Exhibit 10.1
WARRANT SOLICITATION AGREEMENT
THIS WARRANT SOLICITATION AGREEMENT ("Agreement") is dated as of August
30, 2003, by and between Action Products International, Inc. (the "Company") and
X.X. Xxxxxx & Co., LLC ("Broker").
RECITALS
WHEREAS, the Company desires to retain Broker to act as a nonexclusive
Warrant Solicitation Agent in connection with the solicitation of the exercise
of the Company's publicly traded warrants; and
WHEREAS, as of July 31, 2003, the Company had outstanding 3,272,092
redeemable common stock purchase warrants (the "Public Warrants") issued
pursuant to that Warrant Agreement by and between the Company and Registrar and
Transfer Company dated June 12, 2003 (the "Warrant Agreement"); and
WHEREAS, each Public Warrant entitles the holder to purchase one share
of the Company's Common Stock for $2.00 per share; and
WHEREAS, the Company desires Broker to act on behalf of the Company,
and Broker is willing to do so in connection with the exercise of the Public
Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. Appointment of the Solicitation Agent. The Company hereby appoints Broker to
act as a nonexclusive Solicitation Agent for the Company in connection with the
exercise of the Public Warrants and Broker hereby accepts such appointment. The
Broker shall, consistent with its obligations under applicable laws and the
rules and regulations of the National Association of Securities Dealers
("NASD"), use its reasonable best efforts to maximize the number of Public
Warrants which are exercised, including appropriate communications with the
record owners and beneficial owners of the Public Warrants, as well as with said
owners' brokers, agents or other representatives.
2. Warrant Solicitation Fee.
(a) Amount of Solicitation Fee. The Company shall pay Broker a fee
consisting of a cash payment equal to ten percent of the total proceeds received
from the exercise of those Public Warrants for whom Broker was properly
designated as the soliciting broker on the Exercise Form of the Warrant
Certificate evidencing the Public Warrants exercised (the "Solicitation Fee").
(b) Conditions to Payment of Solicitation Fee. The Company shall only
be obligated to pay the Solicitation Fee to Broker if all of the following
conditions are met: (i) the exercise of the Public Warrants are in accordance
with the Warrant Agreement, (ii) the actions of Broker in soliciting the
exercise of the Public Warrants have been consistent with applicable federal and
state securities laws, the guidelines of the NASD and applicable SEC rules and
regulations, including Regulation M; and (iii) disclosure of the Company's
compensation arrangement with Broker is made by the Broker in documents provided
to the holders of the Public Warrants.
(c) Timing of Payment of Solicitation Fee. Within fifteen (15) days
after the end of each month, the Company will deliver a notice to Broker setting
forth the number of Public Warrant certificates which have been properly
completed for exercise by holders of the Public Warrants for which Broker has
solicited in accordance with this Agreement and the Warrant Agreement, together
with payment of the Solicitation Fee with respect to the Public Warrants so
exercised and any documentation requested by Broker.
(d) Entire Solicitation Fee. The amounts to be paid to Broker under
Section 2(a) above represent the entire amount payable by the Company to Broker,
its agents, brokers or representatives in connection with the services described
under Section 1 of this Agreement and shall also include any amounts which are
adjudicated to be owed to any third parties as a result of Broker's commitments
to such third parties.
(e) Broker shall be responsible for compliance with applicable state
securities and "blue sky" laws in connection with the solicitation of the Public
Warrants. Broker shall notify the Company of the states of residence of holders
of the Public Warrants in which Broker intends to solicit the exercise of the
Public Warrants.
3. Representations and Warranties of the Company. The Company represents and
warrants as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida and has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement constitutes the legal, valid
and binding agreement and obligation of the Company, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights generally, including, without limitation laws regarding fraudulent or
preferential transfers, or by the principles governing the availability of
equitable remedies.
(b) The Company's Registration Statement ("Registration Statement") on
Form S-3 (File No. 333-106713), registering the sale of the shares of Common
Stock issuable upon exercise of the Public Warrants (the "Warrant Shares"), was
declared effective by the Securities and Exchange Commission (the "Commission")
on July 31, 2003. The Commission has not issued any orders preventing or
suspending the use of the Prospectus contained in the Registration Statement and
the Prospectus (as modified or supplemented by information incorporated by
reference into such Prospectus) as well as the Company's other public filings
(the "SEC filings") conforms, and during the effectiveness of this Agreement
will conform, in all material respects with the requirements of the Securities
Act of 1933, as amended (the "Securities Act") and the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") and do not, and during the
effectiveness of this Agreement will not, include any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) The Warrant Shares have been duly authorized, have been duly
reserved for issuance and upon exercise of the Public Warrants and payment to
the Company of the exercise price therefor, the Warrant Shares will be validly
issued, fully paid and non-assessable.
