of 90 days after the end of such quarter or the date the
Company timely files its annual report on Form 10-K for the fiscal year then
ended, file with the Commission the requisite registration statement to effect
such registration (including such audited financial statements as may be
required by the Securities Act) and thereafter use its best efforts to cause
such registration statement to become and remain effective; provided further
that the Company may discontinue any registration of its securities which are
not Registrable Securities at any time prior to the effective date of the
registration statement relating thereto; and provided further that before filing
such registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the holders of Registrable Securities which are to be
included in such registration copies of all such documents proposed to be filed'
which documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until the earlier of (x) in the case of a registration pursuant to Section 5.1,
the expiration of 180 days after such registration statement becomes effective
(provided that if the registration statement is suspended pursuant to Section
5.1 (g), the registration statement shall be effective for 180 days after
suspension is ended), or (y) in the case of a registration pursuant to Section
5.2, the expiration of 120 days after such registration statement becomes
effective:
(iii) furnish to each seller of Registrable Securities
covered by such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies of such
registration statement and of each such amendment and of copies of the
prospectus contained in such registration statement supplement thereto (in each
case including all exhibits), such number (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(iv) use its best efforts to reglster or qualify all
Registrable Securities and other securities covered by such registration
statement under blue sky or similar laws of such jurisdictions as any seller
thereof and any underwriter of the securities being sold by such seller shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such seller and
underwriter to consummate the disposition in such jurisdictions of the
securities owned by such seller except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction or to consent to general service of process in any
-11-
such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller and the underwriters, if any of
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if
such registration is in connection with an underwritten
public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory
in form and substance to such seller, and
(B) a "cold comfort" letter, dated the effective date of
such registration statement (and, if such registration is
in connection with an underwritten public offering, a
letter dated the date of the closing under the
underwriting agreement), signed by the independent public
accountants who have certified the Company' financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the cold
comfort letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and in
cold comfort letters delivered to the underwriters in underwritten public
offerings of securities;
(vii) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm such advice
in writing promptly thereafter:
(A) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed,
and, with respect to the registration statement or any
post-effective amendment thereto, when the same has become
effective;
(B) of any request by the Commission for amendments or
supplements to the registration statement or the
prospectus or for additional information:
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration or the
initiation of any proceedings by any Person for that
purpose; and
-12-
(D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or
threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the Company's
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and promptly prepare
and furnish to such seller and each underwriter, if any, a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that. as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(ix) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration statement at the
earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar quarter after the effective date
of such registration statement, which earnings statement shall satisfy the
provisions of Section I 1 (a) of the Securities Act;
(xi) make available for inspection by a representative of
the holders of Registrable Securities participating in the offering, any
underwriter participating in any disposition pursuant to the registration and
any attorney or accountant retained by such selling holders or underwriter
(each, an "Inspector"), all financial and other records, pertinent corporate
documents and properties of the Company (the "Records"), and cause the Company'
officers, directors and employees to supply all information reasonably requested
by any such Inspector in connection with such registration; provided that the
Company shall not be required to comply with this subdivision if there is a
reasonable likelihood, in the judgment of the Company, that such delivery could
result in the loss of any attorney-client privilege related thereto; and
provided further that Records which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors (other than to any holder of Registrable Securities
participating in the offering, and if disclosed to any such holder shall not be
disclosed by such holder) unless (x) such Records have become generally
available to the public or (y) the disclosure of such Records may be necessary
or appropriate (A) to comply with any law, rule, regulation or order applicable
to any such Inspectors or holder of Registrable Securities, (B) in response to
any subpoena or other legal process or (C) in connection with any litigation to
which
-13-
such Inspectors or any holder of Registrable Securities is a party (provided
that the Company is provided with reasonable notice of such proposed disclosure
and a reasonable opportunity to seek a protective order or other appropriate
remedy with respect to such Records);
(xii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
Registration Statement;
(xiii) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities exchange on
which any of the Common Stock is then listed and, if not so listed, to be listed
on the NASD automated quotation system and, if listed on theNASD automated
quotation system, use its best efforts to secure designation of all such
Registrable securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 1 1 Aa2- 1 of the
Securities and Exchange Commission or, failing that. to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the NASD; and
(xiv) use its best efforts to provide a CUSIP number for
the Registrable Securities, not later than the effective date of the
registration.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing
for purposes of preparing the relevant registration statement and amendments and
supplements thereto.
