[Shelf Registration]
November 8, 2000
Xxxxxx Xxxxxx
President
Netsol International
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
The purpose of this letter agreement (the "Agreement") is to set forth the terms
and conditions pursuant to which Ladenburg Xxxxxxxx & Co. Inc. ("LTCO") shall
serve as exclusive placement agent only in connection with the proposed offering
(the "Offering") of equity securities (the "Securities") of Netsol International
(the "Company") pursuant to a registration statement. The gross proceeds from
the Offering will be up to $30,000,000. All references to dollars shall be to
U.S. dollars. The terms of such Offering and the Securities shall be as agreed
to between the Company and the purchasers thereof.
Upon the terms and subject to the conditions of this Agreement, the parties
hereto agree as follows:
1. APPOINTMENT. (a) Subject to the terms and conditions of this Agreement
hereinafter set forth, the Company hereby retains LTCO, and LTCO hereby agrees
to act as the Company's exclusive placement agent and financial advisor in
connection with the Offering, effective as of the date hereof. LTCO's exclusive
appointment as placement agent for the Offering shall terminate (as to
exclusivity, but not as to any of the other terms of this Agreement) if the
Company does not close on a placement of at least $3,000,000 (gross proceeds)
with one or more institutional investors introduced to the Company by LTCO,
within 30 calendar days of the date hereof. Such placement may be pursuant to
the registration statement described herein or by means of a separate private
placement. The Company expressly acknowledges and agrees that LTCO's obligations
hereunder are on a reasonable best efforts basis only and that the execution of
this Agreement does not constitute a commitment by LTCO to purchase the
Securities and does not ensure the successful placement of the Securities or any
portion thereof or the success of LTCO with respect to securing
any other financing on behalf of the Company. LTCO shall not commence any
selling efforts until the registration statement has been declared effective by
the SEC.
(b) Except as set forth below in this Section 1, during the effectiveness
of this Agreement, neither the Company nor any of its subsidiaries or affiliates
shall, directly or indirectly, through any officer, director, employee, agent or
otherwise (including, without limitation, through any placement agent, broker,
investment banker, attorney or accountant retained by the Company or any of its
subsidiaries or affiliates), solicit, initiate or encourage the submission of
any proposal or offer from any person or entity (including any of such person's
or entity's officers, directors, employees, agents and other representatives)
relating to any issuance of the Company's equity securities (including debt
securities with any equity feature) or relating to any other transaction having
a similar effect or result on the Company's or any of its subsidiaries'
capitalization (an "Investment Proposal"). An Investment Proposal shall not
include any securities issued by the Company in connection with a merger or
acquisition of another business, or issued pursuant to the grant or exercise of
any stock options or shares of common stock issued to employees, directors or
consultants of the Company for compensatory purposes. The Company shall
immediately cease and cause to be terminated any and all contacts, discussions
and negotiations with third parties regarding any Investment Proposal. The
Company shall promptly notify LTCO if any such Investment Proposal, or any
inquiry or contact with any person or entity with respect thereto, is made. The
Company shall not provide or release any information with respect to this
Agreement or the Offering, including any press release, except as required by
law.
2. FEES AND COMPENSATION. In consideration of the services rendered by LTCO
in connection with the Offering, the Company agrees to pay LTCO the following
fees and other compensation:
(a) 1) 5% warrant coverage, issuable on the date that the Company and
an investor shall close any part of the Offering, on the value of
the closed part of the Offering only, which warrants shall have
strike price equal to the higher of 120% of the sale price of the
Common Stock to the investor or the strike price of any warrants
issued to the investor in the Offering, shall not be exercisable
for one year after their issuance, shall have a term of four
years, and shall otherwise be in the form of Exhibit D; and
2) a cash fee payable upon each closing equal to 5% of the gross
proceeds to the Company at each such closing (provided,
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however, that if an investor in the Offering is first identified
by the Company and then introduced by the Company to LTCO, LTCO's
cash fee with respect to the amount invested by such investor
shall be one-half of one percent (0.5%)) ; and
(b) a one-time $25,000 non-accountable expense allowance payable upon the
engagement of LTCO by the Company hereunder.
