1
COPY
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH
ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR ASSIGNED TO ANY OTHER PERSON
OR ENTITY FOR A PERIOD OF ONE YEAR EXCEPT TO
OFFICERS OF XXX XXXXXX.
JULY 30, 1996
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON
STOCK OF X. X. XXXXXXXX, INC.
VOID AFTER 5:00 P.M., SAN FRANCISCO TIME, ON JULY 24,
2001, OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN,
AT 5:00 P.M., SAN FRANCISCO TIME, ON THE
IMMEDIATELY PRECEDING BUSINESS DAY
NO. W-1
THIS CERTIFIES that for and in consideration of $ 1. 00,
XXX XXXXXX & COMPANY ("Xxx Xxxxxx"), or registered
assigns, is entitled to subscribe for and purchase from X. X.
Xxxxxxxx, Inc., a California corporation (hereinafter called the
"Company"), at the price of $5.25 per share (such price, as from
time to time to be adjusted as hereinafter provided, being
hereinafter called the "Warrant Price"), at any time and from time
to time but not earlier than the Commencement Date (as defined
below) or later than the Expiration Date (as defined below), up to
122,000 fully paid, nonas sessable shares of no par value Common
Stock of the Company ("Common Stock"), subject, however, to the
provisions and upon the terms and conditions hereinafter set forth,
including without limitation the provisions of Section 3 hereof.
The shares of Common Stock purchasable upon exercise of this
Warrant are hereafter referred to as the "Warrant Shares."
"Commencement Date" shall mean July 24, 1997, which is one
year from the date hereof. "Expiration Date" shall mean 5:00 p.m.,
San Francisco time, on July 24, 2001, which is five years from the
date hereof, or if not a Business Day, as defined herein, at 5:00
p.m., San Francisco time, on the immediately preceding business
day. "Business Day" shall mean a clay other than a Saturday,
Sunday or other day on which banks in the State of California are
authorized by law to remain closed.
This Warrant may represent a portion of a warrant that was
originally issued to Xxx Xxxxxx & Company on July 30, 1996 to
purchase up to 122,000 shares of Common Stock (the "Original
Warrant"). To the extent that Xxx Xxxxxx & Company may have
transferred all or a portion of such warrant or shares issuable
thereunder, the capitalized term "Warrants" as used in this Warrant
shall mean all warrants (including this Warrant) that constituted a
portion of the Original Warrant.
1. Exercise of Warrant
(a) Cash Exercise. This Warrant may be exercised, at any
time and from time to time but not earlier than the
Commencement Date or later than the Expiration Date, by the
holder hereof or its permitted assigns (hereinafter referred to as
the "Warrantholder"), in whole or in part (but not as to a fractional
share of Common Stock and in no event for less than 100 shares
(unless less than an aggregate of 100 shares are then purchasable
under all outstanding Warrants held by a Warrantholder)), by the
comple tion of the subscription form attached hereto and by the
surrender of this Warrant (properly endorsed) at the Company's
offices at 00000 Xxxxxx Xxxx 00X, Xxxxxxx, Xxxxxxxxxx 00000 (or
at such other location in the United States as it may designate by
notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by
payment to the Company of the Warrant Price, in cash or by
certified or official bank check, for each share being purchased.
(b) Net Exercise. Notwithstanding anything to the contrary
contained in Subsection l(a), the Warrantholder may elect to
exercise this Warrant and receive shares on a "net exercise" basis
in an amount equal to the value of this Warrant by delivery of the
subscription form attached hereto and surrender of this Warrant at
the principal off-ice of the Company, in which event the Company
shall issue to Warrantholder a number of shares computed using
the following formula:
X = (P)(Y)(A-B)
A
Where: X = the number of shares of Common Stock to be
issued to Warrantholder.
P = the portion of the Warrant being exercised.
Y = the number of shares of Common Stock issuable
upon exercise of this Warrant.
-2-
3
A = the Current Market Price (as determined pursuant
to Subsection l(d)) of one share of Common Stock.
