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Exhibit 17
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
THE TERMS AND CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED
AS OF OCTOBER 27, 1997, AS AMENDED.
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
Issuance Date: _______ __, ____
Issued To: _______________________
No. of Shares of Common Stock: ________
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TABLE OF CONTENTS
Page
1. DEFINITIONS..............................................................................................1
2. EXERCISE OF WARRANT......................................................................................6
2.1. Manner of Exercise..............................................................................6
2.2. Payment of Taxes................................................................................7
2.3. Fractional Shares...............................................................................7
2.4. Continued Validity..............................................................................7
3. TRANSFER, DIVISION AND COMBINATION.......................................................................7
3.1. Transfer........................................................................................8
3.2. Division and Combination........................................................................8
3.3. Expenses........................................................................................8
3.4. Maintenance of Books............................................................................8
4. ADJUSTMENTS..............................................................................................8
4.1. Stock Dividends, Subdivisions and Combinations..................................................8
4.2. Certain Other Distributions.....................................................................9
4.3. Issuance of Additional Shares of Common Stock..................................................10
4.4. Issuance of Warrants or Other Rights...........................................................11
4.5. Issuance of Convertible Securities.............................................................12
4.6. Superseding Adjustment.........................................................................12
4.7. Other Provisions Applicable to Adjustments Under This Section..................................13
4.8. Reorganization, Reclassification, Liquidation, Dissolution, Merger, Consolidation
or Disposition of Assets.......................................................................15
4.9. Other Action Affecting Common Stock............................................................16
4.10. Certain Limitations............................................................................16
5. NOTICES TO WARRANTHOLDERS...............................................................................16
5.1. Notice of Adjustments..........................................................................16
5.2. Notice of Certain Corporate Action.............................................................17
6. NO IMPAIRMENT...........................................................................................17
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY..........................................................17
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS....................................................18
9. RESTRICTIONS ON TRANSFERABILITY.........................................................................19
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Page
9.1. Restrictive Legends............................................................................19
9.2. Notice of Proposed Transfers; Requests for Registration........................................20
9.3. No Transfer to Directed Electronics, Inc.......................................................20
9.4. Termination of Restrictions....................................................................20
10. SUPPLYING INFORMATION...................................................................................21
11. LOSS OR MUTILATION......................................................................................21
12. OFFICE OF THE COMPANY...................................................................................21
13. [INTENTIONALLY OMITTED.]................................................................................21
14. REGISTRATION RIGHTS.....................................................................................21
15. LIMITATION OF LIABILITY.................................................................................22
16. DIVIDENDS ON UNDERLYING COMMON STOCK....................................................................22
17. MISCELLANEOUS...........................................................................................22
17.1. Nonwaiver and Expenses.........................................................................22
17.2. Notice Generally...............................................................................22
17.3. Indemnification................................................................................23
17.4. Successors and Assigns.........................................................................23
17.5. Amendment......................................................................................24
17.6. Severability...................................................................................24
17.7. Headings.......................................................................................24
17.8. Governing Law; Consent to Jurisdiction and Venue. .............................................24
17.9. Mutual Waiver of Jury Trial....................................................................24
17.10. Fair Value of Warrant..........................................................................24
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THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE AND MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED, IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH APPLICABLE STATE LAWS, OR IN VIOLATION OF THE PROVISIONS OF THIS
WARRANT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
THE TERMS AND CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED
AS OF OCTOBER 27, 1997, AS AMENDED.
Warrant Number: ___________ Date of Issuance: ________
No. of Shares of Common Stock: ________
WARRANT
To Purchase Common Stock of
CODE ALARM INC.
THIS IS TO CERTIFY THAT _______________________ or its
registered assigns, is entitled, at any time during the Exercise Period (as
hereinafter defined), to purchase from Code Alarm Inc., a Michigan corporation
(the "Company"), _____________ (________) shares of Common Stock (as hereinafter
defined and subject to adjustment as provided herein), in whole or in part,
including fractional parts, at a purchase price equal to the Current Warrant
Price (as defined below), all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock, whether now authorized or not.
"Affiliate" of any Person shall mean a Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with, such Person.
