Exhibit 4.4
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED UNLESS
REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
WARRANT
Company: SOUTHHAMPTON ENTERPRISES CORP.
a British Columbia (Canada) corporation
Number of Shares: _________ shares
Class of Stock: Common Stock, No Par Value
Initial Exercise Price: As described in Section 1
Issued as of: May 7, 1997
Expiration Date: As described in Section 1
FOR VALUE RECEIVED, the adequacy and receipt of which is hereby
acknowledged, SOUTHHAMPTON ENTERPRISES CORP., a Nevada corporation, hereby
certifies that IMPERIAL BANCORP, a California bank holding company, and its
successors and assigns, are entitled to purchase from the Company at any time
and from time to time on and after the date hereof until 12:00 midnight
California local time on the Expiration Date at an initial Exercise Price (as
described in Section 1), fully paid and nonassessable shares of Common Stock of
the Company; on the terms and conditions hereinafter set forth.
The number of such shares of Common Stock and the Exercise Price are
subject to adjustment as provided in the Warrant. Anything contained in this
Warrant to the contrary notwithstanding, the number of shares of Common Stock
which may be issued upon exercise of this Warrant by any Regulated Warrantholder
shall never exceed such amount as may be permitted under the Bank Holding
Company Act, or any successor statute, or under any other federal or state
banking or regulations to which such Regulated Warrantholder may be subject at
the time of such exercise.
1. Certain Definitions. As used in this Warrant, the following
terms have the following definitions:
"Additional Shares of Common Stock" means all shares of Common
Stock issued or issuable by the Company after the date of this Warrant.
"Bank" means IMPERIAL BANK, a California banking corporation,
and its successors and assigns.
"Common Stock" means the Company's Common Stock, no par value,
and includes any common stock of the Company of any class or classes resulting
from any reclassification or reclassifications thereof which is not limited to a
fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company.
"Company" means Southhampton Enterprises Corp., a British
Columbia (Canada) corporation.
"Convertible Securities" means evidence of indebtedness,
shares of stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any
other security as of a relevant date means: (i) the Fair Value thereof as
determined in accordance with clause (ii) of the definition of Fair Value with
respect to Common Stock or any other security that is not listed on a national
securities exchange or traded on the over-the-counter market or quoted on
NASDAQ, and (ii) the average of the daily closing, prices for the ten (10)
trading days before such date (excluding any trades which are not bona fide
arm's length transactions) with respect to Common Stock or any other security
that is listed on a national securities exchange or traded on the
over-the-counter market or quoted on NASDAQ. The closing price for each day
shall be (i) the last sale price of shares of Common Stock or such other
security on such date or, if no such sale takes place on such date, the average
of the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which the
same are then listed or admitted to trading, or (ii) if no shares of Common
Stock or if no securities of the same class as such other security are then
listed or admitted to trading on any national securities exchange, the average
of the reported closing bid and asked prices thereof on such due in the
over-the-counter market as shown by the National Association of Securities
Dealers automated quotation system or, if no shares of Common Stock or if no
securities of the same class as such other security are then quoted in such
system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Warrantholders.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exercise Period" means the period commencing on the date
hereof and ending at 12:00 midnight California local time on the Expiration
Date.
"Exercise Price" means initially the lower of (i) One Dollar
($1.00) per share and (ii) the lowest price established by any of the following
financing(s) that occurs within twelve (12) months from the date hereof: (A) the
price per share of common equity established by the first round of common equity
financing after the date hereof or (B) the conversion price to Common Stock or
exercise price for Common Stock established by the first round of preferred
stock, Convertible Securities or options or rights to purchase Common Stock
after the date hereof. In the absence of any such financing within the above
time period, the initial exercise price shall be the price per share established
by the round of Common Equity financing (including, if necessary, the initial
capitalization of the Company) most closely preceding the date hereof. The
exercise price per share shall be subject to adjustment as provided in this
Warrant.
"Expiration Date" means the date that is the later of: (i)
five (5) years after the date hereof (the "Fixed Date"); or (ii) thirty (30)
days after the date that the Fair Value Determination(s) is made (provided that
the procedure for determining Fair Value is initiated prior to the Fixed Date).
"Fair Value" means: (i) with respect to a share of Common
Stock or any other security, the Current Market Price thereof, and (ii) with
respect to any other property, assets, business or entity, an amount determined
in accordance with the following procedure: The Company and the holders of the
Warrants and Warrant Shares, as applicable, shall use their best efforts to
mutually agree to a determination of Fair Value within ten (10) days of the date
of the event requiring that such a determination be made. If the Company and
such holders are unable to reach agreement within said ten (10) day period, the
Company and the Warrantholders shall, within the immediately subsequent ten (10)
day period, select a mutually acceptable independent valuation professional who
shall issue a determination of Fair Value of the Warrant Shares within sixty
(60) days. In the event the Company and such Warrantholders are unable to reach
agreement with respect to a mutually acceptable independent valuation
professional within the aforementioned ten (10) day period, the Warrantholders
shall submit to the Company a list of three (3) independent valuation
professionals. Within the immediately subsequent ten (10) day period the Company
shall select one (1) independent valuation professional from such list. The
independent valuation professional so selected shall issue a determination of
Fair Value of the Warrant Shares within the immediately subsequent sixty (60)
day period. In all of the above cases, the independent valuation professional
shall be engaged by, and shall issue their determination for the benefit of, the
Warrantholders, and the determination so made shall be conclusive and binding on
the Company and the Warrantholders. The fees and expenses of any such
determination made by any and all such independent valuation professionals shall
be paid by the Company. If there is more than one holder of Warrants and/or
Warrant Shares entitled to a determination of Fair Value in any particular
instance, each action to be taken by the holders of such Warrants
and/or Warrant Shares under this Section shall be taken by a majority in
interest of such holders and the action taken by such majority (including as to
any mutual agreement with the Company with respect to Fair Value and as to any
selection of independent valuation professionals) shall be binding upon all such
holders. In the case of a determination the Fair Value per share of Common
Stock, the Company and such holders shall not take into consideration, and shall
instruct all such independent valuation professionals not to take into
consideration, any premium for shares representing control of the Company, any
discount for any minority interest therein or any restrictions on transfer under
applicable federal and state securities laws or otherwise.
"Imperial" means IMPERIAL BANCORP, a California banking
holding company, and its successors and assigns.
"Indemnified Party" and "Indemnifying Party" have the meanings
set forth in Section 11(e)(iii).
"Loan Agreements" means that certain Credit Agreement of even
date herewith between the Company and the Bank.
"Registrable Stocks" means: (i) all Warrant Shares which are
issuable to the Warrantholders pursuant to the Warrants, whether or not the
Warrants have in fact been exercised and whether or not such Warrant Shares have
in fact been issues, (ii) all Warrant Shares acquired by the Warrantholders
pursuant to the Warrants, (iii) any shares of Common Stock, whether or not such
shares of Common Stock have in fact been issued, and stocks or other securities
of the Company issued upon conversion of, in a stock split or reclassification
of, or a stock dividend or other distribution on, or in substitution or exchange
for, or otherwise in connection with, such Warrant Shares or in a merger or
consolidation involving the Company or its assets. For purposes of Section 11, a
Warrantholder of record shall be treated as the record holder of the related
Warrant Shares and other securities issuable pursuant to the Warrants.