B = Warrant Price.
(c) Procedure for Exercise. In the event of any exercise of the
rights represented by this Warrant, a certificate or certificates for
the total number of whole shares of Common Stock so purchased,
registered in the name of the Warrantholder, shall be delivered to
the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a
new Warrant representing the number of shares (ex cept a
remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such
exercise, the Warrantholder shall for all purposes be deemed to
have become the holder of record of the number of shares of
Common Stock evidenced by such certificate or certificates from
the date on which this Warrant was surrendered and if exercise is
pursuant to Section 1(a), payment of the Warrant Price was
made, irrespective of the date of delivery of such certificate,
except that, if the date of such surrender and payment is a date on
which the stock transfer books of the Company are closed, such
person shall be deemed to have been the holder of such shares at
the close of business on the next succeeding date-on which the
stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall
be made upon any exercise on account of any cash dividends on
the Common Stock issued upon such exercise. If any fractional
interest in a share of Common Stock would, except for the
provisions of this Section 1, be delivered upon any such exercise,
the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the
current market price of such fractional interest, as deter-mined
below.
(d) Current Market Price. For any computation hereunder,
the current market price per share of Common Stock on any date
shall be deemed to be the average of the daily market price per
share for the 30 consecutive Trading Days commencing 45
Trading Days before the date in question. "Market Price" is
defined as the closing sale price (or, if no closing sale price is
reported, the closing bid price) of the Common Stock in the
over-the-counter market, and reported by the National Association
of-Securitie s Dealers Automated Quotation System ("Nasdaq"),
or, if the Common Stock is not quoted on Nasdaq, as reported by
the National Quotation Bureau Incorporated. In the event that the
Common Stock is hereafter listed for trading on one or more
United States national or regional securities exchanges, market
price shall be the closing price on the exchange or system
designated by the Board of Directors of the Company as the
principal United States market in which the Common Stock is
traded. If market price cannot be established as described above,
market price shall be the fair market value of the Common Stock
as determined in good faith by the Board of Directors. The term
"Trading Day" shall mean a day on which
-3-
4
Nasdaq or the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for the
transaction of business.
2. Adjustment of Number of Shares
Upon each adjustment of the Warrant Price for any stock
dividend or distribution or any subdivision or combination of the
outstanding shares of the Common Stock as provided in Section 3,
the Warrantholder shall thereafter be entitled to purchase, at the
Warrant Price resulting from such adjustment, the number of
shares of Common Stock. (calculated to the nearest tenth of a
share) obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment
and dividing the product thereof b y the Warrant Price resulting
from such adjustment.
3. Adjustment of Warrant Price
The Warrant Price and the number and kind of shares
issuable hereunder shall be subject to adjustment from time to
time upon the happening of certain events as provided in this
Section 3.
(a) Adjustments
(1) if at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a
distribution on the Common Stock payable in share's of its capital
stock (whether shares of Common Stock or of capital stock of any
other class); (B) subdivide, reclassify or recapitalize its
outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock
into a smaller number of shares, or (D) issue any shares of its
capital stock by reclassification of its Common Stock (excluding
any such reclassification in connection with a consolidation or a
merger), the Warrant Price in effect at the time of the record date
of such dividend, distribution, subdivision, combination,
reclassification or recapitalization shall be adjusted so that the
Warrantholder shall be entitled to receive the aggregate
number and kind of shares which, if this Warrant had been
exercised in full immediately prior to such event, it would
have owned upon suc h exercise and been entitled to receive by
virtue of such dividend, distribution, subdivision, combination,
reclassification or recapitalization. Any adjustment required by
this Section 3 (a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the
effective date, in the case of a subdivision, combination,
reclassification or recapitalization, to allow the purchase of such
aggregate number and kind of shares.