(c) All fees payable hereunder shall be paid to LTCO out of an attorney
escrow account at the closing or by such other means acceptable to
LTCO.
3. TERMS OF RETENTION. (a) Unless extended or terminated in writing by the
parties hereto in accordance with the provisions hereof, this Agreement shall
remain in effect until the Termination Date of September 1, 2002.
(b) Notwithstanding anything herein to the contrary, the obligation to pay
the Fees and Compensation and Expenses described in Section 2, if any, and the
provisions of paragraphs 2, 5, and 8 of Exhibit A and all of Exhibit B and
Exhibit C attached hereto, each of which exhibits is incorporated herein by
reference, shall survive any termination or expiration of the Agreement. It is
expressly understood and agreed by the parties hereto that (i) any private
financing of equity or debt or other capital raising activity of the Company
within 24 months of the termination or expiration of this Agreement, with any
investors to whom the Company was introduced by LTCO or who was contacted by
LTCO while this Agreement was in effect and disclosed to the Company in writing,
or (ii) any financing which the Company receives in breach of Section 1(b)
hereof, shall result in such fees and compensation being due and payable by the
Company to LTCO under the same terms of Section 2 above.
4. RIGHT OF FIRST REFUSAL. Upon completion of the Offering, LTCO shall have
an irrevocable right of first refusal for a period of one year to provide all
financing arrangements for the Company (other than conventional banking
arrangements, borrowing and commercial debt financing and discrete unrelated
transactions of not more than $250,000 where no investment banking fee is being
paid). LTCO shall exercise such right in writing within five (5) business days
of receipt of a written term sheet describing such proposed transaction in
reasonable detail.
5. INFORMATION. The Company recognizes and confirms that in completing its
engagement hereunder, LTCO will be using and relying solely on publicly
available information and on data, material and other information furnished to
LTCO by the Company or the Company's affiliates and agents. It is understood and
agreed that in performing under this engagement, LTCO will rely upon the
accuracy and completeness of, and is not assuming any responsibility for
independent verification of, such publicly available information and the other
information so furnished. Notwithstanding the foregoing, it is understood that
LTCO will conduct a due diligence investigation of the Company and the
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Company will cooperate in all respects with such investigation as a condition of
LTCO's obligations hereunder.
6. REGISTRATION. Promptly following execution of this Agreement, the
Company shall prepare and, following review and approval by LTCO's counsel, file
with the SEC a registration statement. From time to time in connection with any
particular sale of Securities, the Company will, at its own expense, obtain any
registration or qualification required to sell any Securities under the Blue Sky
laws of any applicable jurisdictions, as reasonably requested by LTCO, and shall
pay any filing fees required by NASD Regulation, Inc. in connection with their
review of the terms of this Agreement, if so required.
7. NO GENERAL SOLICITATION. The Securities will be offered only by
approaching prospective purchasers on an individual basis. No general
solicitation or general advertising in any form will be used in connection with
the offering of the Securities. From and after the execution of this Agreement
until the completion of the Offering, the Company shall pre-clear any proposed
press release which mentions this Agreement or the Offering with LTCO.
8. CLOSING. The closing of the sale of the Securities shall be subject to
customary closing conditions, including the provision by the Company to LTCO of
officers' certificates, opinions of counsel and "cold comfort" letters from the
Company's auditors.
9. MISCELLANEOUS. This Agreement together with the attached Exhibits A
through D constitutes the entire understanding and agreement between the parties
with respect to its subject matter and there are no agreements or understandings
with respect to the subject matter hereof which are not contained in this
Agreement. This Agreement may be modified only in writing signed by the party to
be charged hereunder.
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If the foregoing correctly sets forth our agreement, please confirm this by
signing and returning to us the duplicate copy of this letter.
We appreciate this opportunity to be of service and are looking forward to
working with you on this matter.
Very truly yours,
LADENBURG XXXXXXXX & CO. INC.