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"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall mean _______ __, ____.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, no par value, of the Company as constituted on the
Closing Date, and any capital stock into which such Common Stock may thereafter
be changed, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the holders of shares of Common
Stock upon any reclassification thereof which is also not preferred as to
dividends or assets over any other class of stock of the Company and which is
not subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated by
Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of
Common Stock on any date herein specified, the average of the daily market
prices for the 20 consecutive Trading Days immediately preceding such date. The
daily market price for each such Trading Day shall be (i) the last sale price on
such day on the principal stock exchange on which such Common Stock is then
listed or admitted to trading, (ii) if no sale takes place on such day on any
such exchange, the last reported sale price as officially quoted on any such
exchange, (iii) if the Common Stock is not then listed or admitted to trading on
any stock exchange but is traded on the Nasdaq Stock Market, the last reported
sale price as officially quoted on the Nasdaq Stock Market, (iv) if the Common
Stock is not then traded on the Nasdaq Stock Market, the last reported sale
price on the over-the-counter market, as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices), or if such sale price is not available on such
date, the average of the closing bid and asked prices on such date as reported
by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices), or (v) if there is no
such organization or agency, as furnished by any member of the NASD selected
mutually by the Majority Holders and the Company or, if they cannot agree upon
such selection, by a member selected by two such members of the NASD, one of
which shall be selected by the Majority Holders and one of which shall be
selected by the Company.
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"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date. From the Closing
Date through April 30, 2000, the Current Warrant Price is $.272549 per share of
Common Stock, and thereafter the Current Warrant Price is $.0001 per share of
Common Stock, and is at all times subject to adjustment pursuant to Section 4.
Any adjustment to the Current Warrant Price made as a result of any occurrence
on or prior to April 30, 2000 shall be made to the Current Warrant Price before
and after such date.
"DEI shall mean Directed Electronics, Inc., a California
corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period beginning on the
Closing Date and ending at 5:00 P.M., Michigan time, on the seventh anniversary
of the Closing Date.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant outstanding on such
date and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date, whether or not such options,
warrants or other securities are presently convertible or exercisable.
"GECC" shall mean General Electric Capital Corporation, a New
York corporation.
"Holder" shall mean, as the context requires, the Person in
whose name this Warrant or one of the other Warrants is registered on the books
of the Company maintained for such purpose and/or the Person holding any Warrant
Stock.
"Independent Counsel" shall mean counsel to the Holder
reasonably acceptable to the Company.
"Litigation Warrants" shall mean warrants to purchase Common
Stock issued to Pegasus pursuant to Section 5.04 of the Unit Purchase Agreement,
and all warrants issued upon transfer, division or combination of, or in
substitution or exchange for, any thereof.
"Majority Holders" shall mean, at any given time, holders of
Warrants and Other Warrants then outstanding who would hold a majority of the
Common Stock purchasable upon exercise of all Warrants and Other Warrants in the
event all Warrants and Other Warrants were so exercised at such time.
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"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"New Securities" shall mean any Additional Shares of Common
Stock, and any rights or options to purchase any Additional Shares of Common
Stock, and any Convertible Securities.
"Other Property" shall have the meaning set forth in Section
4.8.
"Other Warrants" shall mean (i) warrants to purchase Common
Stock issued as part of Units purchased by Pegasus pursuant to the Unit Purchase
Agreement or issued to Pegasus or their successors or assigns as part of Units
issued in payment of dividends on Preferred Shares, (ii) warrants issued to
Pegasus pursuant to Section 3.01(s) of the Unit Purchase Agreement, (iii)
Litigation Warrants and (iv) all warrants issued upon transfer, division or
combination of, or in substitution or exchange for, any thereof.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any Subsidiary, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Payment Shares" shall have the meaning set forth in Section
2.1.
"Pegasus" shall mean collectively, Pegasus Partners, L.P., a
Delaware limited partnership and Pegasus Related Partners, L.P., a Delaware
limited partnership.
"Permitted Issuances" shall mean (i) the issuance of shares of
Common Stock pursuant to an underwritten public offering, (ii) the issuance of
Other Warrants, (iii) the issuance of shares of Common Stock upon exercise of
the Warrants or the Other Warrants, (iv) the issuance of up to 280,000 shares of
Common Stock upon the exercise of options issued to management employees of the
Company or its Subsidiaries pursuant to the Company's 1987 Stock Option Plan,
(v) the issuance of up to 1,317,178 shares of Common Stock or options to acquire
such shares to management employees of the Company or its Subsidiaries pursuant
to the Company's 1997 Stock Option Plan, (vi) the issuance of Preferred Shares
to Pegasus and (vii) the issuance to GECC of Common Stock upon the exercise of
warrants to purchase up to 131,718 shares of Common Stock (subject to adjustment
as provided therein).