-4-
5
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the
Common Stock of stock of a subsidiary or securities convertible
into or exercisable for such stock, then in lieu of an adjustment in
the Warrant Price or the number of shares of Common Stock
purchasable upon the exercise of this Warrant, the Warrantholder,
upon the exercise hereof at any time after such distribution, shall
be entitled to receive from the Company, such subsidiary or both,
as the Company shall determine, the stock or other securities to
which the Warrantholder would have been entitled if the
Warrantholder had exercise d this Warrant immediately prior
thereto, all subject to further adjustment as provided in this
Section 3, and the Company shall reserve, for the life of the
Warrant such securities of such subsidiary or other corporation;
provided, however, that no adjustment in respect of dividends
or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
(3) If at any time prior to the expiration of this Warrant
in full, the Company shall issue rights or Warrants to all holders of
Common Stock as such entitling them (for a period expiring
within sixty days after the record date of the determination of
shareholders entitled to receive the same), to subscribe for or
purchase Common Stock at a price per share less than the current
market price per share (as defined below) on such record date,
then, in each such case the number of Warrant Shares shall be d
etermined by multiplying the number of shares of Common Stock
theretofore purchasable upon exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights
or warrants, plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus
the number of shares that the aggregate offering price of the total
number of shares of Common Stock so offered would purchase at
such current market price. For purposes of this Section 3(a)(3), the
issuance of rights or Warrants to subscribe for or purchase
securities convertible into Common Stock shall be deemed to be
the issuance of rights or warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering
price equal to the aggregate offering price of such securities plus t
he minimum aggregate amount (if any) payable upon conversion
of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full the Company shall distribute to all holders of its Common
Stock evidence of indebtedness of the Company or assets of the
Company (excluding cash dividends or distributions out of
retained earnings) or rights or warrants to subscribe for securities
of the Company (excluding those referred to in Sections 3(a)(2) or
(3) above), then in each case the Warrant Price shall be adjusted to
a price
-5-
6
determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which
the numerator shall be the then current market price per share
of Common Stock (as defined below) on the record date for
determination of shareholders entitled to receive such
distribution, less the then fair value (as determined by the
Board of Directors of the Company, whose determination shall
be conclusive) of the portion of the assets or evidence of
indebtedness so distributed or of suc h subscription rights or
warrants which are applicable to one share of Common Stock,
and of which the denominator shall be the market price per
share of Common Stock; provided, however, that if the then
current market price per share of Common Stock on the record
date for determination of shareholders entitled to receive
such distribution is less than the then fair value of the
portion of the assets or evidence of indebtedness so
distributed or of such subscription rights or warrants which
are applicable to one share of Common Stock, the foregoing
adjustment of the Warrant Price shall not be made and in lieu
thereof the number of shares purchasable upon exercise of this
Warrant immediately prior to such distribution shall be
adjusted so that the holder of this Warrant shall be entitled
to receive upon exercise of such Warrant the kind and number
of assets, evidence of indebtedness, subscription rights and
Warrants (or, in the event of the redemption of such evidence
of indebtedness, subscription rights or warrants, any cash
paid in respect of such redemption) that such Warrantholder
would have owned or have been entitled to receive after the
happening in such distribution had this Warrant been exercised
immediately prior to the record date of such distribution.
(5) For purposes of any computation under this Section
3(a), the current market price per share of Common Stock on any
date shall be deemed calculated as provided in Section 1(d). (6)
No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any
adjustments which by reason of this Section 3(a)(6) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 3(a) shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. Notwithstanding a
nything in this Section 3(a) to the contrary, the Warrant Price shall
not be reduced to less than the then existing par value of the
Common Stock as a result of any adjustment made hereunder.
(7) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the
Warrantholder thereafter shall become entitled to receive any
securities other than Common Stock, thereafter the number of
such other securities so receivable, upon exercise of any
Warrant shall be subject to adjustment from time to time in a
manner and on terms as
-6-
7
nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Section 3(a).
(8) Notwithstanding the foregoing, no adjustments shall
be made pursuant to Sections 3(a)(2), (3) or (4) hereof unless
the Company directly or indirectly shall make substantially
similar adjustments to any stock options granted pursuant to
any stock option plan or otherwise grant benefits in lieu of
such adjustments to the holder of such stock option.