(b) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in of Section
5.3(a) (viii), such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by of Section 5.3(a) (viii). In
the event the Company shall give any such notice, the periods specified in of
Section 5.3(a) (ii) shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by of Section 5.3(a)(viii).
(c) If any such registration or comparable statement refers to
any holder of Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require, in
the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
-14-
5.4 Underwritten Offerings.
(a) If requested by the underwriters for any underwritten
offering by holders of Registrable Securities pursuant to a registration
requested pursuant to Section 5.1, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the Company, each such holder
and the underwriters, and to contain such representations and warranties by the
Company and such other terms as are generally prevailing in agreements of this
type, including, without limitation, indemnities to the effect and to the extent
provided in Section 5.5. The holders of the Registrable Securities will
cooperate with the Company in the negotiation of the underwriting agreement.
(b) Each Holder of Registrable Securities agrees by
acquisition of its Registrable Securities not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any equity securities of the Company,
during the ten days prior to and the 90 days after the effective date of any
registration statement filed pursuant to Section 5.1 or Section 5.2 which
involves an underwritten offering, except as part of such registered
underwritten offering, whether or not such Holder participates in such offering,
and except as otherwise permitted by the managing underwriter of such registered
underwritten (if any). Each Holder of Registrable Securities agrees that the
Company may instruct its transfer agent to place stop transfer notations in its
records to enforce this Section 5.4(b).
(c) The Company agrees (x) not to sell, make any short sale
of, loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the ten days prior to and the 90 days after the effective date of any
registration statement filed pursuant to Section 5.1 or Section 5.2 which
involves an underwritten offering, except (i) as part of such registered
offering, (ii) pursuant to registration statements on Form S-4 or S-8 or any
successor or similar forms thereto or (iii) as otherwise permitted by the
managing underwriter of such registered offering (if any), and (y) to use all
reasonable efforts to cause each holder of its equity securities or any
securities convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after the date
of this Agreement (other than in a public offering) to agree not to sell, make
any short sale of, loan, grant any option for the purchase of, effect any public
sale or distribution of or otherwise dispose of such securities during such
period except as part of such registered underwritten offering; provided that no
Holder of Registrable Securities included in any registered underwritten
offering shall be required to make any representations or warranties to the
Company or the underwriters other than representations and warranties regarding
such holder and such holder's intended method of distribution.
(d) No Person may participate in any registered underwritten
offering hereunder unless such Person (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the Person or a majority of the
Persons entitled to approve such arrangements and (ii) completes and executes
all agreements, questionnaires, indemnities and other documents (other than
powers of attorney) required under the terms of such underwriting arrangements.
-15-
5.5 Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Securities whose Registrable Securities are covered by any
registration statement, its directors and officers and each other Person, if
any, who controls such Holder within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which any such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse each such indemnified
party for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
specifically for use in the preparation thereof. In addition, the Company shall
indemnify any underwriter of such offering and each other Person, if any, who
controls any such underwriter within the meaning of the Securities Act in
substantially the same manner and to substantially the same extent as the
indemnity herein provided to each indemnified party. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such holder.
(b) Each prospective seller of Registrable Securities
hereunder shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 5.5) the Company, each
director of the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereof,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller specifically for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Any such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller. The amount payable by
any prospective seller of Registrable Securities with respect to the
indemnification set forth in this Section 5.5 (b) in connection with any
offering of securities will not exceed the amount of net proceeds received by
such prospective seller pursuant to such offering.
-16-
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred to in
this Section 5.5, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under this Section 5.5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly, notified. to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. No
indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) If the indemnification provided for in this Section 5.5 is
unavailable to an indemnified party in respect of any expense, loss, damage or
liability referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and, of the Holder or underwriter,
as the case may be, on the other in connection with the statements or omissions
which resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Holder or underwriter, as the case may be, on the other
in connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by the
Company from the initial sale of the Registrable Securities by the Company to
the purchaser bear to the gain realized by the selling Holder or the
underwriting discounts and commissions received by the underwriter, as the case
may be. The relative fault of the Company on the one hand and of the Holder or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the Holder or by the underwriter and parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided that the foregoing contribution
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
proviso contained in the first sentence of Section 5.5 (a), and in
-17-
no event shall the obligation of any indemnifying party to contribute under this
Section 5.5 (d) exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Section 5.5 (a) or Section 5.5 (b) had been available under the
circumstances.