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
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"Preferred Shares" shall mean shares of Series A Preferred
Stock of the Company.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of October 27, 1997 among the Company, Pegasus and
GECC, as amended.
"Reorganization" shall have the meaning set forth in Section
4.8.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean any corporation of which an aggregate
of more than 50% of the outstanding stock having ordinary voting power to elect
a majority of the board of directors of such corporation (irrespective of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by the Company and/or one or more Subsidiaries of the Company.
"Trading Day" shall mean (i) any day on which stock is traded
on the principal stock exchange on which the Common Stock is listed or admitted
to trading, (ii) if the Common Stock is not then listed or admitted to trading
on any stock exchange but is traded on the Nasdaq Stock Market, any day on which
stock is traded on the Nasdaq Stock Market, or (iii) if the Common Stock is not
then traded on the Nasdaq Stock Market, any day on which stock is traded in the
over-the counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices).
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Unit Purchase Agreement" shall mean the Unit Purchase
Agreement dated as of October 27, 1997, by and among the Company and Pegasus.
"Units" shall mean units consisting of one Preferred Share and
one warrant to purchase 72.2525247 shares of Common Stock, as adjusted from time
to time.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
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"Warrant Stock" shall mean the shares of Common Stock
purchased by Holders of the Warrants upon the exercise thereof.
"Warrants" shall mean this warrant and the other warrants
issued to Pegasus pursuant to Section 2 of the Warrant Issuance and Amendment
Agreement dated as of the Closing Date among the Company and Pegasus, and all
warrants issued upon transfer, division or combination of, or in substitution or
exchange for, any thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. At any time during the Exercise
Period, the Holder may exercise this Warrant, on any Business Day, for all or
any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the
Holder shall deliver to the Company at its office at 000 Xxxx Xxxxxxxx, Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000, or at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of the Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price in the manner provided
below, and (iii) this Warrant. Such notice shall be substantially in the form of
the subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by the Holder or its duly appointed agent or attorney. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute or cause to be executed and deliver
or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the Holder
shall request in the notice and shall be registered in the name of the Holder
or, subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date the notice, together
with the cash or check or checks, if any, and this Warrant, are received by the
Company as described above and all taxes required to be paid by the Holder, if
any, pursuant to Section 2.2 prior to the issuance of such shares have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing Warrant
Stock, deliver to the Holder a new Warrant evidencing the rights of the Holder
to purchase the unpurchased shares of Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this Warrant,
or, at the request of the Holder, appropriate notation may be made on this
Warrant and the same returned to the Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired this Warrant (or part hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.
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Payment of the Warrant Price shall be made at the option of
the Holder by (i) cash, (ii) wire transfer to an account in a bank located in
the United States designated for such purpose by the Company, (iii) certified or
official bank check, or (iv) any combination of the foregoing; provided,
however, that the Holder shall have the right, at its election, in lieu of
delivering the Warrant Price in cash, to instruct the Company in the form of
Subscription Notice to retain, in payment of the Warrant Price, a number of
shares of Common Stock (the "Payment Shares") equal to the quotient of the
aggregate Warrant Price of the shares as to which this Warrant is then being
exercised divided by the Current Market Price.
2.2. Payment of Taxes. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof, unless such tax or charge is imposed by law upon the Holder, in which
case such taxes or charges shall be paid by the Holder. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of the
Holder, and in such case the Company shall not be required to issue or deliver
any stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or other
charge is due.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
2.4. Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold pursuant
to a Registration Statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as the Holder under Sections 6,
10, 14, 15 and 17 of this Warrant, subject to the obligations thereunder. The
Company will, at the time of each exercise of this Warrant, in whole or in part,
upon the request of the holder of the shares of Common Stock issued upon such
exercise hereof, acknowledge in writing, in form reasonably satisfactory to such
holder, its continuing obligation to afford to such holder all such rights;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
such holder all such rights.