(b) No Adjustment for Dividends. Except as provided in
Section 3(a) of this Agreement, no adjustment in respect of any
cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) Termination of Purchase Rights in Certain Transactions.
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than a
subdivision or combination of the outstanding Common Stock and
other than a change in the par value of the Common Stock) or in
case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in
which the Company is the continuing corporation and that does
not res ult in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the class
issuable -upon exercise of this Warrant) or in the case of any sale,
lease, transfer or conveyance to another corporation of the
property and assets of the Company as an entirety or substantially
as an entirety, this War-rant shall become exercisable on the
record date for such event if this Warrant was not previously
exercisable. If this Warrant is not exercised on or prior to the
consum mation of any event described in the previous sentence,
then this Warrant shall terminate, if notice of such event was
properly given pursuant to Section 8 of this Agreement.
(d) Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the
Warrant Price of the number or kind of the shares purchasable
pursuant to this Warrant, and Warrants theretofore or thereafter
issued may continue to express the same price and number and
kind of shares as are stated in this Warrant, as initially issued;
provided, however, that the Company may, at any time in its sole
discretion (which shall be conclusive), make any change in the
form of Warrant certificate that it may deem appropriate and that
does not affect the substance thereof. An Warrant certificate
thereafter issued, whether upon registration of transfer of, or in
exchange or substitution for, an outstanding Warrant certificate
may be in the form so changed.
(e) Treatment of Warrantholder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem
and treat the Warrantholder as the absolute owner of this Warrant
(notwithstanding any notation of ownership or other
-7-
8
writing hereon) for all purposes and shall not be affected by any
notice to the contrary.
(f) Notice of Adjustment. Upon any Adjustment of the
Warrant Price, then and in each such case the Company shall give
written notice thereof, by first-class mail, postage prepaid,
addressed to each Warrantholder at the address of such Holder as
shown on the books of the Company, which notice shall state the
Warrant Price resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon
which such calculation is based.
(g) Stock to Be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the exercise of this
Warrant as herein provided, such number of shares of Common
Stock as shall then be issuable upon the exercise of this Warrant.
The Company covenants that all shares of Common Stock which
shall be so issued upon full payment of the Warrant Price therefor
or as other-wise set forth herein, shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to
ensure that the par value per share, if any, of the Common Stock is
at all times equal to or less than the effective Warrant Price. The
Company will take all such action as may be necessary to ensure
that all such shares of Common Stock may be so issu ed without
violation of any applicable law or regulation, or of any
requirement of any national securities exchange or automated
quotation system upon which the Common Stock of the Company
may be listed. The Company will not take any action which
results in any adjustment of the Warrant Price if the total number
of shares of Common Stock issued and issuable after such action
upon exercise of this Warrant would exceed the total number of
shares of Common Stock then authorized by the Company's
Articles of I ncorporation. The Company has not granted and will
not grant any right of first refusal with respect to shares issuable
upon exercise of this Warrant, and there are no preemptive rights
associated with such shares.
(h) Issue Tax. The issuance of certificates for shares of
Common Stock upon exercise of any Warrant shall be made
without a charge to the Warrantholder for any issuance tax in
respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name
other than that of the Warrantholder.
(i) Closing of Books. The Company will at no time close its
transfer books against the transfer of the shares of Common Stock
issued or issuable upon the exercise of this Warrant in any manner
which interferes with the timely exercise of this Warrant.
-8-
9
Definition of Common Stock. The shares purchasable
pursuant to this Warrant shall include only securities designated as
Common Stock of the Company. As used herein the term
"Common Stock' shall mean and include the no par value Common
Stock of the Company, or shares of any class or classes resulting
from any recapitalization or reclassification thereof which are not
limited to any fixed sum or percentage and are not subject to
redemption by the Company and in case at any time there shall be
more than one such resulting class, the shares of each class then
so issuable shall be substantially in the proportion which the
total number of shares of such class resulting from all such
reclassification bears to the total number of shares of all such
classes resulting from all such reclassification.
