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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.
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DIAMOND MULTIMEDIA SYSTEMS, INC.
THIRD COMMON STOCK PURCHASE WARRANT
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This certifies that, for good and valuable consideration, Diamond
Multimedia Systems, Inc., a Delaware corporation ("Diamond" or the "Company"),
grants to S3 Incorporated, a Delaware corporation ("S3" or the "Warrantholder"),
the right to subscribe for and purchase from the Company the number of fully
paid and nonassessable shares (the "Warrant Shares") of the Company's Common
Stock, $0.001 par value (the "Common Stock") specified herein, at the purchase
price per share (the "Exercise Price") determined as set forth herein,
exercisable, subject to the restrictions set forth herein, during the period
(the "Exercise Period") set forth in Section 1.4 hereof, all subject to the
terms, conditions and adjustments herein set forth. This Warrant (the "Third
Warrant") is issued in connection with (i) that certain Credit Agreement, as
amended (the "Credit Agreement"), dated as of June 11, 1999, by and between the
Company and S3 and (ii) that certain Agreement and Plan of Merger (the "Merger
Agreement"), dated as of June 21, 1999, by and between the Company and S3. Two
other Warrants, dated as of June 10, 1999, and June 15, 1999, respectively, have
also been issued to S3 in connection with the Credit Agreement (respectively,
the "First Warrant" and the "Second Warrant"). Certain capitalized terms used
herein are defined in Section 8 hereof. Capitalized terms used herein not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement.
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1. Exercise of Warrant.
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1.1 Duration and Exercise of Warrant.
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(a) Cash Exercise. This Warrant may be exercised by the Warrantholder by
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(i) the surrender of this Warrant to the Company, with a duly
executed Exercise Form specifying the number of Warrant Shares to be purchased,
during normal business hours on any Business Day during the Exercise Period and
(ii) the delivery of payment to the Company, for the account of the Company, of
the Exercise Price for the number of Warrant Shares specified in the Exercise
Form, (A) by wire transfer of immediately available funds to a bank account
specified by the Company; (B) by certified or bank cashier's check; (C) by
cancellation of indebtedness under the Credit Agreement, or (D) of any other
amount due to the Warrantholder under any other contract (including any purchase
order) pursuant to which the Warrantholder does business with the Company not
paid within twenty (20) days of when due, or as otherwise mutually agreed to
between the parties. The Company agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as the record holder of such Warrant Shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for the Warrant Shares as aforesaid. A stock
certificate or certificates for the Warrant Shares specified in the Exercise
Form shall be delivered to the Warrantholder as promptly as practicable. If this
Warrant shall have been exercised only in part, the Company shall, at the time
of delivery of the stock certificate or certificates, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical with
this Warrant. No adjustments shall be made on Warrant Shares issuable on the
exercise of this Warrant for any cash dividends paid or payable to holders of
record of Common Stock prior to the date as of which the Warrantholder shall be
deemed to be the record holder of such Warrant Shares.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant to
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Section 1.1(a), this Warrant may be exercised by the
Warrantholder by the surrender of this Warrant to the Company, with a duly
executed Exercise Form marked to reflect Net Issue Exercise and specifying the
number of Warrant Shares to be purchased, during normal business hours on any
Business Day during the Exercise Period. The Company agrees that such Warrant
Shares shall be deemed to be issued to the Warrantholder as the record holder of
such Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered as aforesaid. Upon such exercise, the
Warrantholder shall be entitled to receive shares equal to the value of this
Warrant (or the portion hereof being exercised) computed as of the date of
surrender of this Warrant to the Company using the following formula:
X = Y x (A-B)
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A
Where X = the number of shares of Common Stock to be issued to Warrantholder
under this Section 1.1(b);
Y = the number of shares of Common Stock otherwise purchasable under
this Warrant (at the date of such calculation);
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A = the fair market value of one share of Common Stock (at the date of
such calculation);
B = the Exercise Price (as adjusted to the date of such calculation).
(c) Fair Market Value. For purposes of Section 1.1(b) "fair market
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value" of one share of Common Stock shall mean:
(i) the average closing price per share of the Common Stock on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading for the ten (10) Trading Day period ending on the date of
exercise, or,
(ii) if not listed or traded on any such exchange, the average last
reported sales price per share of the Common Stock on the Nasdaq National Market
or The Nasdaq SmallCap Market (collectively, "Nasdaq") for the ten (10) Trading
Day period ending on the date of exercise, or,
(iii) if not listed or traded on any such exchange or Nasdaq, the average
of the mean of the bid and asked prices per share of the Common Stock as
reported in the OTC Bulletin Board or, if not so reported, in the "pink sheets"
published by the National Quotation Bureau, Inc. for the ten (10) Trading Day
period ending on the date of exercise, or,
(iv) if such quotations are not available, the fair market value per share
of the Common Stock on the date such notice was received by the Company as
reasonably determined by the Board of Directors of the Company.
1.2 Number of Warrant Shares. This Warrant shall entitle the Warrantholder
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to purchase 2,236,198 shares of Common Stock.
1.3 Exercise Price. The Exercise Price shall be equal to $4.471875 (the
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"Exercise Price"). From and after the issuance of this Warrant,
the Exercise Price shall be adjusted in accordance with Section 6 hereof.