"Regulated Warrantholder" means any Warrantholder which is, or
the parent of which is, subject to the Bank Holding Company Act, or any
successor statute, or any other federal or state banking laws and regulations.
"Securities Act" means the Securities Act of 1933, as amended.
"Term Note" shall have the meaning given to it in the Loan
Agreements.
"Warrant(s)" means this Warrant and any warrants issued in
exchange or replacement of this Warrant or upon transfer hereof.
"Warrantholder(s)" means Imperial and its successors and
assigns.
"Warrant Shares" means shares of Common Stock issuable to
Warrantholders pursuant to the Warrants.
2. Exercise of Warrant. This Warrant may be exercised, in whole
or in part, at any time and from time to time during the Exercise Period by
written notice to the Company and upon payment to the Company of the Exercise
Price (subject to adjustment as provided herein) for the shares of Common Stock
in respect of which the Warrant is exercised.
3. Form of Payout of Exercise Price. Anything contained herein to
the contrary notwithstanding, at the option of the Warrantholders, the Exercise
Price may be paid in any one or a combination of the following forms: (a) by
wire transfer to the Company, (b) by the Warrantholder's check to the Company,
(c) by the cancellation of any indebtedness owed by the Company and/or any
subsidiaries of the Company to the Warrantholder, and/or (d) by the surrender to
the Company of Warrants, Warrant Shares, Common Stock and/or other securities of
the Company and/or any subsidiaries of the Company having a Fair Value equal to
the Exercise Price.
4. Cashless Exercise/Conversion: Appreciation Right.
(a) Conversion. In lieu of exercising this Warrant as
specified in Sections 2 and 3 above, the Warrantholders may from time to time at
the Warrantholders' option convert this Warrant, in whole or in part, into a
number of shares of Common Stock of the Company determined by dividing (A) the
aggregate Fair Value of such shares or other securities otherwise issuable upon
exercise of this Warrant minus the aggregate Exercise Price of such shares by
(B) the Fair Value of one such share.
(b) Appreciation Right. In lieu of exercising this Warrant as
specified in Sections 2 and 3 above, the Warrantholders may, at any time, and
from time to time after the third anniversary date of this Agreement, require
the Company to purchase all or a portion of the Warrant Shares (but in no event
shall such portion represent less than one-third of the Warrant Shares), for
cash, at a price equal to the then Fair Value of the Common Stock issuable upon
exercise of this Warrant less the Exercise Price. Upon the Warrantholders'
exercise of this option, the Company shall promptly wire transfer to the
Warrantholders such amount as is required under this Section 4(b), but in no
event later than five (5) business days after the exercise of such option, in
immediately available funds. Notwithstanding anything in this Section 4(b) to
the contrary, the rights of the Warrantholders under the preceding sentences of
this Section 4(b) ("Appreciation Rights") shall terminate when (i) all of the
Warrant Shares have been registered under the Securities Act and (ii) the Term
Note has been paid in full or cash in the unpaid balance of the Term Note
remains pledged to the holder of the Term Note in accordance with Section 2.4(c)
of the Loan Agreements; provided, however, the Warrantholders shall not be able
to exercise the Appreciation Rights unless the Warrantholders have made a
request to the Company pursuant to
Section 11(a) or (b) to register all the Registrable Stock under the Securities
Act and such Registrable Stock has not been registered within one hundred eight
(180) days after the making of the request for registration of all Registrable
Stock.
5. Certificates for Warrant Shares; New Warrant. The Company agrees
that the Warrant Shares shall be deemed to have been issued to the
Warrantholders as the record owner of such Warrant Shares as of the close of
business on the date on which payment for such Warrant Shares has been made (or
deemed to be made by conversion) in accordance with the terms of this Warrant.
Certificates for the Warrant Shares shall be delivered to Warrantholders within
a reasonable time, not exceeding five (5) days, after this Warrant has been
exercised or converted. A new Warrant representing the number of shares, if any,
with respect to which this Warrant remains exercisable also shall be issued to
the Warrantholders within such time so long as this Warrant has been surrendered
to the Company at the time of exercise.
6. Adjustment of Exercise Price, Number of Shares and Nature of
Securities Issuable Upon Exercise of Warrants.
(a) Exercise Price: Adjustment of Number of Shares. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Exercise Price, the Warrantholders shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, a number of shares determined by multiplying the Exercise 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 by the Exercise Price resulting from such adjustment.
(b) Adjustment of Exercise Price Upon Issuance of Common
Stock. If and whenever after the date hereof the Company shall issue or sell
Additional Shares of Common Stock without consideration or for a consideration
per share less than the Current Market Price or the Exercise Price then in
effect immediately prior to the issuance or sale of such shares, then the
Exercise Price in effect immediately prior to such issuance or sale of such
shares shall be reduced to a number which shall be calculated by dividing (A) an
amount equal to the sum of (1) the number of shares of Common Stock outstanding,
immediately prior to such issue or sale multiplied by the then existing Exercise
Price plus (2) the aggregate consideration, if any, received by the Company upon
such issue or sale, by (B) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
No adjustment of the Exercise Price, however, shall be made in
an amount less than $.01 per share, but any such 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 $.01 per share or more.
The provisions of this Section 6(b) shall not apply to any
Additional Shares of Common Stock which are distributed to holders of Common
Stock pursuant to a stock split for which an adjustment is provided for under
Section 6(b).
(c) Further Provision for Adjustment of Exercise Price Upon
Issuance of Additional Shares of Common Stock and Convertible Securities. For
purposes of Section 6(b), the following provisions shall also be applicable:
(i) In case at any time on or after the date hereof,
the Company shall declare any dividend, or authorize any other
distribution, upon any stock of the Company of any class, payable in
Additional Shares of Common Stock or by the issuance of Convertible
Securities, such declaration or distribution shall be deemed to have
been issued or sold (as of the record date) without consideration and
shall thereby cause an adjustment in the Exercise Price as required by
Section 6(b).
(ii) (A) In case at any time on or after the date
hereof, the Company shall in any manner issue or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder
are immediately exercisable, there shall be determined the price per
share for which Additional Shares of Common Stock are issuable upon the
conversion or exchange thereof, such determination to be made by
dividing (a) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof by (b)
the maximum aggregate number of Additional Shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities
for such minimum aggregate amount of additional consideration; and such
issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such
maximum number of Additional Shares of Common Stock at the price per
share so determined, and shall thereby cause an adjustment in the
Exercise Price, if such an adjustment is required by Section 6(b)
hereof.