4. Registration Rights
(a) Demand Registration. Beginning as of the
Commencement Date and ending on July 24, 2001, if at any time
the holder or holders of Warrants to purchase no less than 50 % of
the Warrant Shares or holder or holders of no less than 50 % of all
outstanding Warrant Shares shall request that the, Company
register the offer and sale of such Warrant Shares to the public
under the Securities Act, the Company shall file a registration
statement with the Securities and Exchange Commission
("SEC") for the purpos e of registering such Warrant Shares (but
not this Warrant) under the Securities Act. The request described
above shall be made in writing directed to the Company at the
address set forth in Section 8 of this Warrant (the "Demand
Registration Notice").
Within ten days after receiving a Demand Registration
Notice, the Company shall issue a notice ("Company's Notice")
informing all holders of Warrants or Warrant Shares who did not
issue a Demand Registration Notice ("Other Holders") offering to
include the Warrant Shares of the Other Holders in that
registration statement for sale to the public. Each Other Holder
must notify the Company by no later than 10 days after the
Company's Notice is sent whether that Other Holder wishes to
include his, her or its Warrant Shares in the registration
statement. If any Other Holder delivers such a notice to the
Company in a timely manner, that Other Holder's Warrant Shares
will be included in the Registration Statement. If any other Holder
does not inform the Company in writing that his, her or its
Warrant Shares are to be included in such registration statement,
that Other Holder will be deemed to have waived all rights to
include his, her or its Warrant Shares in the registration statement.
For the purposes of this Warrant, all Warrant Shares for
which a demand for registration has been made shall be referred to
as "Subject Stock." Promptly upon receipt of a Demand Notice
and the expiration of the period by which the Other Holders must
submit a notice requesting inclusion of their Warrant Shares in the
registration statement, the Company shall file with the SEC a
registration statement on the applicable form for the registration
of the Subject Stock and use its best efforts to
-9-
10
cause such registration statement to become effective (including
without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities
laws, and appropriate compliance with the Regulations) as soon as
practicable to permit or facilitate the sale and distribution of the
Subject Stock. The Company shall be obligated to effect only one
(1) such registration pursuant to this Section 4(a).
Notwithstanding the provisions of this Section 4(a), if
the Company shall furnish to the Warrantholder a certificate
signed by the Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors of the
Company it would be seriously detrimental to the Company and
its shareholders for such a registration statement to be filed and it
is therefore essential to defer a filing of such registration
statement, the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after
receipt of the request from the Warrantholder to effect such a
registration; provided, however, that the Company may not
utilize this right more than once in any twenty four month period;
and provided, further, that the Warrantholder may, at any time in
writing, withdraw such request for such registration and therefore
preserve the right provided in this Section 4 (a) for the
Warrantholder to request such registration.
(b) Reparation of Documents. Prior to filing a registration
statement or any amendments or supplements thereto with the
SEC required hereby, the Company will furnish to the counsel
selected by the Warrantholder copies of all documents proposed
to be filed, which documents will be subject to the timely review
of such counsel. In connection therewith, the Company shall
prepare and file a registration statement to effect such registration.
The Warrantholder agrees to provide all such information and ma
terials and take all such action as may be reasonably required in
order to permit the Company to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of
the effective date of such registration statement.
(c) Piggyback Registration. If (but without any obligation to
do so) the Company proposes to register, prior to July 24, 2003,
with the SEC any of the Common Stock under the Regulations of
the SEC (other than pursuant to a request under Section 4(a) and
other than securities to be issued pursuant to a stock option or
other employee' benefit or similar plan, or in connection with a
merger, acquisition, or a Rule 145 transaction), the Company shall
as promptly as practicable, but at least 30 days prior to the filing
of the applicable registration statement, give written notice to the
Warrantholder of its intention to effect such registration. If, within
20 days after receipt of such notice and after the Commencement
Date but before the Expiration Date, the Warrantholder submits a
written request to the Company specifying the amount of
Registrable Stock that the Warrantholder proposes to sell, the
Company shall include the shares (but not this Warrant)
specified in such request in such registration state ment (and any
related qualification under blue sky laws or other compliance)
and the Company shall keep each such registration statement in
effect
-10-
11
and maintain compliance with each federal and state law and
regulation as set forth in Section 4(d).