1.4 Term of Warrant and Exercisability.
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(a) Term of Warrant. This Warrant shall terminate on the later of (i) June
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21, 2000; (ii) the date on which the indebtedness of the Company to the
Warrantholder under the Credit Agreement is paid in full; provided, however,
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that this Warrant shall terminate upon the
consummation of an S3 Acquisition. Nothing in this Section 1.4(a), however,
shall require S3 to advance any portion of the third Loan pursuant to Section
3.4 of the Credit Agreement, and S3 shall not have any liability for failing to
do so. The parties' rights and obligations under Sections 2, 8 and 9 hereof
shall survive the termination of this Warrant.
(b) Exercisability. Notwithstanding anything to the contrary herein, this
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Warrant shall become immediately exercisable, in whole or in part, as to one
hundred percent (100%) of the Warrant Shares concurrently with the advance by S3
of the third Loan to Diamond pursuant
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to Section 3.4 of the Credit Agreement. This Warrant shall also become
immediately exercisable, in whole or in part, as to one hundred percent (100%)
of the Warrant Shares if (i) Diamond materially breaches its obligations under
the Credit Agreement for so long as such breach shall be continuing; (ii) S3
does not advance the third Loan to Diamond on July 1, 1999 pursuant to Section
3.4 of the Credit Agreement, because any one of the conditions to the third Loan
set forth in Section 3.4(b), Section 3.4(c), Section 3.4(d) (unless such failure
is due to a failure by Finova to consent to the terms of the Credit Agreement),
or Section 3.4(e), of the Credit Agreement is not satisfied on or prior to such
date, or (iii) prior to the time that S3 advances the third Loan to Diamond
pursuant to Section 3.4 of the Credit Agreement, Diamond receives a Superior
Proposal (as defined in the Merger Agreement) in respect of Diamond from a third
party Person and executes a definitive agreement for a transaction that, if
consummated, would constitute a Change of Control of Diamond. If this Warrant
has become exercisable as to one hundred percent (100%) of the Warrant Shares
pursuant to the provisions of this Section 1.4(b), and S3 receives a Superior
Proposal (as defined in the Merger Agreement) in respect of S3 from a third
party Person for a transaction that, if consummated, would constitute an S3
Acquisition, then this Warrant shall cease to be exercisable as to one hundred
percent (100%) of the Warrant Shares until and unless S3 terminates discussions
with such third party Person (without consummation of the transaction that would
constitute an S3 Acquisition), irrespective of whether S3 has executed a
definitive agreement with such third party Person for a transaction that would
constitute an S3 Acquisition; provided, however, that if prior to the time S3
receives a Superior Proposal (as ----------------- defined in the Merger
Agreement) in respect of S3 from a third party Person for a transaction that, if
consummated, would constitute an S3 Acquisition, Diamond has already received a
Superior Proposal (as defined in the Merger Agreement) in respect of Diamond
from a third party Person for a transaction that, if consummated, would
constitute a Change of Control of Diamond, this sentence shall not apply, and
this Warrant shall remain exercisable as to one hundred percent (100%) of the
Warrant Shares unless and until Diamond terminates discussions with such third
party Person (without consummation of the transaction that would constitute a
Change in Control of Diamond) irrespective of whether Diamond has executed a
definitive agreement with such third party Person for a transaction that would
constitute a Diamond Change in Control. Unless this Warrant has become
exercisable as to the Warrant Shares pursuant to the provisions of this Section
1.4(b), this Warrant shall not be exercisable as to the Warrant Shares.
1.5 Payment of Taxes. The issuance of certificates for Warrant Shares shall
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be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; provided, however, that the
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Warrantholder shall be required to pay any and all taxes 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 then Warrantholder as
reflected upon the books of the Company.
1.6 Information. Upon receipt of a written request from a Warrantholder,
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the Company agrees to deliver promptly to such Warrantholder a copy of its
current publicly available financial statements and to provide such other
publicly available information concerning the Company as such Warrantholder may
reasonably request (if electronic access to such information via XXXXX is not
then generally available to the public) in order to assist the Warrantholder in
evaluating the merits and risks of exercising the Warrant and to make an
informed investment decision in connection with such exercise.
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2. Registration Under the Securities Act of 1933.
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2.1 Piggyback Registration.
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(a) Right to Include Registrable Securities. If at any time or from time to
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time prior to the fifth anniversary of the date hereof, the Company proposes to
register any of its securities under the Securities Act on any form for the
registration of securities under such Act, whether or not for its own account
(other than by a registration statement on Form S-8 or other form which does not
include substantially the same information as would be required in a form for
the general registration of securities or would not be available for the
Registrable Securities) (a "Piggyback Registration"), it shall as expeditiously
as reasonably possible give written notice to all Holders of its intention to do
so and of such Holders' rights under this Section 2.1. Such rights are referred
to hereinafter as "Piggyback Registration Rights." All references to "Warrant
Shares" and "Warrants" for purposes of this Article 2 shall refer to any such
shares or warrants issued by Diamond to S3. Upon the written request of any such
Holder made within ten (10) days after receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder), the Company shall include in the Registration Statement the Registrable
Securities which the Company has been so requested to register by the Holders
thereof and the Company shall keep such registration statement in effect and
maintain compliance with each federal and state law or regulation for the period
necessary for such Holder to effect the proposed sale or other disposition (but
in no event for a period greater than ninety (90) days).
(b) Withdrawal of Piggyback Registration by Company. If, at any time after
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giving written notice of its intention to register any securities in a Piggyback
Registration but prior to the effective date of the related Registration
Statement, the Company shall determine for any reason not to register such
securities, the Company shall give notice of such determination to each Holder
and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such Piggyback Registration. All best efforts
obligations of the Company pursuant to Section 2.4 shall cease if the Company
determines to terminate prior to such effective date any registration where
Registrable Securities are being registered pursuant to this Section 2.1.