The Company and the holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this Section
5.5 (d) were determined by pro rata allocation (even if the Holders and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and Section 5.5 (c). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.5 (d), no
holder of Registrable Securities or underwriter shall be required to contribute
any amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable Securities
or (ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 1 1 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.6 Rule 144. If the Company shall have filed a registration statement
pursuant to Section 12 of the Exchange Act or a registration statement pursuant
to the Securities Act, the Company will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder and will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
-18-
ARTICLE VI - DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"Affiliate" has the meaning set forth in the Loan Agreement.
"Appraisal Notice" has the meaning set forth in Section 3.2(a).
"Appraiser" has the meaning set forth in Section 3.2(b).
"Appraiser Determination" has the meaning set forth in Section 3.2(b).
"Business Day" means any day excluding Saturday, Sunday and any day on
which banking institutions located in New York are authorized by law or other
governmental action to be closed, unless there shall have been an offering of
Common Stock registered under the Securities Act, in which case "Business Day"
means (a) if Common Stock is listed or admitted to trading on a national
securities exchange, a day on which the principal national securities exchange
on which the Common Stock is listed or admitted to trading is open for business
or (b) if Common Stock is not so listed or admitted to trading, a day on which
the New York Stock Exchange is open for business.
"Capital Stock" means and includes any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including without limitation, shares of preferred or preference
stock, (ii) all partnership interests (whether general or limited) in any Person
which is a partnership, (iii) all membership interests or limited liability
company interests in any limited liability company and (iv) all equity ownership
interests in any Person of any other type.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Company" has the meaning set forth in the first paragraph of this
Warrant.
"Company Determination" has the meaning set forth in Section 3.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor Federal statute, and the rules and regulations of the
Commission (or its successor) thereunder, all as the same shall he in effect nt
the time.
"Expiration Date" has the meaning set forth in the first paragraph of
this Warrant.
"Fair Market Value" of:
-19-
(i) a share of common stock as of any date of determination
means:
(A) if the common stock is traded on an exchange or is quoted
on the NASDAQ National Market System, then the average of the
closing or last sale prices, respectively, reported for the 5
trading days ended immediately preceding the determination
date, provided, however, that if the date of determination is
either the Closing Date, or a date of determination for
computation of Fair Market Value accordance with Section 4.1
(b)(i /), then the Fair Market Value of a share of common
stock shall be the average of the closing or last sale prices,
respectively, reported for the 20 trading days ended
immediately preceding the Closing Date or such determination
date; or
(B)ab if the common stock is not traded on an exchange or on
the NASDAQ National Market System but is traded in the
over-the-counter market, then the mean of the average of the
closing bid and asked prices reported for the 5 trading days
ended immediately preceding the determination date, provided,
however, that if the date of determination is either the
Closing Date, or a date of determination for computation of
Fair Market Value in accordance with Section 4.1 (b)(iv), then
the Fair Market Value of a share of common stock shall be the
mean of the average of the closing bid and asked prices
reported for the 20 trading days ended immediately preceding
the Closing Date or such determination date; or
(C) in all other circumstances, the fair market value per
share of the common stock as determined in good faith by the
Board of Directors of the Company, or otherwise in accordance
with Section 3.2 hereof;
(ii) the business or property or services in question as of
any date of determination, means the amount determined in good faith by the
Board of Directors of the Company or otherwise in accordance with Section 3.2
hereof; or
(iii) the Company as of any date of determination shall be the
Fair Market Value of a share of Common Stock determined as provided in clause
(i) above multiplied by the number of shares of Common Stock then outstanding.
"Holder" has the meaning set forth in the first paragraph of this
Warrant.
"Holder Determination" has the meaning set forth in Section 3.2(c).
"Initiating Holder" has the meaning set forth in Section 5.1 hereof.
"IPO" means an initial public offering of the Common Stock in a primary
offering pursuant to a Registration Statement on Form S- 1.
-20-
"Issuance Date" has the meaning set forth in Section 1.5.
'Loan Agreement" has the meaning set forth in the second paragraph of
this Warrant.
'NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Objecting Holder" has the meaning set forth in Section 3.2(a).