Prior to filing a registration statement pursuant to the
Regulations under which the shares of Common Stock issuable
upon exercise of this Warrant may be included, the Company
shall give reasonable notice to the holder(s) of this Warrant or
Warrant Shares and shall allow such shares of Common Stock to
be. included in such registration statement subject to the following
terms and conditions; (i) such shares need not be included in any
underwritten offering if and to the extent that the managing
underwriter determines in its best judgment that their inclusion
would impair the success of the offering provided that (A) if other
selling shareholders without contractual registration rights have
requested registration of securities in the proposed offering, the
Company will reduce or eliminate such securities held by selling
shareholders without registration rights before any reduction or
elimination of Registrable Stock, and (B) any such reduction or
elimination (after taking into account the effect of clause (A) )
shall be pro rata to all other selling shareholders with
contractual registration rights; (ii) the Company shall bear all costs
of registration and sale of the shares other than underwriting
discounts or commissions and the fees and expense (if any) of
legal counsel to the holders; and (iii) the Company shall have no
obligation pursuant to this Section if at the time the registration
statement is proposed to be filed the holders may freely sell the
shares of Common Stock issuable upon exercise of this Wa rrant
pursuant to the Regulations of the SEC.
(d) Covenants of the Company. In connection with any
offering of Subject Stock registered pursuant to this Warrant, the
Company shall (a) furnish to the Warrantholder such number of
copies of any registration statement (including any preliminary
prospectus) as it may reasonably request in order to effect the
offering and sale of the Subject Stock to be offered and sold, but
only while the Company shall be required under the provisions
hereof to cause the registration statement to remain current; (b) t
ake such action as shall be desirable or necessary to qualify the
Subject Stock covered by such registration statement under such
blue sky or other state securities laws for offer and sale as the
Warrantholder shall request, and (c) keep the Warrantholder
advised in writing as to the initiation of each registration and as to
the completion thereof. Upon any registration becoming effective
pursuant to this Section 4, the Company shall use its best efforts
to: (i) keep such registration statement current for a period of 120
days; (ii) prepare and file with the SEC such amendments and
supplements to such registration statement as may be necessary to
comply with the provisions of the Regulations of the SEC with
respect to the disposition of all securities covered by such
registration statement; (iii) cause all such Subject Stock registered
pursuant to such registration statement to be listed on each
securities exchange or automated quotation system on which the
Common Stock is then listed; (iv) provide a trans fer agent and
registrar for all Subject Stock registered pursuant to such
registration statement and CUSIP number for all such Subject
Stock
-11-
12
in each case not later than the effective date of such registration;
and (v) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC.
(e) Sales by the Company. In connection with any offering of
Subject Stock pursuant to Section 4(a), the Company agrees not to
effect any public sale or distribution of Common Stock for the
seven-day period preceding, and the 90-day period following the
effective date of any such registration.
(f) Expenses. With respect to the registration of Subject
Stock pursuant to Section 4(a), together with any inclusion of the
Subject Stock in a so-called piggyback registration pursuant to
Section 4(b), the Company will pay all expenses incident to its
performance of or compliance with this Section 4 including,
without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing
expenses, messenger, telephone and delivery expenses, and fees a
nd disbursements of its counsel and independent certified public
accountants; provided that, if a registration of Subject Stock
pursuant to Section 4(a) is withdrawn at the request of the
Warrantholder, the Warrantholder shall reimburse the Company
for all expenses the Company has reasonably incurred in
connection with such registration. The Warrantholder will be
responsible for any stock transfer taxes, broker's fees or other
direct marketing expenses, all internal management, personnel and
administrative costs of the Warrantholder and the fees and
expenses of its attorneys, if any, incurred by it in connection with
effecting any such transactions.