(d) Neither the execution and delivery of this Agreement by the Company
nor the consummation of the transactions contemplated hereby will (i) conflict
with or result in any
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breach of any provision of the Articles of Incorporation or Bylaws of the
Company, each as amended to date; (ii) require any consent, approval,
authorization or permit from, or filing with or notification to, any United
States or foreign governmental or regulatory authority or other third party,
except for any such consents, approvals, authorizations, permits, filings or
notifications, the absence of which would not have a material adverse effect on
the Company or the Public Warrants; (iii) result in a breach of the terms,
conditions or provisions of, constitute a default (or an event which, upon
notice or lapse of time or both, would constitute a default) under or cause,
permit or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of any material agreement or
other material instrument or obligation to which the Company is a party or by
which the Company is bound; or (iv) conflict with or result in a violation of
any provision of (A) any statute, rule, regulation or ordinance which conflict
or violation might have a material adverse impact on the Company or the Public
Warrants, or (B) any material order, writ, injunction, judgment, award, decree,
permit or license applicable to the Company or any of the Company's properties
or assets.
4. Representations and Warranties of Broker. Broker represents and warrants as
follows:
(a) Broker is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the state of its organization or
incorporation and has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All
proceedings on the part of Broker necessary to authorize this Agreement and the
transactions contemplated hereby have been duly and validly taken. This
Agreement has been duly and validly authorized, executed and delivered by
Broker, constitutes the legal, valid and binding agreement and obligation of
Broker, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights generally, including, without
limitation laws regarding fraudulent or preferential transfers, or by the
principles governing the availability of equitable remedies.
(b) Neither the execution and delivery of this Agreement by Broker nor
the consummation of the transactions contemplated hereby will (i) conflict with
or result in any breach of any provision of the governing instruments of Broker,
each as amended to date; (ii) require any consent, approval, authorization or
permit from, or filing with or notification to, any United States or foreign
governmental or regulatory authority or other third party, including the
Securities and Exchange Commission, and the National Association of Securities
Dealers by Broker; (iii) result in a breach of the terms, conditions or
provisions of, constitute a default (or an event which, upon notice or lapse of
time or both, would constitute a default) under or cause, permit or give rise to
any right of termination, cancellation or acceleration under any of the terms,
conditions or provisions of any material agreement or other material instrument
or obligation to which Broker is a party or by which Broker is bound; or (iv)
conflict with or result in a violation of any provision of (A) any statute,
rule, regulation or ordinance which conflict or violation might have a material
adverse impact on Broker, including the Rules of the National Association of
Securities Dealers and the Rules and Regulations of the Commission or (B) any
material order, writ, injunction, judgment, award, decree, permit or license
applicable to Broker or any of Broker's properties or assets.
(c) Broker is familiar with the terms of the Warrant Agreement.
5. Indemnification.
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(a) The Company agrees to indemnify and hold harmless Broker and each
person who controls Broker within the meaning of Section 15 of the Securities
Act from and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise, and
the Company agrees to reimburse Broker and controlling person for any legal or
other expenses incurred by the respective indemnified parties in connection with
defending against such losses, claims or liabilities or in connection with any
investigation or inquiry of, or other proceeding which may be brought against,
the respective indemnified parties, in each case arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (including the Prospectus as part thereof) or any
post-effective amendment thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the indemnity
agreements of the Company contained in this paragraph (a) shall not apply to any
such losses, claims, damages, liabilities or expenses if such statement or
omission was made in reliance upon and in conformity with information furnished
to the Company by or on behalf of Broker.
(b) Broker agrees to indemnify and hold harmless the Company, each of
its officers and directors, and each person who controls the Company within the
meaning of Section 15 of the Securities Act, from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses incurred by the respective indemnified parties
in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation of inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon any untrue statement or alleged untrue
statement of a material fact or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made by or
on behalf of Broker other than as provided in the Registration Statement and
Prospectus.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 5 agrees that, upon its receipt of written notification of
the commencement of any investigation or inquiry of, or proceeding against, it
in respect of which indemnity may be sought on account of any indemnity
agreement contained in such paragraphs, it will promptly give written notice
(the "Notice") of such notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for in such
paragraphs shall be available to any party who shall fail so to give the Notice
if the party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice. Any indemnifying party shall
be entitled at its own expense to participate in the defense of any action, suit
or proceeding against, or investigation or inquiry of, an indemnified party. Any
indemnifying party shall be entitled, if it so elects within a reasonable amount
of time after receipt of the Notice by giving written notice (herein called the
Notice of Defense) to the indemnified party, to assume (alone or in conjunction
with any other indemnifying party or parties) the entire defense of such action,
suit, investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may
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be legal defenses available to such indemnified party or parties different from
or in addition to those available to the indemnifying party or parties, then
counsel for the indemnified party or parties shall be entitled to conduct the
defense to the extent reasonably determined by such counsel to be necessary to
protect the interests of the indemnified party or parties and (ii) in any event,
the indemnified party or parties shall be entitled to have counsel chosen by
such indemnified party or parties participate in, but not conduct, the defense.