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3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Subject to compliance with Section 9, transfer
of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to
Section 12, together with a written assignment of this Warrant substantially in
the form of Exhibit B hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the
Company shall, subject to Section 9, execute and deliver a new Warrant or
Warrants in the name(s) of the assignee or assignees and in the denomination(s)
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued. If requested by the
Company, a new Holder shall acknowledge in writing, in form reasonably
satisfactory to the Company, such Holder's continuing obligation under Section
9.
3.2. Division and Combination. Subject to Section 9, this
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. Expenses. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give the Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1. Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:
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(a) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Additional Shares of
Common Stock,
(b) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, by a reverse
stock split or otherwise,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. Certain Other Distributions. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(a) cash;
(b) any evidences of its indebtedness, any shares of
its stock or any other securities or property of any nature
whatsoever (other than cash, Convertible Securities or
Additional Shares of Common Stock); or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature
whatsoever (other than cash, Convertible Securities or
Additional Shares of Common Stock);
and the Holder of this Warrant has not received a payment on behalf of such
dividend or distribution pursuant to Section 16 hereof, then (i) the number of
shares of Common Stock for which this Warrant is exercisable shall be adjusted
to equal the product obtained by multiplying the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such adjustment
by a fraction (A) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record and (B) the denominator
of which shall be such Current Market Price per share of Common Stock, minus the
amount allocable to one share of Common Stock of (x) any such cash so
distributable and (y) the fair value (as
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determined in good faith by the Board of Directors of the Company and, if
requested by the Holder, supported by an opinion from an investment banking firm
of recognized national standing reasonably acceptable to the Majority Holders)
of any and all such evidences of indebtedness, shares of stock, other securities
or property or warrants or other subscription or purchase rights so
distributable, and (ii) the Current Warrant Price shall be adjusted to equal (A)
the Current Warrant Price multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment divided by
(B) the number of shares for which this Warrant is exercisable immediately after
such adjustment. A reclassification of the Common Stock (other than a change in
par value, or from par value to no par value or from no par value to par value)
into shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section 4.2 and,
if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be, of
the outstanding shares of Common Stock within the meaning of Section 4.1.
4.3. Issuance of Additional Shares of Common Stock. (a) In the
event the Company shall issue or sell any Additional Shares of Common Stock,
other than Permitted Issuances, for a consideration per Additional Share of
Common Stock less than the greater of the Current Warrant Price and the Current
Market Price, then the Current Warrant Price shall be reduced to the lower of
the prices calculated as follows:
(1) by dividing (A) an amount equal to the sum of (x) the
number of Fully Diluted Outstanding shares of Common Stock immediately prior to
such issue or sale multiplied by the then existing Current Warrant Price plus
(y) the aggregate consideration, if any, received by the Company upon such issue
or sale, by (B) the total number of Fully Diluted Outstanding shares of Common
Stock outstanding immediately after such issue or sale; and
(2) by multiplying the then existing Current Warrant Price by
a fraction the numerator of which shall be the sum of (x) the number of Fully
Diluted Outstanding shares of Common Stock immediately prior to such issue or
sale multiplied by the Current Market Price per share of Common Stock
immediately prior to such issue or sale plus (y) the consideration received by
the Company upon such issue or sale, and the denominator of which shall be the
total number of Fully Diluted Outstanding shares of Common Stock immediately
after such issue or sale multiplied by the Current Market Price per share of
Common Stock immediately prior to such issue or sale.
For purposes of this subsection (a), the date as of which the
Current Market Price per share of Common Stock shall be computed shall be the
earlier of the date upon which the Company shall (i) enter into a firm contract
for the issuance of such shares or (ii) issue such shares.
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Upon any adjustment of the Current Warrant Price as provided
in this Section 4.3(a), the Holder shall thereafter be entitled to purchase, at
the Current Warrant Price resulting from such adjustment, the number of shares
of Common Stock (calculated to the nearest 1/100th of a share) obtained by
multiplying the Current Warrant Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable hereunder
immediately prior to such adjustment and dividing the product thereof by the
Current Warrant Price resulting from such adjustment.