(g) Indemnification. The Company will indemnify, to the
maximum extent permitted by law, the Warrantholder, its officers
and directors and each person who controls the Warrantholder
(within the meaning of the Regulations of the SEC) against all
losses, claims, damages, liabilities and expenses (or actions,
proceedings or settlements in respect thereof) caused by, arising
out of or based on any untrue or alleged untrue statement of a
material fact contained in any registration statement (or any
amendme nt or supplement thereto) of the Company relating to
the sale of Subject Stock registered pursuant to this Section 4, or
any exhibits or materials incorporated by reference therein, filed
with the SEC, 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, except insofar as the same
are caused by or contained in any information furnished in
writing to the Company by the Warrantholder expressly for use
therein.
The Warrantholder will indemnify, to the maximum extent
permitted by law, the Company, its officers and directors and each
person who controls the Company (within the meaning of the
Regulations of the SEC) against all losses, claims, damages,
liabilities and expenses (or actions, proceedings or settlements in
respect thereof) caused by, arising out of or based on any untrue
or alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto)
of the Company relating to the sale of Subject Stock registered
-12-
13
pursuant to this Section 4, or any exhibits or materials
incorporated by reference therein, filed with the SEC, 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, but only insofar as the same are caused by
or contained in any information furnished in writing to the
Company by the Warrantholder expressly for use therein.
Any person entitled to indemnification under this Section
4(g) will (i) give prompt written notice to the indemnifying party
of any claim with respect to which it seeks indemnification and
(ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such
defense is a ssumed, the indemnifying party will not be subject to
any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably
withheld)., An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party
a confl ict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such
claim in which case-, the indemnifying party shall be obligated to
pay the fees and expenses of up to two counsel for all parties
indemnified by such indemnifying party with respect to such
claim.
The indemnifications set forth in this Section 4(g) shall
survive the termination or expiration of this Warrant.
5. Notices of Record Dates In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution (other than cash dividends out of retained earnings), or
any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any right to sell shares of stock of any class or any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of the
Company to or consolidation or merger of the Company with or
into any other corporation or entity, or
-13-
14
(c) any voluntary or involuntary dissolution, liquidation or
winding-upof the Company, then and in each such event the
Company will give notice to the Warrantholder specifying (1) the
date on which any such record is to be taken for the purpose of
such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (2) the date
on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up is to take place, and the time, if any is to
be fixed, as of which the holde rs of record of Common Stock will
be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be given
at least 10 days and not more than 90 days prior to the date therein
specified, and such notice shall state that the action in question or
the record date is subject to the effectiveness of a registration
statement u nder the Securities Act of 1933, as amended, or to a
favor-able vote of shareholders, if either is required. Failure to
mail or receive such notice or any defect therein shall not affect
the validity of any such action.
6. No Shareholders Rights or Liabilities
This Warrant shall not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company. No
provision hereof, in the absence of affirmative action by the
Warrantholder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Warrantholder
shall give rise to any liability of such Warrantholder for the
Warrant Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
7. Lost, Stolen, Mutilated or Destroyed Warrant
In case the certificate or certificates evidencing the Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall, at
the request of the Warrantholder, issue and deliver in exchange
and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant
certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of
such Warrant a nd a bond of indemnity, if requested, also
satisfactory in form and amount at the applicant's cost. Applicants
for such substitute Warrant certificate or certificates shall also
comply with such other reasonable regulations and pay such other
reasonable charges as the Company may prescribe.
8. Notices
All notices, requests and other communications required or
permitted to be given or delivered her---under shall be in writing,
and shall be delivered or shall be sent by certified or
-14-
15
registered mail or overnight courier, postage prepaid and
addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have
been furnished to the Company by notice from such Warrantholder
and if to the Company, at 00000 Xxxxxx Xxxx 00X, Xxxxxxx,
Xxxxxxxxxx 00000; Attention: President, facsimile number (916)
662-2880, or at such other address or facsimile number as shall
have been furnished to the Warrantholder by notice from the
Company.