By: /s/ Xxxxxx Xxxxx
--------------------------------------------
Name: Xxxxxx Xxxxx
Title: Director of Investment Banking
Agreed to and accepted
as of the date first written above:
NETSOL INTERNATIONAL
By: /s/ Xxxx Xxxxxx
--------------------------------------------
Name: XXXX XXXXXX
Title: CFO
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EXHIBIT A
STANDARD TERMS AND CONDITIONS
1. The Company shall promptly provide LTCO with all relevant information about
the Company (to the extent available to the Company in the case of parties
other than the Company) that shall be reasonably requested or required by
LTCO, which information shall be complete and accurate in all material
respects at the time furnished.
2. LTCO shall keep all information obtained from the Company strictly
confidential except: (a) information which is otherwise publicly available,
or previously known to, or obtained by LTCO independently of the Company
and without breach of LTCO's agreement with the Company; (b) LTCO may
disclose such information to its employees and attorneys, and to its other
advisors and financial sources on a need to know basis only and shall use
best efforts to ensure that all such employees, attorneys, advisors and
financial sources will keep such information strictly confidential; and (c)
pursuant to any order of a court of competent jurisdiction or other
governmental body (including any subpena) or as may otherwise be required
by law.
3. The Company recognizes that in order for LTCO to perform properly its
obligations in a professional manner, it is necessary that LTCO be informed
of and, to the extent practicable, participate in meetings and discussions
between the Company and any prospective purchaser of the securities,
relating to the Offering.
4. The Company agrees that any report or opinion, oral or written, delivered
to it by LTCO is prepared solely for its confidential use and shall not be
reproduced, summarized, or referred to in any public document or given or
otherwise divulged to any other person without LTCO's prior written
consent, except as may be required by applicable law or regulation.
5. No fee payable to LTCO pursuant to any other agreement with the Company or
payable by the Company to any agent, lender or investor shall reduce or
otherwise affect any fee payable by the Company to LTCO hereunder. If LTCO
engages any other broker-dealer or other finder to assist LTCO in the
placement of the Offering, then the fees of such other broker-dealer or
finder shall be paid by LTCO.
6. The Company represents and warrants that: (a) it has full right, power and
authority to enter into this Agreement and to perform all of its
obligations hereunder; (b) this Agreement has been duly authorized and
executed by and constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms; and (c) the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby do not conflict with or result in a breach of (i) the
Company's certificate of
6
EXHIBIT A (CONTINUED)
incorporation or by-laws or (ii) any agreement to which the Company is a
party or by which any of its property or assets is bound.
7. Nothing contained in this Agreement shall be construed to place LTCO and
the Company in the relationship of partners or joint venturers. Neither
LTCO nor the Company shall represent itself as the agent or legal
representative of the other for any purpose whatsoever nor shall either
have the power to obligate or bind the other in any manner whatsoever.
LTCO, in performing its services hereunder, shall at all times be an
independent contractor.
8. This Agreement has been and is made solely for the benefit of LTCO and the
Company and each of the persons, agents, employees, officers, directors and
controlling persons referred to in Exhibit B and their respective heirs,
executors, personal representatives, successors and assigns, and nothing
contained in this Agreement shall confer any rights upon, nor shall this
Agreement be construed to create any rights in, any person who is not party
to such Agreement, other than as set forth in this paragraph.
9. The rights and obligations of either party under this Agreement may not be
assigned without the prior written consent of the other party hereto and
any other purported assignment shall be null and void.