(c) Piggyback Registration of Underwritten Public Offerings. If a Piggyback
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Registration involves an offering by or through underwriters, then (i) all
Holders requesting to have their Registrable securities included in the
Company's Registration Statement must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to other selling shareholders and (ii) any Holder requesting to have his or its
Registrable Securities included in such Registration Statement may elect in
writing, not later than seven (7) Business Days prior to the effectiveness of
the Registration Statement filed in connection with such registration, not to
have his or its Registrable Securities so included in connection with such
registration.
(d) Payment of Registration Expenses for Piggyback Registration. The
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Company shall pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to a Piggyback Registration Right
contained in this Section 2.1.
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(e) Priority in Piggyback Registration. If a Piggyback Registration
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involves an offering by or through underwriters, the Company, except as
otherwise provided herein, shall not be required to include Registrable
Securities therein if and to the extent the underwriter managing the offering
reasonably believes in good faith and advises each Holder requesting to have
Registrable Securities included in the Company's Registration Statement that
such inclusion would materially adversely affect such offering; provided that
(i) if other selling shareholders who are employees, officers, directors or
other affiliates of the Company have requested registration of securities in the
proposed offering, the Company will reduce or eliminate such other selling
shareholders' securities before any reduction or elimination of Registrable
Securities; and (ii) any such reduction or elimination (after taking into
account the effect of clause (i)) shall be pro rata to all other holders of the
securities of the Company exercising "Piggyback Registration Rights" similar to
those set forth herein in proportion to the respective number of shares they
have requested to be registered.
2.2 Demand Registration.
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(a) Request for Registration. Unless this Warrant is exercised pursuant to
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Section 1.1(b) hereof, if, at any time prior to the fifth anniversary of the
date hereof, Holders holding the greater of (i) at least twenty-five percent
(25%) of the combined total of Warrant Shares issuable and Warrant Shares
outstanding pursuant to the Second Warrant and any prior or subsequent warrant
issued by Diamond to S3 or (ii) one hundred percent (100%) of such shares issued
or issuable pursuant to the First Warrant, at such time request that the Company
file a registration statement on Form S-3 (or Form S-1 if Form S-3 is not then
available to the Company) under the Securities Act, as soon as practicable
thereafter the Company shall use its commercially reasonable efforts to file a
registration statement with respect to all Warrant Shares that it has been so
requested to include (so long as such Warrant Shares represent the greater of
the amount set forth in clause (i) or clause (ii) above)(the "Demand
Registration") and obtain the effectiveness thereof, and to take all other
action necessary under any federal or state law or regulation to permit the
Warrant Shares that are held and/or that may be acquired upon the exercise of
the Warrants specified in the notices of the Holders or holders thereof to be
sold or otherwise disposed of, and the Company shall maintain such compliance
with each such federal and state law and regulation for the period necessary for
such Holders or holders to effect the proposed sale or other disposition, which
period shall be not less than thirty (30) days; provided, however, the Company
shall be entitled to defer such registration for a period of up to forty-five
(45) days if and to the extent that its Board of Directors shall determine that
such registration would interfere with a pending corporate transaction. The
Company shall also promptly give written notice to the Holders and the holders
of any other Warrants and/or the holders of any Warrant Shares who or that have
not made a request to the Company pursuant to the provisions of this Section
2.2(a) of its intention to effect any required registration or qualification,
and shall use its commercially reasonable efforts to effect as expeditiously as
possible such registration or qualification of all such other Warrant Shares
that are then held and/or that may be acquired upon the exercise of the
Warrants, the Holder or holders of which have requested such registration or
qualification within fifteen (15) days after such notice has been given by the
Company. The Company shall be required to effect a registration or qualification
pursuant to this Section 2.2(a) on a total of one (1) occasion.
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(b) Payment of Registration Expenses for Demand Registration. The Company
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shall pay all Registration Expenses in connection with the Demand Registration.
(c) Selection of Underwriters. If the Demand Registration is requested to
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be in the form of an underwritten offering, the managing underwriter shall be
selected by the Holders of a majority of the Warrant Shares to be registered.
Such selection shall be subject to the Company's consent, which consent shall
not be unreasonably withheld.
(d) Procedure for Requesting Demand Registration. Any request for a Demand
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Registration shall specify the aggregate number of the Registrable Securities
proposed to be sold and the intended method of disposition. Within ten (10) days
after receipt of such a request the Company will give written notice of such
registration request to all Holders, and the Company will include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within fifteen (15) Business
Days after the date on which such notice is given by the Company. Each such
request shall also specify the aggregate number of Registrable Securities to be
registered and the intended method of disposition thereof.