(b) The provisions of this Section 4.3 shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment shall be made under this
Section 4.3 upon the issuance of any Additional Shares of Common Stock which are
issued pursuant to the exercise of any warrants or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange rights
in any Convertible Securities, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights or upon the issuance of
such Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. Except with respect
to Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants (other than the Warrants) or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
greater of the Current Warrant Price and the Current Market Price in effect
immediately prior to the time of such distribution, issue or sale, then the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3(a) on the
basis that (i) the maximum number of Additional Shares of Common Stock issuable
pursuant to all such warrants or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding, (ii) the price per share for such Additional
Shares of Common Stock shall be deemed to be the lowest price per share at which
such Additional Shares of Common Stock are issuable to such holders, and (iii)
the Company shall have received all of the consideration, if any, payable for
such warrants or other rights as of the date of the actual issuance thereof. No
further adjustments of the number of shares of Common Stock for which this
Warrant is exercisable or of the Current Warrant Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such Convertible Securities.
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4.5. Issuance of Convertible Securities. Except with respect
to Permitted Issuances and distributions on behalf of which a payment is made to
the Holder of this Warrant pursuant to Section 16 hereof, if at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the greater of the Current Warrant Price and the
Current Market Price in effect immediately prior to the time of such issue or
sale, then the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall be adjusted as provided in
Section 4.3(a) on the basis that (i) the maximum number of Additional Shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding, (ii) the price
per share of such Additional Shares of Common Stock shall be deemed to be the
lowest possible price in any range of prices at which such Additional Shares of
Common Stock are available to such holders, and (iii) the Company shall have
received all of the consideration payable therefor, if any, as of the date of
actual issuance of such Convertible Securities. No further adjustment of the
number of shares of Common Stock for which this Warrant is exercisable or of the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the number of
shares of Common Stock for which this Warrant is exercisable or of the Current
Warrant Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and, if any issue or sale
of such Convertible Securities is made upon exercise of any warrant or other
right to subscribe for or to purchase or any warrant or other right to purchase
any such Convertible Securities for which adjustments thereof have been or are
to be made pursuant to other provisions of this Section 4, no further
adjustments shall be made by reason of such issue or sale.
4.6. Superseding Adjustment. If, at any time after any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable shall have been made pursuant to Section 4.4 or Section 4.5 as the
result of any issuance of warrants, rights or Convertible Securities, and either
(a) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities,
shall expire, and all or a portion of such warrants or rights,
or the right of conversion or exchange with respect to all or
a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
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(b) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights,
or such other Convertible Securities, shall be increased or
decreased by virtue of provisions therein contained,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the then outstanding Warrants, but not on any
then outstanding Warrant Stock, on the basis of
(c) treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually
issued or issuable pursuant to the previous exercise of any
such warrants or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and
receivable therefor, and
(d) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of
such increase or decrease of the consideration per share for
which shares of Common Stock or other property are issuable
under such warrants or rights or other Convertible Securities.
4.7. Other Provisions Applicable to Adjustments Under This
Section. The following provisions shall be applicable to the making of
adjustments provided for in this Section 4:
(a) Computation of Consideration. To the extent that
any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration,
the consideration received by the Company therefor shall be
the amount of the cash received by the Company therefor, or,
if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common
Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued
dividends, but not subtracting any compensation, discounts or
expenses paid or incurred by the Company for and in the
underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at
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the time of such issuance as determined in good faith by the
Board of Directors of the Company. In case any Additional
Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase such
Additional Shares of Common Stock or Convertible Securities
shall be issued in connection with any merger in which the
Company issues any securities, the amount of consideration
therefor shall be deemed to be the fair value, as determined
in good faith by the Board of Directors of the Company, of
such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the case
may be. The consideration for any Additional Shares of Common
Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration
received by the Company for issuing such warrants or other
rights plus the additional consideration payable to the
Company upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Convertible Securities
shall be the consideration, if any, received by the Company
for issuing warrants or other rights to subscribe for or
purchase such Convertible Securities, plus the consideration
paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon
the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of
any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon
any class of stock other than Common Stock, the Company shall
be deemed to have received for such Additional Shares of
Common Stock or Convertible Securities a consideration equal
to the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments
required by this Section 4 shall be made whenever and as often
as any specified event requiring an adjustment shall occur,
except that any adjustment of the number of shares of Common
Stock for which this Warrant is exercisable that would
otherwise be required may be postponed (except in the case of
a subdivision or combination of shares of the Common Stock, as
provided for in Section 4.1) up to, but not beyond the date of
exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1%
of the shares of Common Stock for which this Warrant is
exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made upon the earlier of (i) the
date upon which such adjustment, together with other
adjustments required by this Section 4 and not previously
made, would result in a minimum adjustment, and (ii) the date
of exercise. For
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the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date
of its occurrence.