9. Restrictions on Transfer
This Warrant may not be sold, transferred, hypothecated or
assigned to any other person or entity for a period of one year from
the date of this Warrant, except to officers of the Xxx Xxxxxx in
accordance with all applicable laws. This Warrant shall bear a
legend setting forth the foregoing restriction.
10. Compliance with Securities Act.
This Warrant and the Warrant Shares may not be offered or
sold except in compliance with the Securities Act of 1933, as
amended, and then only against receipt of an agreement of such
person to whom such offer of sale is made to comply with the
provisions of this Section 10 with respect to any resale or other
disposition of the Warrant or Warrant Shares. The Company may
cause the following legend to be set forth on this Warrant and each
certificate representing the Warrant Shares to the extent that the
offer and sale of the Warrant Shares has not been registered under
the Securities Act o f 1933 pursuant to Section 4 hereof, unless
counsel for the Company is of the opinion as to any such
certificate that such legend is unnecessary;
THIS WARRANT [THESE SHARES] HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
11. Amendments and Waivers
This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such change, waiver,
discharge or termination is sought.
12. Severability
If one or more provisions of this Warrant are held to be
unenforceable under applicable law, such provisions shall be
excluded from this Warrant, and the balance of this
-15-
16
Warrant shall be interpreted as if such provision were so excluded
and shall be enforceable in accordance with its terms.
13. Governing Law
This Warrant shall be governed by and construed under the
laws of the State of California without regard to conflict of law
principles.
14. Headings
The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect any of the terms hereof.
IN WITNESS WHEREOF, the Company has executed this
Warrant on and as of the day and year first above written.
X. X. Xxxxxxxx, Inc.
a California corporation
/s/Xxxx X. Xxxxxxxx
___________________________________
Xxxx X. Xxxxxxxx
Co-Chief Executive Officer
-16-
17
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
____________________________:
The undersigned hereby irrevocably elects to exercise the
right of purchaser represented by the within Warrant for, and to
purchase thereunder, ___________________ shares of Common
Stock, as provided for therein, and either tenders herewith
payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of
$_______________ or, if the undersigned elects pursuant to
Section 1(b) of the within Warrant to convert such Warrant into
Common Stock net issuance, the undersigned exercises the within
Warrant by exchange under the terms of Section 1(b).
Please issue a certificate or certificates for such Common
Stock in the name of and pay any cash for any fractional share to:
Name:______________________________
Address:___________________________
Social
Security
No:_______________________
Signature:_________________________
Note: The above signature must
correspond exactly with the
name on the first page of
this Warrant or with the
name of the assignee
appearing in the assignment
form below.
If said number of shares shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be
issued in the name of said undersigned for the balance remaining
of the shares purchasable thereunder rounded up to the next higher
number of shares.
Signature
Guaranteed:____________________________________________
(Signature must be guaranteed by a bank or trust company
having an office or correspondence in the United States or by a
member firm of a registered securities exchange or the National
Association of Security Dealers, Inc.)
-17-
18
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received,____________________________ hereby
sells, assigns, and transfers unto
_____________________________ the within Warrant
Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute, and appoint attorney, to
transfer said Warrant on the books of the within-named Company
with respect to the number of Warrants set forth below, with full
power of substitution in the premises:
Name(s) of
Assignee(s)/Address No. of Warrants
------------------- ---------------
And if said number of Warrants shall not be all the Warrants
represented by the Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the
Warrants registered by said Warrant.
Dated:
Signature:________________________
Note: The above signature must
correspond exactly with the
name on the face of this
Warrant
Signature
Guaranteed:____________________________________________
(Signature must be guaranteed by a bank or trust company
having an office or correspondence in the United States or by a
member firm of a registered securities exchange or the National
Association of Security Dealers, Inc.)
-18-