2.3 Registration Procedures. If and whenever the Company is required to
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use its commercially reasonable efforts to take action pursuant to any federal
or state law or regulation to permit the sale or other disposition of any
Registrable Securities that are then held or that may be acquired upon exercise
of the Warrants in order to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Article 2, the Company
shall, as expeditiously as practicable:
(a) prepare and file with the SEC, as soon as practicable within forty-five
(45) ays after the end of the period within which requests for registration may
be iven to the Company (but subject to the provision for deferral contained in
ection 2.2(a) hereof) a Registration Statement or Registration Statements
elating to the registration on any appropriate form under the Securities Act,
whch form shall be available for the sale of the Registrable Securities in
acordance with the intended method or methods of distribution thereof, subject
to Section 2.1(e) hereof, and use its commercially reasonable efforts to cause
such Registration Statements to become effective; provided that before filing a
Registration Statement or Prospectus or any amendment or supplements thereto,
including documents incorporated by reference after the initial filing of any
Registration Statement, the Company will furnish to the Holders of the
Registrable Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents provided to be filed, which
documents will be subject to the review of such Holders and underwriters;
(b) prepare and file with the SEC such amendments and post-effective
amendments to a Registration Statement as may be necessary to keep such
Registration Statement effective for a period of thirty (30) days; cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Securities Act;
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement or supplement to such
Prospectus;
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(c) notify the selling Holders of Registrable Securities and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm
such advice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related Prospectus or for additional information; (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iv) if at any time the representations and warranties of the Company
contemplated by paragraph (m) below cease to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (vi) of the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus or any
document incorporated therein by reference untrue or which requires the making
of any changes in the Registration Statement or Prospectus so that they will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(e) if reasonably requested by the managing underwriters, immediately
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters believe (on advice of counsel) should
be included therein as required by applicable law relating to such sale of
Registrable Securities, including, without limitation, information with respect
to the purchase price being paid for the Registrable Securities by such
underwriters and with respect to any other terms of the underwritten (or
"best-efforts" underwritten) offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each selling Holder of Registrable Securities and each
managing underwriter, without charge, at least one signed copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(g) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each preliminary Prospectus) any amendment or supplement
thereto as such Persons may reasonably request; the Company consents to the use
of such Prospectus or any amendment or supplement thereto by each of the selling
Holders of Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities, cooperate with
the selling Holders of Registrable Securities, the underwriters, if any, and
their respective counsel in connection with the registration or qualification of
such Registrable Securities for offer and sale
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under the securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder or underwriter reasonably requests in writing, keep
each such registration or qualification effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided that the Company will not be required to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action which would subject the Company to general service of process
in any jurisdiction where it is not at the time so subject;
(i) cooperate with the selling Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two (2) Business Days prior to any sale of Registrable
Securities to the underwriters;
(j) use its commercially reasonable efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities within the
United States as may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities;
(k) upon the occurrence of any event contemplated by Section 2.3(c)(vi)
above, prepare a supplement or post-effective amendment to the applicable
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such that the Prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(l) with respect to each issue or class of Registrable Securities, use its
commercially reasonable efforts to cause all Registrable Securities covered by
the Registration Statement to be listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed if requested by
the Holders of a majority of such issue or class of Registrable Securities;
(m) enter into such agreements (including an underwriting agreement) and
take all such other action reasonably required in connection therewith in order
to expedite or facilitate the disposition of such Registrable Securities and in
such connection, if the registration is in connection with an underwritten
offering (i) make such representations and warranties to the underwriters, in
such form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions in form, scope and substance shall be reasonably
satisfactory to the underwriters) addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such underwriters; (iii)
obtain "cold comfort" letters and updates thereof from the Company's accountants
addressed to the underwriters,
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such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection with
underwritten offerings; (iv) set forth in full in any underwriting agreement
entered into the indemnification provisions and procedures of Section 2.4 hereof
with respect to all parties to be indemnified pursuant to said Section; and (v)
deliver such documents and certificates as may be reasonably requested by the
underwriters to evidence compliance with clause (i) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company; the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required hereunder;
(n) make available for inspection by one or more representatives of the
Holders of Registrable Securities being sold, any underwriter participating in
any disposition pursuant to such registration, and any attorney or accountant
retained by such Holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such representatives, in connection with such; and
(o) otherwise use its commercially reasonable efforts to comply with all
applicable federal and state regulations; and take such other action as may be
reasonably necessary to or advisable to enable each such Holder and each such
underwriter to consummate the sale or disposition in such jurisdiction or
jurisdiction in which any such Holder or underwriter shall have requested that
the Registrable Securities be sold.
Except as otherwise provided in this Agreement, the Company shall have sole
control in connection with the preparation, filing, withdrawal, amendment or
supplementing of each Registration Statement, the selection of underwriters, and
the distribution of any preliminary Prospectus included in the Registration
Statement, and may include within the coverage thereof additional shares of
Common Stock or other securities for its own account or for the account of one
or more of its other security holders.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding the distribution of such securities and such other information as may
otherwise be required by the Securities Act to be included in such Registration
Statement.
2.4 Indemnification.
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(a) Indemnification by Company. In connection with each Registration
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Statement relating to disposition of Registrable Securities, the Company shall
indemnify and hold harmless each Holder and each underwriter of Registrable
Securities and each Person, if any, who controls such Holder or underwriter
(within the meaning of section 15 of the Securities Act or section 20 of the
Exchange Act) against any and all losses, claims, damages and liabilities, joint
or several (including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Securities Act, the Exchange Act or other federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged
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untrue statement of a material fact contained in any Registration Statement,
Prospectus or preliminary Prospectus or any amendment thereof or supplement
thereto, or arise out of or are based upon 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; provided, however, that such indemnity
shall not inure to the benefit of any Holder or underwriter (or any person
controlling such Holder or underwriter within the meaning of section 15 of the
Securities Act or section 20 of the Exchange Act) on account of any losses,
claims, damages or liabilities arising from the sale of the Registrable
Securities if such untrue statement or omission or alleged untrue statement or
omission was made in such Registration Statement, Prospectus or preliminary
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with information furnished in writing to the Company by such Holder or
underwriter specifically for use therein; provided, further, that the Company
shall not be liable to such Holder or any underwriter (or any person controlling
such Holder or underwriter) with respect to any such untrue statement or alleged
untrue statement or omission made in any preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased shares of
the Common Stock from such Holder or underwriter but was not given a copy of the
Prospectus (as amended or supplemented) in any case where such delivery of the
Prospectus (as amended or supplemented) was required by the Securities Act. The
Company shall also indemnify selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of section 15 of the Securities Act or section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Holders of Registrable Securities, if requested. This indemnity agreement shall
be in addition to any liability which the Company may otherwise have.