(c) Fractional Interests. In computing adjustments
under this Section 4, fractional interests in Common Stock
shall be taken into account to the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property
becomes distributable pursuant to this Section 4 by reason of
the taking of any record of the holders of Common Stock, but
prior to the occurrence of the event for which such record is
taken, the Holder exercises this Warrant, any Additional
Shares of Common Stock issuable and other property
distributable upon exercise by reason of such adjustment shall
be held in escrow for the Holder by the Company to be issued
to the Holder upon and to the extent that the event actually
takes place, upon payment of the then Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is
rescinded, then such escrowed shares shall be cancelled by the
Company and escrowed property returned.
(f) Challenge to Good Faith Determination. Whenever
the Board of Directors of the Company shall be required to
make a determination in good faith of the fair value of any
item under this Section 4, such determination may be
challenged in good faith by the Majority Holders, and any
dispute shall be resolved by an investment banking firm of
recognized national standing selected by the Company and
acceptable to the Majority Holders.
4.8. Reorganization, Reclassification, Liquidation,
Dissolution, Merger, Consolidation or Disposition of Assets. In case the Company
shall reorganize its capital, reclassify its capital stock, liquidate its
assets, dissolve, consolidate or merge with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation or other entity (hereinafter, a
"Reorganization") and, pursuant to the terms of such Reorganization, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other
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securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of the Company, then the Holder
shall have the right following the effectiveness of such Reorganization to
receive, upon exercise of such Warrant, or, in the case of a liquidation of
assets or a dissolution to receive, upon such liquidation or dissolution,
without taking any further action, the number of shares of common stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
Reorganization by a holder of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such event. In case of any such
Reorganization, the successor or acquiring corporation (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such appropriate modifications as are satisfactory to the Holder in
order to provide for adjustments of shares of the Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.8
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive Reorganizations.
4.9. Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Section 4 for which a specific
adjustment is provided, then, unless such action will not have a materially
adverse effect upon the rights of the Holder, the number of shares of Common
Stock or other stock for which this Warrant is exercisable and/or the purchase
price thereof shall be adjusted in such manner as may be equitable in the
circumstances.
4.10. Certain Limitations. Notwithstanding anything herein to
the contrary, the Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price to be
less than the par value per share of Common Stock.
5. NOTICES TO WARRANTHOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock or the class or type of stock or other property for which this
Warrant is exercisable, or whenever the price at which a share of such Common
Stock may be purchased upon exercise of this Warrant, shall be adjusted pursuant
to Section 4, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in
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reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board of Directors of the Company determined the fair value of any evidences
of indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights referred to in Section 4.2 or 4.7(a)),
specifying the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 17.2. The Company shall keep at its office or
agency designated pursuant to Section 12 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by the Holder.
5.2. Notice of Certain Corporate Action. The Holder shall be
entitled to the same rights to receive notice of corporate action as any holder
of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Current
Warrant Price immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (c) use its best efforts
to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of the Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to the Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
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7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to permit the exercise in full of all outstanding Warrants and Other
Warrants, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, taking appropriate board action, recommending
such an increase to the holders of Common Stock, holding shareholders meetings,
soliciting votes and proxies in favor of such increase to obtain the requisite
shareholder approval and upon such approval, the Company shall reserve and keep
available such additional shares solely for the purpose of permitting the
exercise of Warrants or Other Warrants.
All shares of Common Stock which shall be so issuable, when
issued upon exercise of any Warrant and payment therefor in accordance with the
terms of such Warrant, shall be duly and validly issued, fully paid and
nonassessable and free and clear of any liens, claims and restrictions (other
than as provided herein). Except as provided in this Warrant, no stockholder of
the Company has or shall have any preemptive rights to subscribe for such shares
of Common Stock.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock or the type of consideration for which
this Warrant is exercisable or in the Current Warrant Price, the Company shall
obtain all such authorizations or exemptions thereof, or consents thereto, as
may be necessary from any public regulatory body or bodies having jurisdiction
thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification with
any governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
8. TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
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9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9. The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 9.