10. All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be mailed, hand delivered,
or sent by a recognized overnight courier service such as Federal Express,
via facsimile and confirmed by letter, to the party to whom it is addressed
at the following addresses or such other address as such party may advise
the other in writing:
To the Company:
Xxxxxx Xxxxxx
Netsol International
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To LTCO:
Ladenburg Xxxxxxxx & Co. Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
7
Facsimile: (000) 000-0000
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
8
EXHIBIT B
INDEMNIFICATION
The Company agrees that it shall indemnify and hold harmless, LTCO, its
stockholders, directors, officers, employees, agents, affiliates and controlling
persons within the meaning of Section 20 of the Securities Exchange Act of 1934
and Section 15 of the Securities Act of 1933, each as amended (any and all of
whom are referred to as an "Indemnified Party"), from and against any and all
losses, claims, damages, liabilities, or expenses, and all actions in respect
thereof (including, but not limited to, all legal or other expenses reasonably
incurred by an Indemnified Party in connection with the investigation,
preparation, defense or settlement of any claim, action or proceeding, whether
or not resulting in any liability), incurred by an Indemnified Party: (a)
arising out of, or in connection with, any actions taken or omitted to be taken
by the Company, its affiliates, employees or agents, or any untrue statement or
alleged untrue statement of a material fact contained in any of the financial or
other information contained in the registration statement and/or final
prospectus furnished to LTCO by or on behalf of the Company or the omission or
alleged omission of a 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; or (b) with respect to, caused by, or otherwise
arising out of any transaction contemplated by the Agreement or LTCO's
performing the services contemplated hereunder; PROVIDED, HOWEVER, the Company
will not be liable under this paragraph to the extent, and only to the extent,
that any loss, claim, damage, liability or expense is finally judicially
determined to have resulted primarily from (i) LTCO's gross negligence or bad
faith in performing such services or (ii) arises from information provided by
LTCO for use in the registration statement and/or final prospectus.
LTCO agrees that it shall indemnify and hold harmless, the Company, its
directors, officers, employees, agents, affiliates and controlling persons
within the meaning of Section 20 of the Securities Exchange Act of 1934 and
Section 15 of the Securities Act of 1933, each as amended (any and all of whom
are referred to as an "Indemnified Party"), from and against any and all losses,
claims, damages, liabilities, or expenses, and all actions in respect thereof
(including, but not limited to, all legal or other expenses reasonably incurred
by an Indemnified Party in connection with the investigation, preparation,
defense or settlement of any claim, action or proceeding, whether or not
resulting in any liability), incurred by an Indemnified Party: (a) arising out
of, or in connection with, the gross negligence or bad faith of LTCO in
performing the services contemplated hereunder, or (b), arising out of, or in
connection with, any information provided by LTCO for use in the registration
statement and/or final prospectus.
If the indemnification provided for herein is conclusively determined (by
an entry of final judgment by a court of competent jurisdiction and the
expiration of the time or denial of the right to appeal) to be unavailable or
insufficient to hold any Indemnified Party harmless in respect to any losses,
claims, damages, liabilities or expenses referred to herein, then the Company
shall contribute to the amounts
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paid or payable by such Indemnified Party in such proportion as is appropriate
and equitable under all circumstances taking into account the relative benefits
received by the Company on the one hand and LTCO on the other, from the
transaction or proposed transaction under the Agreement or, if allocation on
that basis is not permitted under applicable law, in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
the one hand and LTCO on the other, but also the relative fault of the Company
and LTCO; PROVIDED, HOWEVER, in no event shall the aggregate contribution of
LTCO and/or any Indemnified Party be in excess of the net compensation actually
received by LTCO and/or such Indemnified Party pursuant to this Agreement.
The Indemnifying Party shall not settle or compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in which any Indemnified Party is
or could be a party and as to which indemnification or contribution could have
been sought by such Indemnified Party hereunder (whether or not such Indemnified
Party is a party thereto), unless such consent or termination includes an
express unconditional release of such Indemnified Party, reasonably satisfactory
in form and substance to such Indemnified Party, from all losses, claims,
damages, liabilities or expenses arising out of such action, claim, suit or
proceeding.
In the event any Indemnified Party shall incur any expenses covered by this
Exhibit B, the Indemnifying Party shall reimburse the Indemnified Party for such
covered expenses within ten (10) business days of the Indemnified Party's
delivery to the Indemnifying Party of an invoice therefor, with receipts
attached. Such obligation of the Indemnifying Party to so advance funds may be
conditioned upon the Indemnifying Party's receipt of a written undertaking from
the Indemnified Party to repay such amounts within ten (10) business days after
a final, non-appealable judicial determination that such Indemnified Party was
not entitled to indemnification hereunder.