(B) If such Convertible Securities shall by their
terms provide for an increase or increases, with the passage of time,
in the amount of additional consideration, if any, payable to the
Company, or in the rate of exchange upon the conversion or exchange
thereof, the adjusted Exercise Price shall, upon any such increase
becoming effective, be increased to such Exercise Price as would have
been in effect had the adjustments made upon the issuance of such
Convertible Securities been made upon the basis of (and the total
consideration received therefor) (a) the issuance of the number of
shares of Common Stock theretofore actually delivered upon the exercise
of such Convertible Securities,
(b) the issuance of all Common Stock, all Convertible Securities and
all rights and options to purchase Common Stock issued after the
issuance of such Convertible Securities, and (c) the original issuance
at the time of such change of any such Convertible Securities then
still outstanding; provided, however, that any such increase or
increases shall not exceed, in the aggregate, the amount of the
original reduction of the Exercise Price attributable to the
Convertible Securities.
(C) If any rights of conversion or exchange evidenced
by such Convertible Securities shall expire without having been
exercised, the adjusted Exercise Price shall forthwith be readjusted to
such Exercise Price as would have been in effect had an adjustment with
respect to such Convertible Securities been made on the basis that the
only Additional Shares of Common Stock issued or sold were those issued
upon the conversion or exchange of such Convertible Securities, and
that they were issued or sold for the consideration actually received
by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of such Convertible
Securities.
(iii) (A) In case at any time on or after the date
hereof, the Company shall in any manner grant or issue any rights or
options to subscribe for, purchase or otherwise acquire Additional
Shares of Common Stock, whether or not such rights or options are
immediately exercisable, there shall be determined the price per share
for which Additional Shares of Common Stock are issuable upon the
exercise of such rights or options, such determination to be made by
dividing (a) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options if
the maximum number of Additional Shares were issued pursuant to such
rights or options for such minimum aggregate amount of additional
consideration, by (b) the maximum number of Additional Shares of Common
Stock of the Company issuable upon the exercise of all such rights or
options for such minimum aggregate amount of additional consideration;
and the granting of such rights or options shall be deemed to be an
issue or sale for cash (as of the date of the granting of such rights
or options) of such maximum number of Additional Shares of Common Stock
at the price per share so determined, and shall thereby cause an
adjustment in the Exercise Price, if such an adjustment is required by
Section 6(b) hereof.
(B) If such rights or options shall by their terms
provide for an increase or increases, with passage of time, in the
amount of additional consideration payable to the Company upon the
exercise thereof, the adjusted Exercise Price shall, upon any such
increases becoming effective, be increased to such Exercise Price as
would have been in effect
had the adjustments made upon the issuance of such rights or options
been made upon the basis for (and the total consideration received
therefor) (a) the issuance of the number of shares of Common Stock
theretofore actually delivered upon the exercise of such rights or
options, (b) the issuance of all Common Stock, all rights and options
and all Convertible Securities issued after the issuance of such rights
and options, and (c) the original issuance at the time of such change
of any such rights or options then still outstanding; provided,
however, that any such increase or increases in the Exercise Price
shall not exceed, in the aggregate, the amount of the original
reduction of the Exercise Price attributable to the grant of such
rights or options.
(C) If any such rights or options shall expire
without having been exercised, the adjusted Exercise Price shall
forthwith be readjusted to such Exercise Price as would have been in
effect had an adjustment with respect to such rights or options been
made on the basis that the only Additional Shares of Common Stock so
issued or sold were those issued or sold upon the exercise of such
rights or options and that they were issued or sold for the
consideration actually received by the Company upon such exercise, plus
the consideration, if any, actually received by the Company for the
granting of such rights or options.
(iv) (A) In case at any time on or after the date
hereof, the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Convertible Securities, there shall be
determined the price per share for which Additional Shares of Common
Stock are issuable upon the exchange or conversion of such Convertible
Securities if such rights or options were exercised, such determination
to be made by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the issuance of such
rights or options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options if the maximum number of Convertible Securities were
issued pursuant to such rights or options for such minimum aggregate
amount of additional consideration, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the
exchange or conversion of such Convertible Securities if the maximum
number of Additional Shares were issued pursuant to such Convertible
Securities for such minimum aggregate amount of additional
consideration, by (b) the maximum aggregate number of Additional Shares
of Common Stock issuable upon the exchange or conversion of the
Convertible Securities for such minimum aggregate amount of additional
consideration; and the issue or sale of such rights or options shall be
deemed to be an issue or sale for cash (as of the date of the granting
of such rights or options) of such maximum number of Additional Shares
of Common Stock at the price per share so determined,
and thereby shall cause an adjustment in the Exercise Price, if such an
adjustment is required by Section 6(b).
(B) If such rights or options to subscribe for or
otherwise acquire Convertible Securities shall by their terms provide
for an increase or increases, with the passage of time, in the amount
of additional consideration payable to the Company upon the exercise,
exchange or conversion thereof, the adjusted Exercise Price shall,
forthwith upon any such increase becoming effective, be increased to
such Exercise Price as would have been in effect had the adjustments
made upon the issuances of such rights or options been made upon the
basis of (and the total consideration received therefor) (a) the
issuance of the number of shares of Common Stock theretofore actually
delivered upon the exchange or conversion of such Convertible
Securities, (b) the issuances of all Common Stock and all rights,
options and Convertible Securities issued after the issuance of such
rights and options, and (c) the original issuances at the time of such
change of any such rights, options and Convertible Securities issued
upon exercise of such rights or options which are then still
outstanding; provided, however, that any such increase or increases
shall not exceed, in the aggregate, the amount of the original
reduction of the Exercise Price attributable to the grant of such
rights or options.
(C) If any such rights, options or rights of
conversion or exchange of such Convertible Securities shall expire
without having been exercised, exchanged or converted, the adjusted
Exercise Price shall forthwith be readjusted to such Exercise Price as
would have been in effect had an adjustment been made with respect to
such rights, options or rights of conversion or exchange of such
Convertible Securities on the basis that the only Additional Shares of
Common Stock so issued or sold were those issued or sold upon the
exercise of such rights or options and exchange or conversion of such
Convertible Securities and that they were issued or sold for the
consideration actually received by the Company upon exercise of such
rights and options and exchange or conversion of such Convertible
Securities, plus the consideration, if any, actually received by the
Company for the granting of such rights, options or Convertible
Securities.
(v) In any case where an adjustment has been made in
the Exercise Price upon the issuance of Convertible Securities or any
rights or options to purchase Convertible Securities or Additional
Shares of Common Stock pursuant to this Section 6(c), no further
adjustment shall be made at the time of the conversion of any such
Convertible Securities or at the time of the exercise of any such
rights or options.
(vi) In case at any time on or after the issuance of
this Warrant any shares of Common Stock or Convertible
Securities shall be issued or sold for a consideration other than cash,
the amount of the consideration other than cash payable to the Company
shall be deemed to be the Fair Value of such consideration. Whether or
not the consideration so received is cash, the amount thereof shall be
determined after deducting therefrom any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by
the Company in connection therewith.