"Other Securities" has the meaning set forth in Section 5.1.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any government
agency or political subdivision thereof.
"Public Sale" means any sale of Capital Stock to the public pursuant to
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (or any
successor provision then in effect) adopted under the Securities Act.
"Registrable Securities" means any Warrants or Warrant Shares until the
date (if any) on which such Warrant Shares shall have been transferred or
exchanged and new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require registration or qualification of them under the
Securities Act or any similar state law then in force.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 5.1 through Section 5.5 hereof,
including (i) all registration, filing and NASD fees, (ii) all fees and expenses
of complying with federal and state securities or blue sky laws, (iii) all word
processing, duplicating and printing expenses, (iv) all messenger telephone and
delivery expenses, (v) the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits and "cold comfort" letters required by or incident to such performance
and compliance, (vi) the fees and disbursements of any one counsel and any one
accountant retained by the holder or holders of more than 50% of the Registrable
Securities being registered, (or, in the case of any registration effected
pursuant to Section 5.1, as the Initiating Holders shall have selected to
represent all holders of the Registrable Securities being registered), (vii) the
fees and expenses of "qualified independent appraiser participating in an
offering pursuant to Section 3 of Schedule of the By laws of the NASD, (viii)
premiums and other costs of policies of insurance (if any) against liabilities
arising out of the public offering of the Registrable Securities being
registered if the Company desires such insurance (ix) fees and expenses of other
persons retrained by the Company, (x) internal expenses of the Company
(including without limitation, all salaries and expenses of officers and
employees of the Company performed legal or accounting duties), (xi) the expense
of any annual audit, (xii) the fees and expenses of listing on any securities
exchange, and (xiii) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but not
-21-
including underwriting discounts and commissions and transfer taxes, if any,
provided that, in any case where Registration Expenses are not to be borne by
the Company, such expenses shall not include (i) salaries of the Company
personnel or general overhead expenses of the Company, (ii) auditing fees, (iii)
premiums or other expenses relating to liability insurance required by
underwriters of th~ Company or (iv) other expenses for the preparation of
financial statements or other data, to the extent that any of the foregoing
either is normally prepared by the Company in the ordinary course of its
business or would have been incurred by the Company had no public offering taken
place.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor Federal statute and the rules and regulations of the Securities and
Exchange Commission (or its successors) thereunder, all as the same shall be in
effect from time to time.
'Subsidiary" of any Person means any corporation, partnership, joint
venture, association or other business entity of which more than 50% of the
total voting power of shares of stock or other interests therein entitled to
vote in the election of members of the board of directors, partnership
committee. board of managers or trustees or other managerial body thereof is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of such Person or a combination thereof. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company and
"Subsidiaries" means all Subsidiaries of the Company.
"Vested Shares" has the meaning set forth in the fourth paragraph of
this Warrant.
"Warrant" means the Warrant(s) to purchase Common Stock issued by the
Company in connection with the Loan Agreement.
"Warrant Securityholder" means at any time any Warrantholder or any
holder of Warrant Shares.
"Warrant Shares" means (i) any shares of Common Stock or other
securities issued upon the exercise of any Warrants and (ii) any securities
issued with respect to any of such shares or other securities referred to in
clause (i) upon the conversion thereof into other securities or by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise;
provided that any of such securities shall cease to be Warrant Shares when such
securities shall have (x) been disposed of pursuant to a Public Sale or (y)
ceased to be outstanding.
"Warrantholder" means a holder of a Warrant.
All references herein to "days" shall mean calendar days unless
otherwise specified.
-22-
ARTICLE VII - MISCELLANEOUS
7.1 Notices. Notices and other communications provided for herein must
be in writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or, if mailed, four Business Days after being deposited in the
United States mail with postage prepaid and properly addressed. In the case of
the Company, such notices shall be addressed to it as follows:
Finantra Capital, Inc
Attention: Xxxxxx X. Press, Chairman
Westside Corporate Center
000 X. Xxxx Xxxxxx Xxxx. Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx X. Xxxxxxx, Esq.
Westside Corporate Center
000 X. Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
In the case of the Holder, such notices and communications shall be
addressed to its address as shown on the books maintained by the Company, unless
the Holder shall notify the Company that notices and communications should be
sent to a different address (or telex or facsimile number), in which case such
notices and communications shall be sent to the address (or telex or facsimile
number) specified by the Holder.