The foregoing indemnification and contribution provisions are not in lieu
of, but in addition to, any rights which any Indemnified Party may have at
common law hereunder or otherwise, and shall remain in full force and effect
following the expiration or termination of LTCO's engagement and shall be
binding on any successors or assigns of the parties and successors or assigns to
all or substantially all of each party's business or assets.
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EXHIBIT C
JURISDICTION
The Company and LTCO each hereby irrevocably: (a) submits to the
jurisdiction of any court of the State of New York or any federal court sitting
in the State of New York for the purposes of any suit, action or other
proceeding arising out of the Agreement between the Company and LTCO which is
brought by or against the Company or LTCO; (b) agrees that all claims in respect
of any suit, action or proceeding may be heard and determined in any such court;
and (c) to the extent that the Company or LTCO has acquired, or hereafter may
acquire, any immunity from jurisdiction of any such court or from any legal
process therein, the Company and LTCO each hereby waives, to the fullest extent
permitted by law, such immunity. The prevailing party in any litigation
respecting this Agreement shall be entitled to an award of its costs, including
reasonable attorneys' fees, in connection therewith.
The Company and LTCO each waives, and agrees not to assert in any such
suit, action or proceeding, in each case, to the fullest extent permitted by
applicable law, any claim that: (a) it is not personally subject to the
jurisdiction of any such court; (b) it is immune from any legal process (whether
through service or notice, attachment prior to judgment, attachment in the aid
of execution, execution or otherwise) with respect to it or its property; (c)
any such suit, action or proceeding is brought in an inconvenient forum; (d) the
venue of any such suit, action or proceeding is improper; or (e) this Agreement
may not be enforced in or by any such court.
Any process against the Company or LTCO in, or in connection with, any
suit, action or proceeding filed in the United States District Court for the
Southern District of New York or any other court of the State of New York,
arising out of or relating to this Agreement or any transaction or agreement
contemplated hereby, may be served personally, or by first class mail or
overnight courier (with the same effect as though served personally) addressed
to the party being served at the address set forth in the Agreement between the
Company and LTCO.
Nothing in these provisions shall affect any party's right to serve process
in any manner permitted by law or limit its rights to bring a proceeding in the
competent courts of any jurisdiction or jurisdictions or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of law principles.
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EXHIBIT D
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
OR EXERCISED UNLESS AND UNTIL SUCH WARRANT AND/OR SHARES OF COMMON STOCK IS
REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTIONS 4 AND 10 OF THIS
WARRANT.
Warrant No. 1 Number of Shares: _______
(subject to adjustment)
Date of Issuance: ______________, 2000
[ISSUER]
Common Stock Purchase Warrant
(Void after [four years])
[Issuer], a ________________ corporation (the "Company"), for value received,
hereby certifies that Ladenburg Xxxxxxxx & Co. Inc., or its registered assigns
(the "Registered Holder"), is entitled, subject to the terms and conditions set
forth below, to purchase from the Company, at any time or from time to time on
or after one year from the date of issuance and on or before 5:00 p.m. (Eastern
time) on________, 200_, _____________________ shares of Common Stock, of the
Company, at a purchase price of $__________ per share. The shares purchasable
upon exercise of this Warrant, and the purchase price per share, each as
adjusted from time to time pursuant to the provisions of this Warrant, are
hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole or in
part, by surrendering this Warrant, with the purchase form appended hereto as
Exhibit I duly executed by the Registered Holder or by the Registered Holder's
duly authorized attorney, at the principal office of the Company, or at such
other office or agency as the Company may designate, accompanied by payment in
full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
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(b) The Registered Holder may, at its option, elect to pay some or all of
the Purchase Price payable upon an exercise of this Warrant by canceling all or
a portion of this Warrant. If the Registered Holder wishes to exercise this
Warrant by this method, the number of Warrant Shares purchasable (which shall in
no event exceed the total number of Warrant Shares purchasable under this
Warrant as set forth above), subject to adjustment under Section 2 of this
Warrant) shall be determined as follows:
X=Y[(A-B)/A]; where
X= the number of Warrant Shares to be issued to the Holder.
Y= the number of Warrant Shares with respect to which this Warrant is being
exercised.
A= the Fair Market Value of one share of Common Stock.