(b) Indemnification by Holder. In connection with each Registration
--------------------------
Statement, each Holder shall indemnify, to the same extent as the
indemnification provided by the Company in Section 2.4(a), the Company, its
directors and each officer who signs the Registration Statement and each Person
who controls the Company (within the meaning of section 15 of the Securities Act
and section 20 of the Exchange Act) but only insofar as such losses, claims,
damages and liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in the
Registration Statement, the Prospectus or preliminary Prospectus or any
amendment thereof or supplement thereto, in reliance upon and in conformity with
information furnished in writing by such Holder to the Company specifically for
use therein. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
so furnished in writing by such Persons specifically for inclusion in any
Prospectus, Registration Statement or preliminary Prospectus or any amendment
thereof or supplement thereto.
(c) Conduct of Indemnification Procedure. Any party that proposes to assert
-------------------------------------
the right to be indemnified hereunder will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an
-11-
indemnifying party or parties under this Section, notify each such indemnifying
party of the commencement of such action, suit or proceeding, enclosing a copy
of all papers served. No indemnification provided for in Section 2.4(a) or
2.4(b) shall be available to any party who shall fail to give notice as provided
in this Section 2.4(c) if the party to whom notice was not given was unaware of
the proceeding to which such notice would have related and was materially
prejudiced by the failure to give such notice, but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
it from any liability that it may have to any indemnified party for contribution
otherwise than under this Section. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and the approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of counsel
by such indemnified party has been authorized in writing by the indemnifying
parties, (ii) the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in which case
the indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (iii) the indemnifying parties
shall not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which cases
the fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnified party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.
(d) Contribution. In connection with each Registration Statement relating
-------------
to the disposition of Registrable Securities, if the indemnification provided
for in Section 2.4(a) or 2.4(b) hereof is unavailable to an indemnified party
thereunder in respect to any losses, claims, damages or liabilities referred to
therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraphs (a) or (b) of this Section 2.4 in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this paragraph
(d) shall be deemed to include any legal or other expenses
-12-
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.
(e) Underwriting Agreement to Control. Notwithstanding the foregoing
----------------------------------
provisions of this Section 2.4, to the extent that the provisions on
indemnification and contribution contained in any underwriting agreement entered
into in connection with the underwritten public offering of the Registrable
Securities are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall control.
(f) Specific Performance. The Company and the Holder acknowledge that
---------------------
remedies at law for the enforcement of this Section 2.4 may be inadequate and
intend that this Section 2.4 shall be specifically enforceable.
(g) Survival of Obligations. The obligations of the Company and the Holder
------------------------
under this Section 2.4 shall survive the completion of any offering of
Registrable Securities pursuant to a Registration Statement under this Article
2, and otherwise.
2.5 Reports Under Securities Exchange Act of 1934. With a view to making
----------------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144, the Securities
Act and the Exchange Act, or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without registration
or pursuant to such form.
2.6 Restrictions on Transfer; Compliance with Securities Laws. This Warrant
----------------------------------------------------------
and the Warrant Shares issued upon the exercise of the Warrant may not be
transferred or assigned in whole or in part without compliance with all
applicable federal and state securities laws by the transferor and transferee
(including the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, if such are requested by the Company).
The Warrantholder, by acceptance hereof, acknowledges that this Warrant and the
Warrant Shares to be issued upon exercise hereof are being acquired solely for
the Warrantholder's own account and not as a nominee for any other party, and
for investment, and that the Warrantholder will not offer, sell or otherwise
dispose of any Warrant Shares to be issued upon exercise hereof except
-13-
under circumstances that will not result in a violation of the Securities Act or
any state securities laws. Upon exercise of this Warrant, the Warrantholder
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the Warrant Shares so purchased are being acquired solely
for the Warrantholder's own account and not as a nominee for any other party,
for investment, and not with a view toward distribution or resale.
2.7 Restrictive Legends. This Warrant shall (and each Warrant issued upon
--------------------
transfer in whole or in part of this Warrant pursuant to this Section 2 or
issued in substitution for this Warrant pursuant to Section 4 shall) be stamped
or otherwise imprinted with a legend in substantially the following form:
"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."
Except as otherwise permitted by this Section 2, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE 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."
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a stock certificate for Warrant Shares without a legend if (i) such
Warrant Shares, as the case may be, have been registered for resale under the
Securities Act or sold pursuant to Rule 144 under the Securities Act (or a
successor rule thereto) or (ii) the Warrantholder has received an opinion of
counsel reasonably satisfactory to the Company that such registration is not
required with respect to such Warrant Shares.
3. Representations and Warranties of the Company. The Company hereby
----------------------------------------------
represents and warrants to the Warrantholder (except as otherwise may be
prohibited, restricted or limited by law or any rule or regulation of a
regulatory entity) as follows:
3.1 Organization; Authority Relative to this Warrant. The Company is a
-------------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to execute and deliver this Warrant, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Warrant by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly and validly authorized by
all
-14-
necessary corporate action on the part of the Company. This Warrant has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and by general equitable principles.
3.2 Authority to Issue Shares. The Company has taken all necessary
--------------------------
corporate action to authorize and reserve and permit it to issue, and at all
times from the date hereof through the end of the Exercise Period shall have
reserved, all the Warrant Shares issuable pursuant to this Warrant. All of the
shares of Common Stock issuable under this Warrant, upon their issuance and
delivery in accordance with the terms of this Warrant, will be duly authorized,
validly issued, fully paid and nonassessable, will be delivered free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Warrantholder's voting rights, charges,
adverse rights and other encumbrances of any nature whatsoever (other than this
Warrant) and will not be subject to any preemptive rights.