7.2 Waivers: Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case shall entitle the
Company to any other or future notice or demand in similar or other
circumstances. The rights and remedies ofthe Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Warrantholders holding Warrants
entitling such holders to purchase a majority of the Common Stock subject to
purchase upon exercise of all the outstanding Warrants (exclusive of Warrants
then owned by the Company or any Subsidiary or Affiliate of the Company);
provided, however, that no such amendment, modification or waiver shall, without
the written consent of the holders of all Warrants at the time outstanding, (a)
change the number of shares of Common Stock subject to purchase upon exercise of
this Warrant, the Exercise Price or provisions for payment thereof or (b) amend,
modify or waive the provisions of this Section 7.2 or Articles III, IV, Section
1.5 or the definition of Fair Market Value in Article VI and (ii) no amendment,
modification or waiver shall, without the written consent of the holders of a
majority of Registrable Shares, amend, modify or waive the provisions of Article
V.
-23-
Any such amendment, modification or waiver effected pursuant to and in
accordance with the provisions of this Section shall be binding upon the holders
of all Warrants and Warrant Shares, upon each future holder thereof and upon the
Company. In the event of any such amendment, modification or waiver, the Company
shall give prompt notice thereof to all holders of Warrants and Warrant Shares
and, if appropriate, notation thereof shall be made on all Warrants thereafter
surrendered for registration of transfer or exchange.
7.3 Governing Law. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
7.4 Transfer: Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant and all of the Holder's rights hereunder, shall
be transferable and assignable by the Holder hereof in whole, or from time to
time in part, to any other Person, subject to the restrictions on
transferability contained herein and under the applicable securities laws, and
the provisions of this Warrant shall be binding upon and inure to the benefit of
the Holder hereof and its successors and assigns.
7.5 Severability. In case any one or more of the provisions contained
in this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
7.6 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
7.7 Right to Specific Performance. The Company acknowledges and agrees
that in the event of any breach of the foregoing covenants and agreements, the
Holder would be irreparably harmed and could not be made whole only by the award
of monetary damages. Accordingly, the Company agrees that the Holder, in
addition to any other remedy to which the Holder may be entitled at law or
equity, will be entitled to seek and obtain an award of specific performance of
any of the foregoing covenants and agreements.
7.8 CONSENT TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO HOLDER'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS WARRANT
SHALL BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF THE
-24-
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
WARRANT.
7.9 WAIVER OF JURY TRIAL. THE COMPANY AND HOLDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS WARRANT. THE COMPANY AND HOLDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS
RELIED ON THE WAIVER IN ENTERING INTO THIS WARRANT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE COMPANY AND HOLDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-25-
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers "hereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
TRAVELERS INVESTMENT CORPORATION
[Seal]
By:
------------------------------ ---------------------------------
Name: Xxxxxx X. Press
Title: Vice President
Accepted as of the date and year
first above written:
BHC INTERIM FUNDING L.P.
By: BHCGP, L.L.C., its General Partner
By: BHC Investors, L.L.C., its Managing Member
By:
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Manager
Address: BHC Interim Funding L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: 000-000-0000
Telecopier: 000-000-0000
TO: Finantra CaPital. Inc
(solely with respect to Section 3.1 and
the definitions of the terms used therein)
By:
------------------------------------------
Name: Xxxxxx X. Press
Title: Vice President
SUBSCRIPTION FORM
(To Be Executed by the Registration Holder If He Desires to Exercise the
Warrant)
-26-
TO: Travelers Investment Corporation
The undersigned hereby exercises the right to purchase _____________
shares of Common Stock, no par value per share, covered by the attached Warrant
in accordance with the terms and conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full.
--------------------------------
Signature
--------------------------------
Address
--------------------------------
Dated:
-----------------------
-27-
ASSIGNMENT
(To Be Executed by the Registered Holder If He Desires to Exercise the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________ the right to purchase shares of Common Stock of Finantra
Capital. Inc., evidenced by the within Warrant, and does hereby irrevocably
constitute and appoint [____________________] Attorney to transfer the said
Warrant on the books of the Company, with full power of substitution.
--------------------------------
Signature
--------------------------------
Address
--------------------------------
Dated:
-----------------------
In the Presence of:
----------------------------
-28-