9.1. Restrictive Legends. (a) Except as otherwise provided in
this Section 9, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with legends in substantially the following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended,
or under the securities or blue sky laws of any state and are
subject to the conditions specified in a certain Warrant dated
_______ __, ____, originally issued by Code Alarm Inc. The
shares represented by this certificate may not be sold, or
otherwise transferred, in the absence of such registration or
an exemption therefrom under such Act and under any such
applicable state laws, or in violation of the provisions of
the Warrant. A copy of the form of said Warrant is on file
with the Secretary of Code Alarm Inc. The holder of this
certificate, by acceptance of this certificate, agrees to be
bound by the provisions of such Warrant."
"The shares represented by this certificate are
subject to the terms and conditions of a Registration Rights
Agreement, dated as of October 27, 1997, as amended."
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with legends in substantially
the following form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933, as
amended, or under the securities or blue sky laws of any state
and may not be sold, or otherwise transferred, in the absence
of such registration or an exemption therefrom under such Act
and under any such applicable state laws, or in violation of
the provisions of this Warrant."
"This Warrant and the securities represented hereby
are subject to the terms and conditions of a Registration
Rights Agreement, dated as of October 27, 1997, as amended."
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9.2. Notice of Proposed Transfers; Requests for Registration.
Prior to any Transfer or attempted Transfer of any Warrants or any shares of
Restricted Common Stock, the Holder of such Warrants or Restricted Common Stock
shall deliver to the Company either a written opinion reasonably acceptable to
the Company of Independent Counsel addressed to the Company or a no-action
letter from the Commission to the effect that the proposed Transfer of such
Warrants or such Restricted Common Stock may be effected without registration
under the Securities Act and applicable state securities or blue sky laws. After
delivery of the written opinion or the no-action letter to the Company, such
Holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock. Each certificate, if any, evidencing such shares of Restricted
Common Stock issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1(a), and each Warrant issued upon such Transfer shall bear
the restrictive legend set forth in Section 9.1(b), unless in the written
opinion of Independent Counsel addressed to the Company such legend is not
required in order to ensure compliance with the Securities Act.
9.3. No Transfer to Directed Electronics, Inc. The Holder
shall not sell or otherwise transfer any Warrants to DEI, any affiliate of DEI,
Mr. Xxxxxxx Xxxx, the president of DEI, any entity which, to the knowledge of
the Holder, is controlled by Xx. Xxxx, or any person who, to the knowledge of
the Holder, is a member of the immediate family (as such term is defined in Rule
16a-1 promulgated under the Exchange Act) of Xx. Xxxx.
9.4. Termination of Restrictions. Notwithstanding the
foregoing provisions of Section 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto, or (ii) when the Company shall have delivered to the Holder or
Holders of Warrants, Warrant Stock or Restricted Common Stock the written
opinion of Independent Counsel stating that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions imposed
by Section 9 shall terminate as to this Warrant, as hereinabove provided, the
Holder hereof shall be entitled to receive from the Company, at the expense of
the Company, a new Warrant bearing the following legend in place of the first
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE
WITHIN WARRANT CONTAINED IN SECTION 9 HEREOF
TERMINATED ON ____________, ____, AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants entitled to bear
such legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any
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share of Restricted Common Stock, as hereinabove provided, the Holder thereof
shall be entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 9.1(a).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and
each Holder of Restricted Common Stock in supplying such information as may be
reasonably requested by such Holder or reasonably necessary for such Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from the Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably satisfactory
to it (it being understood that the written indemnity agreement of Pegasus
Partners, L.P. or Pegasus Related Partners, L.P. shall be sufficient indemnity)
and in case of mutilation upon surrender and cancellation hereof, the Company
will execute and deliver in lieu hereof a new Warrant of like tenor to the
Holder; provided, in the case of mutilation, no indemnity shall be required if
this warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. [INTENTIONALLY OMITTED.]
14. REGISTRATION RIGHTS
This Warrant is entitled to the benefits of the registration
rights provisions contained in the Registration Rights Agreement. The Company
shall keep a copy of the Registration Rights Agreement, including any amendments
thereto, at the office or agency designated by the Company pursuant to Section
12 and shall furnish copies thereof to the Holder upon request.