(vii) In case at any time the Company shall fix a
record date of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution payable
in Common Stock, Convertible Securities or rights or options to
purchase either thereof, or (b) to subscribe for or purchase Common
Stock, Convertible Securities or rights or options to purchase either
thereof, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed, pursuant to this
Section 6(c), to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(viii) The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the deposition of any such
shares shall be considered an issue or sale of Common Stock for the
purposes of this Section 6(c).
(d) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive cash, stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the Warrantholders shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant upon exercise of this Warrant and in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such cash, shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of Common Stock equal to the number of shares
of such Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, and in any such case appropriate
provision shall be made with respect to the rights and interest of the
Warrantholders to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Exercise Price and of the number
of shares purchasable and receivable upon
the exercise of this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any
consolidation, merger or sale of all or substantially all of the assets of the
Company unless prior to or simultaneous with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation, merger or purchase of such assets shall assume, by written
instrument executed and mailed or delivered to the Warrantholders, the
obligation to deliver to such Warrantholders such cash (or cash equivalent),
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Warrantholders may be entitled to receive and containing the
express assumption of such successor corporation of the due and punctual
performance and observance of each provision of this Warrant to be performed and
observed by the Company and of all liabilities and obligations of the Company
hereunder; provided, however, in this case of any consolidation or merger of the
Company with another corporation or the sale of all or substantially all of its
assets to another corporation effected in such a manner that the holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, at the election of each
Warrantholder, in lieu of receiving such stock, securities or assets, such
Warrantholder shall receive cash equal to the Fair Value of the Common Stock
issuable upon exercise of the Warrant, less the Exercise Price payable upon
exercise thereof.
Upon any "change in control" of the Company, the appreciation
rights described in this section shall become immediately and contemporaneously
exercisable. In addition, should the Warrantholders not participate in the sale
of, nor receive a proportionate interest in, the proceeds of any sale of
twenty-five percent (25%) or more of the Common Stock of the Company, then such
appreciation right in their entirety shall become immediately and
contemporaneously exercisable.
In case any Additional Shares of Common Stock or Convertible
Securities or any rights or options to purchase any Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any merger of
another corporation into the Company, the amount of consideration therefor shall
be deemed to be the Fair Value of such portion of the assets of such merged
corporation as the Board of Directors of the Company shall in good faith
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities or rights or options, as the case may be, and the
Exercise Price shall be adjusted in accordance with this Section 6(d).
(e) Company to Prevent Dilution. In case at any time or from
time to time conditions arise by reason of action taken by the Company which are
not adequately covered by the provisions of this Section 6, and which might
materially and adversely affect the exercise rights of the Warrantholders under
any provision of this
Warrant, unless the adjustment necessary shall be agreed upon by the Company and
the Warrantholders, the Board of Directors of the Company shall appoint a firm
of independent certified public accountants of recognized national standing (who
have not been employed by the Company within the last five years), acceptable to
the Warrantholders, who at the Company's expense shall give their opinion upon
the adjustment, if any, on a basis consistent with the standards established in
the other provisions of this Section 6, necessary with respect to the Exercise
Price and the number of shares purchasable upon exercise of the Warrants, so as
to preserve, without dilution, the exercise rights of the Warrantholders. Upon
receipt of such opinion, such Board of Directors shall forthwith make the
adjustments described therein.
(f) Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Warrant immediately prior to such subdivision
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock purchasable upon the exercise of this Warrant immediately prior to
such combination shall be proportionately reduced.
(g) Dissolution, Liquidation and Wind-Up. In case the Company
shall, at any time prior to the expiration of this Warrant, dissolve, liquidate
or wind up its affairs, the Warrantholders shall be entitled, upon the exercise
of this Warrant, to receive, in lieu of the shares of Common Stock of the
Company which such Warrantholders would have been entitled to receive, the same
kind and amount of assets as would have been issued, distributed or paid to such
Warrantholders upon any such dissolution, liquidation or winding up with respect
to such shares of Common Stock of the Company, had such Warrantholders been the
holders of record of the Warrant Shares receivable upon the exercise of this
Warrant on the record date for the determination of those persons entitled to
receive any such liquidating distribution. After any such dissolution,
liquidation or winding up which shall result in any cash distribution in excess
of the Exercise Price provided for by this Warrant, the Warrantholders may, at
each such Warrantholder's option, exercise the same without making payment of
the Exercise Price, and in such case the Company shall, upon the distribution to
said Warrantholders, consider that said Exercise Price has been paid in full to
it and in making settlement to said Warrantholders, shall deduct from the amount
payable to such Warrantholders an amount equal to such Exercise Price.
(h) Noncash Consideration. In case any Additional Shares of
Common Stock or Convertible Securities or any rights or options to purchase any
Additional Shares of Common Stock or
Convertible Securities shall be issued for a consideration in a form other than
cash, the amount of such consideration shall be deemed to be the Fair Value
thereof.
(i) Accountants' Certificate. In each case of an adjustment in
the number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the Warrants, the Company at its expense shall
cause independent public accountants of recognized standing selected by the
Company and acceptable to the Warrantholders to compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of (a) the consideration received or to be
received by the Company for any Additional Shares of Common Stock, rights,
options or Convertible Securities issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock of each class outstanding or
deemed to be outstanding, (c) the adjusted Exercise Price and (d) the number of
shares issuable upon exercise of this Warrant. The Company will forthwith mail a
copy of each such certificate to each Warrantholder.
7. Special Agreements of the Company.
(a) Reservation of Shares. The Company covenants and agrees
that all Warrant Shares will, upon issuance, be validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder, and from
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant. The Company
hereby covenants and agrees to take all such action as may be necessary to
assure that the par value per share of the Common Stock is at all times equal to
or less than the Exercise Price.
(b) Avoidance of Certain Actions. The Company will not, by
amendment of its Articles or Certificates of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, issue or sale of
securities or otherwise, avoid or take any action which would have the effect of
avoiding the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in carrying out all of the provisions of this Warrant and in taking all of such
action as may be necessary or appropriate in order to protect the rights of the
Warrantholders against dilution or other impairment of their rights hereunder.
(c) Securing Governmental Approvals. If any shares of Common
Stock required to be reserved for the purposes of exercise of this Warrant
require registration with or approval of any governmental authority under any
federal law (other than the
Securities Act) or under any state law before such shares may be issued upon
exercise of this Warrant, the Company will, at its expense, as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
(d) Listing on Securities Exchanges; Registration. If, and so
long as, any class of the Company's Common Stock shall be listed on any national
securities exchange (as defined in the Exchange Act), the Company will, at its
expense, obtain and maintain the approval for listing upon official notice of
issuance of all Warrant Shares and maintain the listing of Warrant Shares after
their issuance; and the Company will so list on such national securities
exchange, will register under the Exchange Act (or any similar statute then in
effect), and will maintain such listing of, any other securities that at any
time are issuable upon exercise of this Warrant if and at the time any
securities of the same class shall be listed on such national securities
exchange by the Company.