3.3 No Conflict; Required Filings and Consents.
-------------------------------------------
(a) The execution and delivery of this Warrant by the Company does not, and
the performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby will not, (i) conflict with or violate
the certificate of incorporation or bylaws of the Company, (ii) assuming that
all consents and filings described in Section 3.3(b) have been obtained or made,
conflict with or violate any law applicable to the Company or by which any
property or asset of the Company is bound or affected or (iii) result in any
violation pursuant to, any note, bond, mortgage, indenture, contract, agreement
, lease, license, permit, franchise or other instrument or obligation to which
the Company is a party or by which the Company or any of its properties may be
bound or affected.
(b) No consent of, or filing with, any governmental entity is required by
the Company in connection with the execution and delivery of this Warrant, the
performance by the Company of its obligations hereunder or the consummation by
the Company of the transactions contemplated hereby, except for (i) compliance
with the Xxxx-Xxxxx-Xxxxxx Act and (ii) consents or filings the failure of which
to be obtained or made would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated hereby or the
performance by the Company of any of its obligations hereunder.
3.4 Reservation and Registration of Shares, Etc. The Company covenants and
--------------------------------------------
agrees that all Warrant Shares which are issuable upon the exercise of this
Warrant will, upon issuance, be validly issued, fully paid and nonassessable and
free from all taxes, liens, security interests, charges and other encumbrances
with respect to the issue thereof, other than taxes in respect of any transfer
occurring contemporaneously with such issue. The Company further covenants and
agrees that, during the Exercise Period, the Company will at all times have
authorized and reserved, and keep available free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant and will, at its expense, upon each such
reservation of shares, procure such listing of such shares of Common Stock
(subject to issuance or notice of issuance) as then may be required on all stock
exchanges on which the Common Stock is then listed or on Nasdaq.
-15-
4. Exchange, Loss or Destruction of Warrant. Upon receipt by the Company of
-----------------------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, of such bond or
indemnification as the Company may require, and, in the case of such mutilation,
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor. The term "Warrant" as used in this
Agreement shall be deemed to include any Warrants issued in substitution or
exchange for this Warrant.
5. Ownership of Warrant. The Company may deem and treat the person in whose
---------------------
name this Warrant is registered as the holder and owner hereof (notwithstanding
any notations of ownership or writing hereon made by anyone other than the
Company) for all purposes and shall not be affected by any notice to the
contrary.
6. Certain Adjustments.
--------------------
6.1 Adjustments. The number of Warrant Shares purchasable upon the exercise
------------
of this Warrant and the Exercise Price shall be subject to adjustment as
follows:
(a) Stock Dividends. If at any time prior to the exercise of this Warrant
----------------
in full (i) the Company shall fix a record date for the issuance of any stock
dividend payable in shares of Common Stock or (ii) the number of shares of
Common Stock shall have been increased by a subdivision or split-up of shares of
Common Stock, then, on the record date fixed for the determination of holders of
Common Stock entitled to receive such dividend or immediately after the
effective date of subdivision or split-up, as the case may be, the number of
shares of Common Stock to be delivered upon exercise of this Warrant will be
increased so that the Warrantholder will be entitled to receive the number of
shares of Common Stock that such Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto,
and the Exercise Price will be adjusted as provided below in paragraph (f).
(b) Combination of Stock. If at any time prior to the exercise of this
---------------------
Warrant in full the number of shares of Common Stock outstanding shall have been
decreased by a combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the number of shares
of Common Stock to be delivered upon exercise of this Warrant will be decreased
so that the Warrantholder thereafter will be entitled to receive the number of
shares of Common Stock that such Warrantholder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto,
and the Exercise Price will be adjusted as provided below in paragraph (f).
(c) Reorganization, etc. If at any time prior to the exercise of this
--------------------
Warrant in full any capital reorganization of the Company, or any
reclassification of the Common Stock, or any consolidation of the Company with
or merger of the Company with or into any other person or any sale, lease or
other transfer of all or substantially all of the assets of the Company to any
other person, shall be effected in such a way that the holders of Common Stock
shall be entitled to receive stock, other securities or assets (whether such
stock, other securities or assets are issued or distributed by the Company or
another person) with respect to or in exchange for Common Stock, then, upon
exercise of this Warrant the Warrantholder shall have the right to receive the
kind and amount of stock, other securities or assets receivable upon such
reorgani-
-16-
zation, reclassification, consolidation, merger or sale, lease or other transfer
by a holder of the number of shares of Common Stock that such Warrantholder
would have been entitled to receive upon exercise of this Warrant had this
Warrant been exercised immediately before such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer, subject to adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 6.
(d) Fractional Shares. No fractional shares of Common Stock or scrip shall
------------------
be issued to any Warrantholder in connection with the exercise of this Warrant.
Instead of any fractional shares of Common Stock that would otherwise be
issuable to such Warrantholder, the Company will pay to such Warrantholder a
cash adjustment in respect of such fractional interest in an amount equal to
that fractional interest of the fair market value of one share of Common Stock
as of the date of exercise.
(e) Carryover. Notwithstanding any other provision of this Section 6, no
----------
adjustment shall be made to the number of shares of Common Stock to be delivered
to the Warrantholder (or to the Exercise Price) if such adjustment represents
less than one percent (1%) of the number of shares to be so delivered, but any
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to one percent (1%) or more of the number of
shares to be so delivered.