B= the Purchase Price of one share of Common Stock.
The Fair Market Value per share of Common Stock shall be determined
as follows:
(i) If the Common Stock is listed on a national securities exchange,
the Nasdaq National Market or another nationally recognized trading system
(including, without limitation, the OTC Bulletin Board and, if the average
daily trading volume for the preceding 10 days has been at least 100,000
shares, the Pink Sheets) as of the Exercise Date, the Fair Market Value per
share of Common Stock shall be deemed to be the average of the high and low
reported sale prices per share of Common Stock thereon on the trading day
immediately preceding the Exercise Date (provided that if no such price is
reported on such day, the Fair Market Value per share of Common Stock shall
be determined pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national securities
exchange, the Nasdaq National Market or another nationally recognized
trading system as of the Exercise Date, the Fair Market Value per share of
Common Stock shall be deemed to be the amount most recently determined by
the Board of Directors to represent the fair market value per share of the
Common Stock (including without limitation a determination for purposes of
granting Common Stock options or issuing Common Stock under an employee
benefit plan of the Company); and, upon request of the Registered Holder,
the Board of Directors (or a representative thereof) shall promptly notify
the Registered Holder of the Fair Market Value per share of Common Stock.
Notwithstanding the foregoing, if the Board of Directors has not made such
a determination within the three-month period prior to the Exercise Date,
then (A) the
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Board of Directors shall make a determination of the Fair Market Value per
share of the Common Stock within 15 days of a request by the Registered
Holder that it do so, and (B) the exercise of this Warrant pursuant to this
subsection 1(b) shall be delayed until such determination is made.
(c) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided in subsection 1(a) above
accompanied by payment in full of the Purchase Price (the "Exercise Date"). At
such time, the person or persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as provided in subsection
1(d) below shall be deemed to have become the holder or holders of record of the
Warrant Shares represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant in full or in
part, and in any event within 5 business days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which the Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which the Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, calling in the aggregate on the face
or faces thereof for the number of remaining Warrant Shares.
2. ADJUSTMENTS.
(a) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at
any time or from time to time after the date on which this Warrant was first
issued (the "Original Issue Date") effect a subdivision of the outstanding
Common Stock, the Purchase Price then in effect immediately before that
subdivision shall be proportionately decreased. If the Company shall at any time
or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock, the Purchase Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(b) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event the
Company at any time, or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional
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shares of Common Stock, then and in each such event the Purchase Price then in
effect immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Purchase Price then in
effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number
of shares of Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Purchase Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Purchase Price shall be adjusted
pursuant to this paragraph as of the time of actual payment of such dividends or
distributions.
(c) ADJUSTMENT IN NUMBER OF WARRANT SHARES. When any adjustment is required
to be made in the Purchase PRICE pursuant to subsections 2(a) or 2(b), the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of shares issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(d) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event the
Company at any time or from time to time after the Original Issue Date shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Company (other than shares of Common Stock) or in cash or
other property (other than cash out of earnings or earned surplus, determined in
accordance with generally accepted accounting principles), then and in each such
event provision shall be made so that the Registered Holder shall receive upon
exercise hereof, in addition to the number of shares of Common Stock issuable
hereunder, the kind and amount of securities of the Company and/or cash and
other property which the Registered Holder would have been entitled to receive
had this Warrant been exercised into Common Stock on the date of such event and
had the Registered Holder thereafter, during the period from the date of such
event to and including the Exercise Date, retained any such securities
15
receivable, giving application to all adjustments called for during such period
under this Section 2 with respect to the rights of the Registered Holder.
(e) ADJUSTMENT FOR MERGERS OR REORGANIZATIONS, ETC. If there shall occur
any reorganization, recapitalization, consolidation or merger involving the
Company in which the Common Stock is converted into or exchanged for securities,
cash or other property (other than a transaction covered by subsections 2(a),
2(b) or 2(d)), then, following any such reorganization, recapitalization,
consolidation or merger, the Registered Holder shall receive upon exercise
hereof the kind and amount of securities, cash or other property which the
Registered Holder would have been entitled to receive if, immediately prior to
such reorganization, recapitalization, consolidation or merger, the Registered
Holder had held the number of shares of Common Stock subject to this Warrant.