(e) Information Rights. So long as the Warrantholders hold
this Warrant and/or any of the Warrant Shares, the Company shall deliver to the
Warrantholders (i) promptly after mailing, copies of all communications to the
shareholders of the Company, (ii) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by the independent public accountants of recognized standing,
and (iii) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
(f) Restrictions on Public Sale by the Company. The Company
will not effect any public or private sale or distribution of its convertible
debt or equity securities, including a sale pursuant to Regulation D under the
Securities Act, during the ten (10) day period prior to, and during the ninety
(90) day period beginning on, the closing date of each underwritten offering by
the Company made pursuant to a registration statement filed pursuant to Sections
11(a) or 11(b); and the Company shall cause each holder of its privately placed
convertible debt or equity securities issued by it at any time on or after the
date of this Warrant to agree not to effect any public sale or distribution of
any such securities during such period, including a sale pursuant to Rule 144 or
Rule 144A under the Securities Act.
(g) Preemptive Rights. In the event the Company offers to the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock issuable pursuant to the Warrants shall be deemed to
be issued and outstanding and held by the Warrantholders and the Warrantholders
shall be entitled to participate in such rights offering.
(h) Compliance with Law. The Company shall comply with all
applicable laws, rules and regulations of the United States and of all states,
municipalities and agencies of any other
jurisdiction applicable to the Company and shall do all things necessary to
preserve, renew and keep in full force and effect and in good standing its
corporate existence and authority necessary to continue its business.
8. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, the Company
shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the Current Market Value of one share of Common Stock.
9. Notices of Stock Dividends, Subscriptions, Reclassifications,
Consolidations Mergers, etc. If at any time: (i) the Company shall declare a
cash dividend (or an increase in the then existing dividend rate), or declare a
dividend on Common Stock payable otherwise than in cash out of its net earnings
after taxes for the prior fiscal year; or (ii) the Company shall authorize the
granting to the holders of Common Stock of rights to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or (iii) there
shall be any capital reorganization, or reclassification, or redemption of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another corporation or firm;
or (iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then the Company shall give to the Warrantholders at
the addresses of such Warrantholders as shown on the books of the Company, at
least twenty (20) days prior to the applicable record date hereinafter
specified, a written notice summarizing such action or event and starting the
record date for any such dividend or rights (or, if a record date is not to be
selected, the date as of which the holders of Common Stock of record entitled to
such dividend or rights are to be determined), the date on which any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected the holders of Common Stock of record shall be
entitled to effect any exchange of their shares of Common Stock for cash (or
cash equivalent), securities or other property deliverable upon any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up.
10. Registered Holder; Transfer of Warrants or Warrant
Shares.
(a) Maintenance of Registration Books; Ownership of this
Warrant. The Company shall keep at its principal office a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result in
preventing or delaying the exercise or transfer of this Warrant.
(b) Exchange and Replacement. This Warrant is exchangeable
upon surrender hereof by the registered holder to the Company at its principal
office for new Warrants of like tenor and date representing in the aggregate the
right to purchase the number of shares purchasable hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by said registered holder at the time of surrender. This Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the registered holder hereof in person or by duly authorized
attorney, and new Warrants shall be made and delivered by the Company, of the
same tenor and date as this Warrant but registered in the name of the
transferee(s), upon surrender of this Warrant, duly endorsed, to said office of
the Company. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant, without
requiring the posting of any bond or the giving of any other security. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this Section 10.
(c) Warrants and Warrant Shares Not Registered. The holder of
this Warrant, by accepting this Warrant, represents and acknowledges that this
Warrant and the Warrant Shares are not being registered under the Securities Act
on the grounds that the issuance of this Warrant and the offering and sale of
such Warrant Shares are exempt from registration under Section 4(2) of the
Securities Act as not involving any public offering.
11. Registration.
(a) Required Registration. Whenever the Company shall receive
a written request therefor from any holder or holders of at least 50% of the
Registrable Stock, the Company shall promptly prepare and file a registration
statement under the Securities Act covering the Registrable Stock which is the
subject of such request and shall use its best efforts to cause such
registration statement to become effective as expeditiously as possible. Upon
the receipt of such request, the Company shall promptly give written notice to
all holders of Registrable Stock that such registration is to be effected. The
Company shall include in such registration statement such Registrable Stock for
which it has received written requests to register such shares by the holders
thereof within thirty (30) days after the effectiveness of the Company's written
notice to such other holders. Except as hereinafter expressly provided, without
the written consent of the holders of a majority of the shares of Registrable
Stock for which registration has been requested pursuant to this Section,
neither the Company nor any other holder of securities of the Company may
include securities in such registration. Notwithstanding anything in this
Section 11(a)
to the contrary, the Company shall not be required to effect more than two (2)
registrations of Registrable Stock pursuant to this Section 11(a) and it shall
not be required to effect more than one registration under this Section 11(a) on
Form S-3.
(b) Incidental Registration. Each time the Company shall
determine to file a registration statement under the Securities Act (other than
on Form S-8 or Form S-4) in connection with the proposed offer and sale for
money of any of its securities by it or by any of its security holders, the
Company will give written notice of its determination to all holders of
Registrable Stock. Upon the written request of a holder of any Registrable
Stock, the Company will cause all such Registrable Stock, the holders of which
have so requested registration thereof, to be included in such registration
statement, all to the extent requisite to permit the sale or other disposition
by the prospective seller or sellers of the Registrable Stock to be so
registered in accordance with the terms of the proposed offering. If the
registration statement is to cover an underwritten distribution, the Company
shall use its best efforts to cause the Registrable Stock requested for
inclusion pursuant to this Section 11(b) to be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter of such
public offering, the inclusion of all of the Registrable Stock requested to be
registered would materially and adversely affect the successful marketing of the
other shares proposed to be offered, then the amount of the Registrable Stock to
be included in the offering shall be reduced and the Registrable Stock and the
other shares to be offered shall participate in such offering as follows: the
shares to be sold by the Company, the Registrable Stock to be included in such
offering and the other shares of Common Stock to be included in such offering
shall each be reduced pro rata in proportion to the number of shares of Common
Stock proposed to be included in such offering by each holder of such shares and
by the Company.