(f) Exercise Price Adjustment. Whenever the number of Warrant Shares
--------------------------
purchasable upon the exercise of the Warrant is adjusted, as herein provided,
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
purchasable immediately thereafter.
(g) No Duplicate Adjustments. Notwithstanding anything else to the contrary
-------------------------
contained herein, in no event will an adjustment be made under the provisions of
this Section 6 to the number of Warrant Shares issuable upon exercise of this
Warrant or the Exercise Price for any event if an adjustment having
substantially the same effect to the Warrantholder as any adjustment that
otherwise would be made under the provisions of this Section 6 is made by the
Company for any such event to the number of shares of Common Stock (or other
securities) issuable upon exercise of this Warrant.
6.2 No Adjustment for Dividends. Except as provided in Section 1 hereof or
----------------------------
Section 6.1 hereof, no adjustment in respect of any dividends shall be made
during the term of the Warrant or upon the exercise of this Warrant.
6.3 Notice of Adjustment. Whenever the number of Warrant Shares or the
---------------------
Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to the
Warrantholder, notice of such adjustment or adjustments and a certificate of the
chief financial officer of the Company setting forth the number of Warrant
Shares and the Exercise Price of such Warrant Shares after such adjustment,
setting forth a brief
-17-
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
7. Notices of Corporate Action. 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, 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 other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any Change of Control,
or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
the Company will mail to the Warrantholder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right and the amount and character of any such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, Change of Control,
dissolution, liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, Change of Control,
dissolution, liquidation or winding-up. Such notice shall be mailed at least ten
(10) days prior to the date therein specified, in the case of any date referred
to in the foregoing subdivision (i), and at least ten (10) days prior to the
date therein specified, in the case of the date referred to in the foregoing
subdivision (ii).
8. Definitions. As used herein, unless the context otherwise requires, the
------------
following terms have the following respective meanings:
Business Day: any day other than a Saturday, Sunday or a day on which
------------
national banks are authorized by law to close in the City of San Francisco,
State of California.
Change of Control: shall mean (i) the consolidation of the Company with or
-----------------
merger of the Company with or into any other person in which the Company is not
the surviving corporation or in which the Company's stockholders prior to such
transaction do not own, directly or indirectly, immediately after such
transaction, fifty percent (50%) or more of the outstanding securities entitled
to vote generally for the election of directors or similar managing authority of
the surviving or resulting entity in such transaction, (ii) the sale of all or
substantially all of the assets of the Company to any other person or (iii) any
sale or transfer of any capital stock of the Company after the date of this
Warrant, following which forty (40%) or more of the combined voting power of the
Company becomes beneficially owned by one person or group acting together. For
purposes of this definition of Change of Control, "group" shall have the meaning
as such term is used in section 13(d) under the Exchange Act and the rules and
regulations thereunder.
-18-
Company: Diamond Multimedia Systems, Inc., a Delaware corporation.
-------
Exchange Act: the Securities Exchange Act of 1934, as amended, or any
------------
successor federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Exchange Act of 1934, as amended, shall include a
reference to a comparable section, if any, of any successor federal statute.
Exercise Form: an Exercise Form in the form annexed hereto as Exhibit A.
-------------
Exercise Price: the meaning specified in Section 1.3, as such price may be
--------------
adjusted pursuant to Section 6 hereof.
Holder: shall mean a holder of Registrable Securities.
------
Nasdaq: the meaning specified in Section 1.1(c)(ii).
------
Person: shall mean an individual, a corporation, a limited liability
------
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
Prospectus: shall mean any prospectus included in any Registration
----------
Statement, as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments and all material
incorporated by reference in such Prospectus.
Registration Expenses: shall mean any and all expenses incurred in
---------------------
connection with any registration or action incident to performance of or
compliance by the Company with Article 2, including, without limitation, (i) all
SEC, national securities exchange and NASD registration and filing fees; all
listing fees and all transfer agent fees; (ii) all fees and expenses of
complying with state securities or blue sky laws (including the fees and
disbursements of counsel of the underwriters in connection with blue sky
qualifications of the Registrable Securities); (iii) all printing, mailing,
messenger and delivery expenses, (iv) all fees and disbursements of counsel for
the Company and of its accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, and (v) any disbursements of underwriters customarily paid by
issuers or sellers of securities including the reasonable fees and expenses of
any special experts retained in connection with the requested registration, but
excluding underwriting discounts and commissions, brokerage fees and transfer
taxes, if any, and fees of counsel or accountants retained by the Holders of
Registrable Securities to advise them in their capacity as Holders of
Registrable Securities.
Registrable Securities: shall mean any Warrant Shares issued to the
----------------------
Warrantholder, and/or other securities that may be or are issued by the Company
upon exercise of this Warrant, including those which may thereafter be issued by
the Company in respect of any such securities by means of any stock splits,
stock dividends, recapitalizations, reclassifications or the like, and as
adjusted pursuant to Article 6 hereof; provided, however, that as to any
particular security
-19-
contained in Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement; or (ii) they shall have been sold to the public pursuant to Rule 144
(or any successor provision) under the Securities Act.
Registration Statement: shall mean any registration statement of the
----------------------
Company filed or to be filed with the SEC which covers any of the Registrable
Securities pursuant to the provisions of this Warrant, including all amendments
(including post-effective amendments) and supplements thereto, all exhibits
thereto and all material incorporated therein by reference.
SEC: the Securities and Exchange Commission or any other federal agency at
---
the time administering the Securities Act or the Exchange Act, whichever is the
relevant statute for the particular purpose.