Notwithstanding the foregoing sentence, if (x) there shall occur any
reorganization, recapitalization, consolidation or merger involving the Company
in which the Common Stock is converted into or exchanged for anything other than
solely equity securities, and (y) the common stock of the acquiring or surviving
company is publicly traded, then, as part of any such reorganization,
recapitalization, consolidation or merger, (i) the Registered Holder shall have
the right thereafter to receive upon the exercise hereof such number of shares
of common stock of the acquiring or surviving company as is determined by
multiplying (A) the number of shares of Common Stock then subject to this
Warrant by (B) a fraction, the numerator of which is the Fair Market Value per
share of Common Stock as of the effective date of such transaction, as
determined pursuant to subsection 1(b), and the denominator of which is the fair
market value per share of common stock of the acquiring or surviving company as
of the effective date of such transaction, as determined in good faith by the
Board of Directors of the Company (using the principles set forth in subsection
1(b) to the extent applicable), and (ii) the exercise price per share of common
stock of the acquiring or surviving company shall be the Purchase Price divided
by the fraction referred to in clause (B) above. In any such case, appropriate
adjustment (as determined in good faith by the Board of Directors of the
Company) shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Registered Holder, to
the end that the provisions set forth in this Section 2 (including provisions
with respect to changes in and other adjustments of the Purchase Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities, cash or other property thereafter deliverable upon the exercise of
this Warrant.
(e) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment of the Purchase Price pursuant to this Section 2, the Company at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Registered Holder a certificate setting
forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property for which this Warrant shall be exercisable
and the Purchase Price) and showing in detail the facts upon
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which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of the Registered Holder, furnish or cause to be
furnished to the Registered Holder a certificate setting forth (i) the Purchase
Price then in effect and (ii) the number of shares of Common Stock and the
amount, if any, of other securities, cash or property which then would be
received upon the exercise of this Warrant.
3. FRACTIONAL SHARES. The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock, as determined pursuant to subsection 1(b) above.
4. REQUIREMENTS FOR TRANSFER.
(a) This Warrant and the Warrant Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities Act
of 1933, as amended (the "Act"), or (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of counsel
shall be required for (i) a transfer by a Registered Holder which is a
corporation to a wholly owned subsidiary of such corporation, a transfer by a
Registered Holder which is a partnership to a partner of such partnership or a
retired partner of such partnership or to the estate of any such partner or
retired partner, a transfer by a Registered Holder which is a limited liability
company to a member of such limited liability company or a retired member or to
the estate of any such member or retired member, or a transfer by a Registered
Holder which is a member of the National Association of Securities Dealers (the
"NASD") to an officer or employee of the Registered Holder as permitted by NASD
rules, provided that the transferee in each case agrees in writing to be subject
to the terms of this Section 4, or (ii) a transfer made in accordance with Rule
144 under the Act.
(c) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered, sold
or otherwise transferred, pledged or hypothecated unless and until such
securities are registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect that such
registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act or if an
effective
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registration statement is then in effect permitting the resale of the Warrant
Shares.
(d) The Registered Holder shall have "piggyback" registration rights to
have the Warrant Shares (but not the Warrants) registered for resale on any
registration statement which the Company files for any purpose on a form
available for such registration, after the Original Issue Date. Such
registration shall be subject to customary obligations by the Registered Holder
to provide information to the Company and by the Company to indemnify the
Registered Holder against Securities Act liabilities.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
6. NOTICES OF RECORD DATE, ETC. In the event:
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or of any capital reorganization of the Company, any reclassification of
the Common Stock of the Company, any consolidation or merger of the Company with
or into another corporation (other than a consolidation or merger in which the
Company is the surviving entity and its Common Stock is not converted into or
exchanged for any other securities or property), or any transfer of all or
substantially all of the assets of the Company; or
(b) of the voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation
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or winding-up. Such notice shall be mailed at least ten days prior to the record
date or effective date for the event specified in such notice.
7. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other securities, cash and/or property, as
from time to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder, properly
endorsed, to the Company at the principal office of the Company, the Company
will, subject to the provisions of Section 4 hereof, issue and deliver to or
upon the order of such Holder, at the Company's expense, a new Warrant or
Warrants of like tenor, in the name of the Registered Holder or as the
Registered Holder (upon payment by the Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock (or other securities, cash
and/or property) then issuable upon exercise of this Warrant.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. TRANSFERS, ETC.
(a) The Company will maintain a register containing the name and address of
the Registered Holder of this Warrant. The Registered Holder may change its or
his address as shown on the warrant register by written notice to the Company
requesting such change.
(b) Subject to the provisions of Section 4 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this
Warrant with a properly executed assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant register, the
Company may treat the Registered Holder as the absolute owner hereof for all
purposes; provided, however, that if and when this Warrant is properly assigned
in blank, the Company may (but shall not be obligated to) treat the bearer
hereof as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary.
11. REPRESENTATIONS OF THE REGISTERED HOLDER. The Registered Holder of this
Warrant represents and warrants to the Company as follows:
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(a) INVESTMENT. The Registered Holder is acquiring this Warrant and the
Warrant Shares issuable upon the exercise of this Warrant, for its own account
for investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the same, except as otherwise may be permitted under applicable securities laws.
(b) AUTHORITY. The Registered Holder has full power and authority to enter
into and to perform this Warrant in accordance with its terms. The Registered
Holder has not been organized specifically for the purpose of investing in the
Company.
(c) ACCREDITED INVESTOR. The Registered Holder is an Accredited Investor
within the definition set forth in Rule 501(a) promulgated under the Securities
Act.
12. MAILING OF NOTICES, ETC. All notices and other communications from the
Company to the Registered Holder shall be mailed by first-class certified or
registered mail, postage prepaid, to the address last furnished to the Company
in writing by the Registered Holder. All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
its principal office set forth below. If the Company should at any time change
the location of its principal office to a place other than as set forth below,
it shall give prompt written notice to the Registered Holder and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
13. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the Registered
Holder shall not have or exercise any rights by virtue hereof as a stockholder
of the Company. Notwithstanding the foregoing, in the event (i) the Company
effects a split of the Common Stock by means of a stock dividend and the
Purchase Price of and the number of Warrant Shares are adjusted as of the date
of the distribution of the dividend (rather than as of the record date for such
dividend), and (ii) the Registered Holder exercises this Warrant between the
record date and the distribution date for such stock dividend, the Registered
Holder shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.
14. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived only by
an instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
15. SECTION HEADINGS. The section headings in this Warrant are for the
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
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16. GOVERNING LAW. This Warrant will be governed by and construed in accordance
with the internal laws of the State of New York (without reference to the
conflicts of law provisions thereof).
EXECUTED as of the Date of Issuance indicated above.
[ISSUER]
By:________________________________
Title:_______________________________
ATTEST:
-------------------------
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EXHIBIT I
PURCHASE FORM
To:_________________ Dated:____________
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No. ___), hereby irrevocably elects to purchase (CHECK APPLICABLE BOX):
0 _____ shares of the Common Stock covered by such Warrant; or
0 the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth
in Section 1(b).
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is $________.
Such payment takes the form of (CHECK APPLICABLE BOX OR BOXES):
0 $______ in lawful money of the United States; and/or
0 the cancellation of such portion of the attached Warrant as is
exercisable for a total of _____ Warrant Shares (using a Fair
Market Value of $_____ per share for purposes of this
calculation); and/or
0 the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in Section
1(b), to exercise this Warrant with respect to the maximum
number of Warrant Shares purchasable pursuant to the cashless
exercise procedure set forth in Section 1(b).
Signature: ____________________
Address: ______________________
----------------------
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EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (No. ____) with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated:_____________________
Signature:________________________________
Signature Guaranteed:
By: _______________________
The signature should be guaranteed by an eligible guarantor institution (banks,
stockbrokers, savings and loan associations and credit unions with membership in
an approved signature guarantee medallion program) pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
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