If, within a reasonable time after receipt of the Notice, an indemnifying party
gives a Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) and (b) of
this Section 5 for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear the legal and other expenses incurred in connection with the
conduct of the defense as referred to in clause (i) of the proviso to the
preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) No indemnifying party will, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any person who controls such indemnified party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party and each controlling person from all liability arising out of such claim,
action, suit or proceeding.
6. Termination. Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated by the Company at any time and for any reason
effective the close of the Company's next business day after delivery of written
notice of termination to Broker in accordance with Section 7(e) herein. If this
Agreement is terminated pursuant to this Section 6, this Agreement shall
thereafter have no effect except for (i) the Company's obligation to pay the
Solicitation Fee for exercises of Public Warrants prior to the effectiveness of
said termination and (ii) both parties' indemnification obligations under
Section 5 above, all of which shall survive the termination of this Agreement.
7. Miscellaneous.
(a) Survival of Representations and Warranties. The parties' respective
representations and warranties contained in this Agreement shall survive until
three years after the termination of this Agreement at which time they shall
expire and be deemed terminated and thereafter neither party may claim any
damage for breach thereof.
(b) Amendment and Waiver. Any term or provision of this Agreement may
be waived at any time by the party which is entitled to the benefits thereof,
but only in a writing signed by such party, and this Agreement may be amended or
supplemented at any time, but only by written agreement of the Company and
Broker. Any such waiver with respect to a failure to observe any such provision
shall not operate as a waiver of any subsequent failure to observe such
provision unless otherwise expressly provided in such waiver.
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(c) Expenses. Except as otherwise provided in this Agreement, the
Company and Broker shall pay their respective fees, commissions, costs, and
other expenses, separately incurred in connection with the preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(d) Entire Agreement. This Agreement contains the entire agreement
between the Company and Broker with respect to the solicitation of the exercise
of the Public Warrants and the related transactions and supersedes all prior
arrangements or understandings with respect thereto.
(e) Notices. All notices, consents, requests, instructions, approvals
and other communications provided for herein shall be validly given, made or
served, if in writing and delivered personally or sent by fax (except for legal
process) or certified mail, postage prepaid, to:
Company: Action Products International, Inc.
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx, Chairperson of the Board
Fax No: (000) 000-0000
With copies to:
Xxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax No: (000) 000-0000
Broker: X.X. Xxxxxx & Co., LLC
0000 Xxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Fax No: 000-000-0000
or to such other address or fax number as any party hereto may, from time to
time, designate in a written notice given in a like manner. Notice given by fax
shall be deemed delivered on the day the sender receives confirmation that such
notice was received at the fax number of the addressee, provided that if the
faxed notice is transmitted by the sender after 5:00 p.m. (Eastern time), it
shall be deemed to have been delivered the following day. Notice given by mail
as set out above shall be deemed delivered three calendar days after the date
the same is postmarked.
(f) Assignment. Except as provided in the following sentence, this
Agreement may not be assigned, by operation of law or otherwise, and any attempt
to do so shall be void. This Agreement shall be binding upon and inure to the
benefit of successors and assigns of the parties hereto.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
(h) Arbitration. The parties agree that any controversy, claim or
dispute arising out of or relating to this Agreement shall be settled by
arbitration before a single arbitrator to be in
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the City of New York, State of New York in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect.
Judgment may be entered on the Arbitrator's award in any court having
jurisdiction, and the parties consent to the jurisdiction of the courts of New
York for this purpose.
(i) Construction of Agreement. Each of the parties hereto acknowledges
and agrees that no provision in this Agreement is to be interpreted for or
against any party because that party or that party's legal representative
drafted the provision.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
ACTION PRODUCTS INTERNATIONAL, INC.
By: /s/ XXXXXX X. XXXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: CFO
X.X. Xxxxxx & Co., LLC
By: /s/ XXXXXXX XXXXX
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
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