Securities Act: the Securities Act of 1933, as amended, or any successor
--------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time. Reference to a particular section of
the Securities Act of 1933, as amended, shall include a reference to the
comparable section, if any, of any successor federal statute.
S3 Acquisition: shall mean any transaction or series of related
--------------
transactions involving: (i) any purchase from S3 or acquisition by any Person or
"group" (as defined under section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a fifty percent (50%) interest in the total
outstanding voting securities of S3 or any tender offer or exchange offer that
if consummated would result in any person or "group" (as defined under section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning fifty percent (50%) or more of the total outstanding voting securities of
S3 or any merger, consolidation, business combination or similar transaction
involving S3 in which the stockholders of S3 immediately prior to such
transaction do not own, immediately after such transaction, at least a majority
of the outstanding securities entitled to vote generally for the election of
directors or similar managing authority of the surviving or resulting entity in
such transaction; or (ii) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of all or substantially all of the assets
of S3, other than to an entity of which at least a majority of the outstanding
securities entitled to vote generally for the election of directors or similar
managing authority are directly or indirectly owned or controlled by S3.
Trading Day: any day other than a day on which securities are not traded,
-----------
listed or reported on the principal securities exchange or securities market on
which the Common Stock is traded, listed or reported.
Warrantholder: the meaning specified on the cover of this Warrant.
-------------
Warrant Shares: the meaning specified on the cover of this Warrant, subject
--------------
to the provisions of Section 1 and Section 6 hereof.
-20-
9. Miscellaneous.
9.1 Entire Agreement. This Warrant constitutes the entire agreement between
----------------
the Company and the Warrantholder with respect to this Warrant.
9.2 Binding Effects; Benefits. This Warrant shall inure to the benefit of
-------------------------
and shall be binding upon the Company and the Warrantholder and their respective
successors. Nothing in this Warrant, expressed or implied, is intended to or
shall confer on any person other than the Company and the Warrantholder, or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Warrant.
9.3 Restrictions on Transferability. Subject to the terms and conditions of
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this Warrant and compliance with all applicable securities laws, this Warrant
and all rights hereunder (and any shares of common stock acquired upon exercise
of this Warrant) may be transferred in whole or in part, only (a) to a wholly
owned subsidiary of the Warrantholder, or (b) in a sale effectuated pursuant to
Rule 144 promulgated under the Securities Act, or (c) in an offering registered
under section 5 of the Securities Act.
9.4 Amendments and Waivers. This Warrant may not be modified or amended
----------------------
except by an instrument or instruments in writing signed by the Company and the
Warrantholder. Either the Company or the Warrantholder may, by an instrument in
writing, waive compliance by the other party with any term or provision of this
Warrant on the part of such other party hereto to be performed or complied with.
The waiver by any such party of a breach of any term or provision of this
Warrant shall not be construed as a waiver of any subsequent breach.
9.5 Section and Other Headings. The section and other headings contained in
--------------------------
this Warrant are for reference purposes only and shall not be deemed to be a
part of this Warrant or to affect the meaning or interpretation of this Warrant.
9.6 Further Assurances. Each of the Company and the Warrantholder shall do
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and perform all such further acts and things and execute and deliver all such
other certificates, instruments and documents as the Company or the
Warrantholder may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
9.7 Notices. All notices and other communications required or permitted to
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be given under this Warrant shall be in writing and shall be deemed to have been
duly given if delivered personally or sent by United States mail, postage
prepaid, or by facsimile (with electronic confirmation of successful
transmission) to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
(a) if to the Company, Diamond Multimedia Systems, Inc.
addressed to: 0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President and Chief Executive Officer
Telecopier: (000) 000-0000
-21-
(b) if to the Xxxxxxxxxxxxx, X0 Incorporated
addressed to: 0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000-0000
Attention: President and Chief Executive Officer
Telecopier: (000) 000-0000
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
9.8 Separability. Any term or provision of this Warrant which is invalid or
-------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the terms and provisions of this Warrant or affecting the
validity or enforceability of any of the terms or provisions of this Warrant in
any other jurisdiction.
9.9 Governing Law. This Warrant shall be deemed to be a contract made under
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the laws of the State of California (irrespective of its choice of law
principles).
9.10 No Rights or Liabilities as Stockholder. Nothing contained in this
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Warrant shall be determined as conferring upon the Warrantholder any rights as a
stockholder of the Company or as imposing any liabilities on the Warrantholder
to purchase any securities whether such liabilities are asserted by the Company
or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated: June 21, 1999.
DIAMOND MULTIMEDIA SYSTEMS, INC.
By /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
-22-
EXHIBIT A
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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.
EXERCISE FORM
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(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Shares and (check one):
|_| herewith tenders payment for _______ of the Warrant Shares to the
order of Diamond Multimedia Systems, Inc. in the amount of $_________
in accordance with the terms of this Warrant; or
|_| herewith tenders this Warrant for _______ Warrant Shares pursuant to
the Net Issue Exercise provisions of Section 1.1(b) of the Warrant.
The undersigned requests that a certificate (or certificates) for such
Warrant Shares be registered in the name of the undersigned and that such
certificate (or certificates) be delivered to the undersigned's address below.
In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the Warrant Shares are being acquired solely for the account
of the undersigned and not as a nominee for any other party, or for investment,
and that the undersigned will not offer, sell or otherwise dispose of any such
Warrant Shares except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended, or any state securities laws.
Dated: ___________________.
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Signature
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(Print Name)
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(Street Address)
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(City) (State) (Zip Code)
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.
A-1