(c) Registration Procedures. If and whenever the Company is
required by the provisions of Section 11(a) or 11(b) to effect the registration
of Registrable Stock under the Securities Act, the Company will, at its expense,
as expeditiously as possible:
(i) In accordance with the Securities Act and the
rules and regulations of the Commission, prepare and file with the
Commission a registration statement on the form of registration
statement appropriate with respect to such securities and use its best
efforts to cause such registration statement to become and remain
effective until the securities covered by such registration statement
to become and remain effective until the earlier ("Registration
Maintenance Event") of (a) the securities covered by such registration
statement having been sold or (b) the date one hundred eighty (180)
days after the effective date of such registration statement; and
prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective and such registration statement and prospectus accurate and
complete until the occurrence of the Registration Maintenance Event;
(ii) If the offering is to be underwritten, in whole
or in part, enter into a written underwriting agreement with the
holders of the Registrable Stock participating in such offering and the
underwriter in form and substance reasonably satisfactory to the
managing underwriter of the public offering and the holders of the
Registrable Stock participating in such offering;
(iii) Furnish to the holders of securities
participating in such registration and to the underwriters of the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as such underwriters and holders may reasonably
request in order to facilitate the public offering of such securities;
(iv) Use its best efforts to register to qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders and underwriters may reasonably request;
(v) Notify the holders participating in such
registration, promptly after it shall receive notice thereof, of the
date and time when such registration statement and each post-effective
amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed;
(vi) Notify such holders promptly of any request by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the opinion of
counsel for such holders, is required under the Securities Act or the
rules and regulations thereunder in connection with the distribution of
the Registrable Stock by such holders;
(viii) Prepare and promptly file with the Commission,
and promptly notify such holders of the filing of, such amendments or
supplements to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such
securities is required to be delivered under the Securities Act, any
event has occurred as the result of which any such prospectus or any
other prospectus as then in effect may include an 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;
(ix) In case any of such holders or any underwriter
for any such holders is required to deliver a prospectus at a time when
the prospectus then in circulation is not in compliance with the
Securities Act or the rules and regulations of the Commission, prepare
promptly upon request such amendments or supplements to such
registration statement and such prospectus as may be necessary in order
for such prospectus to comply with the requirements of the Securities
Act and such rules and regulations;
(x) Advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
(xi) If requested by the managing underwriter or
underwriters or a holder of Registrable Stock being sold in connection
with an underwritten offering, immediately incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters and the holders of a majority of the Registrable Stock
being sold agree should be included therein relating to the plan of
distribution with respect to such Registrable Stock, including
information with respect to the Registrable Stock being sold to such
underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten
(or best efforts underwritten) offering of the Registrable Stock to be
sold in such 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;
(xii) Cooperate with the selling holders of
Registrable Stock and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing
Registrable Stock to be sold and not bearing any restrictive legends;
and enable such Registrable Stock to be in such denominations and
registered in such names as the managing underwriters may request at
least two business days prior to any sale of Registrable Securities to
the underwriters;
(xiii) Prepare a prospectus supplement or
post-effective amendment to the registration statement or the related
prospectus or any document incorporated therein by reference or file
any other required documents so that, as thereafter delivered to the
purchasers of the Registrable Stock, the prospectus will not contain an
untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xiv) Enter into such agreements (including an
underwriting agreement) and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(A) make such representations and warranties
to the holders of such Registrable Stock and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings;
(B) If an underwriting agreement is entered
into, the same shall set forth in full the indemnification provisions
and procedures of Section 11(e) hereof with respect to all parties to
be indemnified pursuant to said Section; and
(C) The Company shall deliver such documents
and certificates as may be requested by the holders of the majority of
the Registrable Stock being sold and the managing underwriters, if any,
to evidence compliance with the terms of this Section 11(c) 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 thereunder;
(xv) Make available for inspection by a
representative of the holders of a majority of the Registrable Stock,
any underwriter participating in any disposition pursuant to a
registration statement, and any attorney or accountant retained by the
sellers 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 representative, underwriter, attorney
or accountant in connection with the preparation of the registration
statement; provided, that any records, information or documents that
are designated by the Company in writing as confidential shall be kept
confidential by such persons unless disclosure of such records,
information or documents is required by court or administrative order;
(xvi) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to the Company's security holders, earning
statements satisfying the provisions of Section 11(a) of the Securities
Act, no later than forty-five (45) days after the end of any twelve
(12) month period (or ninety (90) days, if such a period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which
Registrable Stock is sold to underwriters in an underwritten offering,
or, if not sold to underwriters in such an offering, (ii) beginning
with the first month of the Company's first fiscal quarter commencing
after the effective date of a registration statement;
(xvii) Not file any amendment or supplement to such
registration statement or prospectus to which a majority in interest of
such holders has objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five (5) business days prior to the filing thereof; provided, however,
that the failure of such holders or their counsel to review or object
to any amendment or supplement to such registration statement or
prospectus shall not affect the rights of such holders or any
controlling person or persons thereof or any underwriter or
underwriters therefor under Section 11(e) hereof; and
(xviii) At the request of any such holder (i) furnish
to such holder on the effective date of the registration statement or,
if such registration includes an underwritten public offering, at the
closing provided for in the underwriting agreement, an opinion, dated
such date, of the counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and to the
holder or holders making such request, covering such matters with
respect to the registration statement, the prospectus and each
amendment or supplement thereto, proceedings under state and federal
securities laws, other matters relating to the Company, the securities
being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings, and such opinion of
counsel shall additionally cover such legal matters with respect to the
registration as such requesting holder or holders may reasonably
request, and (ii) use its best effort to furnish to such holder letters
dated each such effective date and such closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, stating that they are independent certified public accountants
within the meaning of the Securities Act and dealing with such matters
as the underwriters may request, or, if the offering is not
underwritten, that in the opinion of such accountants the financial
statements and other financial
data of the Company included in the registration statement or the
prospectus or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the
Securities Act, and additionally covering such other financial matters,
including information as to the period ending immediately prior to the
date of such letter with respect to the registration statement and
prospectus, as such requesting holder or holders may reasonably
request.
(d) Expense of Registration. All expenses incident to the
Company's performance of or compliance with this Warrant, including, without
limitation, the following shall be borne by the Company, regardless of whether
the registration statement becomes effective:
(i) All registration and filing fees (including those
with respect to filings required to be made with the National
Association of Securities Dealers, Inc.);
(ii) Fees and expenses of compliance with all
securities or blue sky laws (including fees and disbursements of
counsel for the underwriters or selling holders in connection with blue
sky qualifications of the Registrable Stock an in determination of
their eligibility for investment under the laws of such jurisdictions
as the managing underwriters or holders of a majority of the
Registrable Stock being sold may designate);
(iii) Printing, messenger, telephone and delivery
expenses;
(iv) Fees and disbursements of counsel for the
Company, the underwriters and for the sellers of the Registrable Stock
as hereinafter provided;
(v) Fees and disbursements of all independent
certified public accountants of the Company (including the expenses of
any special audit and "comfort" letters required by or incident to such
performance);
(vi) Fees and disbursements of underwriters
(excluding discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Stock or legal expenses
of any person other than the Company and the selling holders); and
(vii) Fees and expenses of other persons retained by
the Company.
The Company will, in any event, pay its internal expenses (including
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees an expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed, rating agency fees and the fees and expenses of any person, including
special experts, retained by the Company.
In connection with the registration statement required hereunder, the
Company will reimburse the holders of Registrable Stock being registered
pursuant to the registration statement for the reasonable fees and disbursements
of not more than one counsel (or more than one counsel if conflict exists among
such selling holders in the exercise of the reasonable judgment of counsel for
the selling holders and counsel for the Company) chosen by the holders of a
majority of such Registrable Stock.
(e) Indemnification.