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15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
the Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
the Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
16. DIVIDENDS ON UNDERLYING COMMON STOCK
In the event that, at any time after the Company shall have
failed for any reason to issue Common Stock to the Holder upon exercise of this
Warrant or shall have failed to comply with Section 7 hereof, the Company shall
pay a dividend or make any other distribution with respect to its Common Stock
whether in the form of cash, evidences of indebtedness, securities or other
property (other than a Common Stock dividend subject to the provisions of
Section 4.1 or a dividend of warrants or rights to purchase Common Stock subject
to the provisions of Section 4.2), then the Company shall pay to the Holder of
this Warrant on the date of payment of such dividend or other distribution, an
amount in cash equal to the number of shares of Common Stock issuable upon
exercise of this Warrant in full on the record date for such dividend or other
distribution multiplied by the sum of (i) the amount of cash and (ii) the fair
value of any evidences of indebtedness, securities or other property distributed
with respect to each share of Common Stock. The "fair value" of any such
evidences of indebtedness, securities or other property shall mean the fair
market value thereof, as determined by the Board of Directors in good faith,
which good faith determination may be challenged by the Holder in accordance
with Section 4.7(f).
17. MISCELLANEOUS
17.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right or otherwise prejudice the Holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
17.2. Notice Generally. All notices, demands, requests, or
other communications which may be or are required to be given, served, or sent
by any party to any other party pursuant to this Warrant shall be in writing and
shall be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery (including delivery
by courier), or facsimile transmission, addressed as follows:
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(a) If to the Company:
Code Alarm Inc.
000 Xxxx Xxxxxxxx
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx and Xxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Holder, at its last known address
appearing on the books of the Company maintained for such purpose.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication shall be deemed to have been duly
given five business days after being deposited in the mail, postage prepaid, if
mailed; when delivered by hand, if personally delivered; or upon receipt, if
sent by facsimile (followed by a confirmation copy sent by either overnight or
two (2) day courier).
17.3. Indemnification. The Company agrees to indemnify and
hold harmless the Holder, its officers, directors, employees, agents, and
attorneys from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against the Holder relating to or arising out of any litigation to which the
Holder is made a party in its capacity as a stockholder or warrantholder of the
Company; provided, however, that the Company will not be liable hereunder to the
extent that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a judgment by a court to have resulted from (i) the Holder's gross
negligence or willful misconduct, (ii) actions or omissions taken or not taken
by the Holder in any capacity other than as a stockholder or warrantholder of
the Company or (iii) actions or omissions taken or not taken by the Holder
solely as a stockholder or warrantholder of the Company and for which
stockholders or warrantholders may be held liable under Michigan law.
17.4. Successors and Assigns. Subject to the provisions of
Sections 3.1 and 9, (i) this Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and assigns of the Holder, and (ii) the
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provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant, and shall be enforceable by any such Holder.
17.5. Amendment. The Warrants may be modified or amended or
the provisions thereof waived with the written consent of the Company and the
Holder.
17.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
17.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
17.8. Governing Law; Consent to Jurisdiction and Venue. In all
respects, including all matters of construction, validity and performance, this
Agreement and the obligations arising hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. EACH OF THE COMPANY AND HOLDER CONSENTS TO PERSONAL
JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN XXX XXXX XX XXX
XXXX, XXXXX XX XXX XXXX. Service of process on the Company or the Holder in any
action arising out of or relating to this Agreement shall be effective if mailed
to such party in accordance with the procedures and requirements set forth in
Section 17.2. Nothing herein shall preclude the Holder or the Company from
bringing suit or taking other legal action in any other jurisdiction.
17.9. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS WARRANT.
17.10. Fair Value of Warrant. The Company and the Holder
agree that the value of 100% of this Warrant (which value shall be used by the
Company and the Holder, as well as
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any subsequent holder of this Warrant, for all purposes, including the
preparation of tax returns and the preparation of financial statements of the
Company) shall be $________.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its duly authorized officer and its corporate seal to be
impressed hereon and attested by its Secretary or Assistant Secretary.
Dated: __________, ____
CODE ALARM INC.
By:
------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
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EXHIBIT A
SUBSCRIPTION FORM
[TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _______ shares of Common Stock of
CODE ALARM INC. and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
__________________ whose address is ___________________________ and, if such
shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant, that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
------------------ (Name of Registered Owner)
------------------ (Signature of Registered Owner)
------------------ (Street Address)
------------------ (City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
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EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of Code Alarm Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:
-------------------------
Name:
-------------------------
Signature:
---------------------
Witness:
-----------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