(i) The Company hereby agrees to indemnify each of
the holders of Registrable Stock against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, preliminary or final
prospectus, or other document incident to any such registration,
qualification or compliance (or in any related registration statement,
notification or the like) 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, or any
violation by the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration, qualification or compliance, and to reimburse the holders
of Registrable Stock (including officers and directors of the same and
controlling persons) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action, provided, however, the Company will
not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by
Warrantholders in an instrument duly executed by Warrantholders and
stated to be specifically for use therein.
(ii) The Warrantholders severally and not jointly
agree to indemnify the Company and its officers and directors and each
person, if any, who controls any thereof within the meaning of Section
15 of the Securities Act and their respective successors against all
claims, losses, damages and liabilities (or actions in respect hereof)
arising out of or based on any untrue statement of a material fact
contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance relating to
securities purchased pursuant to the Warrants (or in any
related registration statement, notification or the like) or any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading and will reimburse the Company and each other
person indemnified pursuant to this subsection (ii) for any legal and
any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action;
provided, however, that this subsection (ii) shall apply only if (and
only to the extent that) such statement or omission was made in
reliance upon information (including, without limitation, written
negative responses to inquiries) furnished to the Company by an
instrument duly executed by Warrantholders and stated to be
specifically for use in such prospectus, or other document (or related
registration statement, notification or the like) or any amendment or
supplement thereto.
(iii) Each party entitled to indemnification
hereunder (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party
(at such Indemnifying Party's expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be satisfactory to the Indemnified Party, and the
Indemnified Party may participate in such defense at such party's
expense, and provided further, the omission by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 11(e) except to the extent that
the omission results in a failure of actual notice to the Indemnifying
Party and such Indemnifying Party is materially damaged solely as a
result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or
litigation.
(iv) If the indemnification provided for in this
Section 11(e) is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any losses, claims, damages,
liabilities, expenses or actions in respect thereof referred to herein,
then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims,
damages, liabilities, expenses or actions in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on
the one hand, and the Indemnified Party on the other,
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities, expenses or actions as well as
any other relevant equitable considerations, including the failure to
give the notice required hereunder. The relative fault of the
Indemnifying Party and the Indemnified Party shall be determined by
reference to, among other things whether the untrue or alleged untrue
statement of 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 statement or omission. The Company and the Warrantholders
agree that it would not be just and equitable if contributions pursuant
to this Section 11(e) were determined by pro rata allocation or by any
other method of allocation which did not take account of the equitable
considerations referred to above. The amount paid or payable to an
Indemnified Party as a result of the losses, claims, damages,
liabilities or actions in respect thereof, referred to above, shall be
deemed to include any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions
of this Section 11(e), in no event shall the amount contributed by any
seller of Registrable Stock exceed the aggregate net offering proceeds
received by such seller from the sale of Registrable Stock to which
such contribution or indemnification claim relates. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
(v) The indemnification required by this Section
11(e) shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses
incurred. Anything contained herein to the contrary notwithstanding,
the liability of any holder of Registrable Stock under this Section
11(e) shall not exceed the amount of the net proceeds actually received
by such holder from the sale of its Registrable Stock pursuant to the
registration, qualification, notification or compliance in respect of
which such liability arose.
(f) Reporting Requirements Under Exchange Act. The Company
shall maintain the registration of its Common Stock under Section 12 of the
Exchange Act and shall keep effective such registration and shall timely file
such information, documents and reports as the Commission may require or
prescribe under Section 13 of the Exchange Act, or otherwise. From and after the
effective date of the first registration statement filed by the Company under
the Securities Act, the Company shall (whether or not it shall then be required
to do so) timely file such information, documents and reports as the Commission
may require or prescribe under Section 13 or 15(d) (whichever is applicable) of
the Exchange Act.
Immediately upon becoming subject to the reporting requirements of either
Section 13 or 15(d) of the Exchange Act, the Company shall forthwith upon
request furnish any holder of Registrable Stock (i) a written statement by the
Company that it has complied with such reporting requirements, (ii) a copy of
the most recent annual or quarterly report of the Company, and (iii) such other
reports and documents filed by the Company with the Commission as such holder
may reasonably request in availing itself of an exemption for the sale of
Registrable Stock without registration under the Securities Act. The Company
acknowledges and agrees that the purpose of the requirements contained in this
Section 11(f) is to enable any such holder to comply with the current public
information requirement contained in Rule 144 under the Securities Act should
such holder ever wish to dispose of any of the securities of the Company
acquired by it without registration under the Securities Act in reliance upon
Rule 144 (or any other similar exemptive provision). In addition, the Company
shall take such other measures and file such other information, documents and
reports as shall hereafter be required by the Commission as a condition to the
availability of Rule 144 and Rule 144A under the Securities Act (or any similar
exemptive provision hereafter in effect).
(g) Stockholder Information. The Company may require each
holder of Registrable Stock as to which any registration is to be effected
pursuant to this Section 11 to furnish the Company such information with respect
to such holder and the distribution of such Registrable Stock as shall be
required by law or by the Commission in connection therewith.
12. Representation and Warranties. The Company hereby represents
and warrants to and covenants with Imperial, the Bank, each Warrantholder, and
each holder of Warrant Shares that:
(a) Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Arizona. As of the date hereof, the authorized
capital of the Company consists of 100,000,000 shares of Common Stock and
30,000,000 shares of Preferred Stock, of which a number of shares of Common
Stock and Preferred Stock are issued and outstanding as is described on Schedule
1 (attached hereto). The Company has, and at all times during the Exercise
Period will have, reserved for issuance pursuant to the Warrants that number of
shares of Common Stock that are issuable pursuant to the Warrants. Except as
otherwise described on Schedule 1 (attached hereto), no unissued shares of
Common Stock are reserved for any purpose other than for issuance upon the
exercise of the Warrants. As of the date hereof and except as otherwise
described on Schedule 1 (attached hereto), the Company has not issued or agreed
to issue any stock purchase rights or convertible securities (other than this
Warrant), and there are no preemptive rights in effect with respect to the
issuance of any shares of Common Stock. All the outstanding shares of Common
Stock and Preferred Stock have been validly issued without violation of any
preemptive or similar rights, are fully paid and nonassessable
and have been issued in compliance with all federal and applicable state
securities laws.
(b) Authority. The Company has full corporate power and
authority to execute and deliver this Warrant, to issue the shares of Common
Stock issuable upon exercise of this Warrant, and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action on its part. This Warrant
has been duly executed on behalf of the Company and constitutes the legal, valid
and binding obligation of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Neither the execution, delivery or
performance of this Warrant nor the issuance of the shares of Common Stock
issuable upon exercise of this Warrant will (a) conflict with or result in a
violation of the Certificate of Incorporation or By-Laws of the Company, (b)
conflict with or result in a violation of any law, statute, regulation, order or
decree applicable to the Company or any affiliate, (c) require any consent or
authorization or filing with, or other act by or in respect of any governmental
authority or (d) result in a breach of, constitute a default under or constitute
an event creating rights of acceleration, termination or cancellation under any
mortgage, lease, contract, franchise, instrument or other agreement to which the
Company is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, the shares of Common Stock so issued will have
been validly issued and will be fully paid and nonassessable. On the date
hereof, the par value of the Common Stock is less than the Exercise Price per
share of Common Stock.
13. Continuing Validity. Imperial, the Bank and each holder of
Warrant Shares shall continue to be entitled to all rights to which a
Warrantholder is entitled pursuant to the provisions of this Warrant except such
rights as by their terms apply solely to a Warrantholder, notwithstanding the
fact that this Warrant has been exercised or the period of exercisability has
expired. The Company will, at any time upon the request of Imperial, the Bank or
a holder of the Warrant Shares, acknowledge in writing, in form reasonably
satisfactory to Imperial, the Bank or such holder, the Company's continuing
obligation to afford to Imperial, the Bank or such holder all rights to which
Imperial, the Bank or such holder shall continue to be entitled in accordance
with the provisions of this Warrant; provided, however, that if Imperial, the
Bank or such holder shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to Imperial, the Bank
and such holder all such rights.
14. Miscellaneous Provisions.
(a) Notice of Expiration. The Company shall give written
notice to the Warrantholders specifically advising them of
the Expiration Date and of their right to exercise the Warrants not more than
one hundred eighty (180) days and not less than ninety (90) days before the
Expiration Date. If such written notice is not so given, the Expiration Date
shall automatically be extended until ninety (90) days after the date that the
Company gives the Warrantholders such written notice.
(b) Governing Law, Venue and Waiver of Jury Trial. This
Warrant shall be deemed to have been made in the State of California and the
validity of this Warrant, the construction, interpretation, and enforcement
thereof, and the rights of the parties thereto shall be determined under,
governed by, and construed in accordance with the internal laws of the State of
California, without regard to principles of conflicts of law. The parties agree
the all actions or proceedings arising in connection with this Warrant shall be
tried and litigated only in the state or federal courts located in the County of
Los Angeles, State of California or, at the sole option of a Warrantholder, in
any other court in which a Warrantholder shall initiate legal or equitable
proceedings and which has subject matter jurisdiction over the matter in
controversy. The Warrantholders and the Company each waive the right to a trial
by jury and any right each may have to assert the doctrine of forum non
conveniens or to object to venue to the extent any proceeding is brought in
accordance with this Section 14(b). Service of process, sufficient for personal
jurisdiction in any action against the Company, may be made by registered or
certified mail, return receipt requested, to its address indicated in Section
14(b).
(c) Notices. Except for telephonic notices (if any) permitted
herein, any notices or other communications required or permitted to be given by
this Warrant to the Company or the Warrantholders or holders of the Warrant
Shares must be (i) given in writing and personally delivered or mailed by
prepaid certified or registered mail, or (ii) made by telefacsimile delivered or
transmitted (but confirmed on the date the telefacsimile is transmitted by one
of the other methods of giving of notice provided in this Section) to the party
to whom such notice or communication is directed, to the address of such person
as follows:
Company: Southhampton Enterprises Corp.
0000 Xxxxxxxxx Xxx
Xxxxxx, Xxxxx 00000
Attn: L. Xxxxxx Xxxxxx
Telecopier: (000) 000-0000
Warrantholders or the holders of the Warrant Shares:
Imperial Bank
0000 Xxxxx Xx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telecopier: (000) 000-0000
With a copy (which shall not constitute notice) to:
Imperial Bank
Xxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopier: (000) 000-0000
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the person to whom such notice
is directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
and confirmed; provided that notice given to the Warrantholders or the holders
of the Warrant Shares shall be deemed given only if given to such person at both
addresses as aforesaid. The Company, the Warrantholders or the holders of the
Warrant Shares may change its address for purposes of this Warrant by giving
notice of such change to the other parties pursuant to this Section.
(d) Successors and Assigns. This Warrant shall be binding upon
and inure to the benefit of the Company, Imperial, the Bank, the Warrantholders
and the holders of Warrant Shares and the successors, assigns and transferees of
the Company, Imperial, the Bank, the Warrantholders and the holders of Warrant
Shares.
(e) Attorneys' Fees. The Company agrees to pay, on demand, all
attorneys' fees (including attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may be
incurred by Imperial, the Bank, the Warrantholders and the holders of Warrant
Shares in connection with any amendment to this Warrant and/or in connection the
enforcement of this Warrant or in any way arising out of, or consequential to
the protection, assertion, or enforcement of the Obligations under the Loan
Agreement (or any security therefor), whether or not suit is brought.
(f) Entire Agreement; Amendments and Waivers. This Warrant
sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby. The failure of any party to seek redress for
the violation or to insist upon the strict performance of any term of this
Warrant shall not constitute a waiver of such term and such party shall be
entitled to enforce such term without regard to such forbearance. This Warrant
may be amended, the Company may take any action herein prohibited or omit to
take action herein required to be performed by it, and any breach of or
compliance with any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written consent or written waiver
of the majority in interest of the Warrantholders, and then such consent or
waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
(g) Severability. If any terms of this Warrant as applied to
any person or to any circumstance is prohibited, void, invalid or unenforceable
in any jurisdiction, such term shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or invalidity without in any way affecting any
other term of this Warrant or affecting the validity or enforceability of this
Warrant or of such provision in any other jurisdiction.
(h) Headings. The headings in this Warrant are inserted only
for convenience of reference and shall not be used in the construction of any of
its terms.
(i) Transferability. This Agreement may be assigned,
transferred or sold by Warrantholder at any time without the consent of Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers effective as of the date first set forth above.
SOUTHHAMPTON ENTERPRISES CORP., a
British Columbia (Canada) corporation
By: /s/ L. Xxxxxx Xxxxxx
Type/Print Name: L. Xxxxxx Xxxxxx
Title: President
SCHEDULE 1
Capital Structure Total
Common Stock Shares Warrants Options Equity
Outstanding x 13,789,621 240,000
Scheduled for
Cancellation x (1,184,000)
Private Placement 1 x 811,000 811,000
Private Placement 2 x 1,050,000 1,050,000
Private Placement 3 x 1,180,556 590,278
Private Placement 4 x 850,000 850,000
Preferred Stock
Private Placement 6 x 3,900,000 3,900,000
Convertible Note
Private Placement 7 x 5,142,656 5,142,656
x 3,881,250 3,881,250
Fees
Finders Fees:
Geometry 800,000
Xxxxxxx 80,000
Xxxx Capital 808,803
Sportswear LLC 658,792
Misc Finders Fee 1,000,000
Proposed Options
Employee 1,335,000
Directors 535,000
Total 31,079,875 17,913,987 2,110,000 51,103,862
LaSalle 1,580,532
Cruttenden 5,678,207
Imperial 5,678,207
Fully Diluted 64,040,808
5 for 1
reverse split 6,215,975 6,170,187 422,000 12,808,162
Fully Diluted 12,808,162
