NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH REGISTRATION
REQUIREMENTS OR AN AVAILABLE EXEMPTION THEREFROM AND EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF THIS WARRANT.
AMENDED AND RESTATED WARRANT
To Purchase Common Stock of
OPTEK TECHNOLOGY, INC.
This AMENDED AND RESTATED WARRANT (the "Warrant"), entered
into this 12th day of December, 1995, between Optek Technology,
Inc., a Delaware corporation (the "Company") and First Source
Financial, Inc., a Delaware corporation ("First Source").
WITNESSETH THAT:
WHEREAS, the Company previously has issued a warrant, dated
as of January 20, 1994, (the "Original Warrant") to purchase
shares of its Common Stock to First Source, as
successor-in-interest to Household Commercial Financial Services,
Inc. pursuant to an amended and restated Secured Credit Agreement
dated as of January 20, 1994 (as hereinafter defined) in
consideration of the loans by Household Commercial Financial
Services, Inc.;
WHEREAS, the Original Warrant was an amendment and
restatement of, and was issued in replacement of, a warrant dated
as of November 27, 1991, which, in turn, was an amendment and
restatement of, and was issued in replacement of, the warrant
dated as of January 31, 1991, which in turn replaced rights
granted under a Conversion Agreement dated July 1, 1988, all of
which were issued to Household Commercial Financial Services,
Inc.;
WHEREAS, in consideration of a single lump-sum cash payment
of Two Hundred Thousand Dollars ($200,000.00) to be made by the
Company to First Source upon execution and delivery of this
Warrant, the Company and First Source have agreed to amend
various provisions of the Original Warrant as set forth herein,
including elimination of provisions for repurchase of the Warrant
or shares of Common Stock by the Company, addition of covenants
and decoupling of the obligations under the Warrant from those
under the Secured Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing payment,
the mutual covenants and agreements set forth below, and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and
First Source hereby covenant to amend and restate the Original
Warrant in its entirety as follows:
THIS IS TO CERTIFY that First Source Financial, Inc., a
Delaware corporation ("First Source"), as successor-in-interest
to Household Commercial Financial Services, Inc., or registered
assigns, is entitled upon the due exercise hereof at any time
during the Exercise Period (as hereinafter defined) to purchase,
in whole or in part, from Optek Technology, Inc., a Delaware
corporation (the "Company'), the number of shares of Common
Stock, $0.01 par value, of the Company as provided in Section 2.1
(subject to adjustment) at the price for each share of such
Common Stock so purchased as provided in Section 2.1 (subject to
adjustment) and to exercise the other rights, powers and
privileges hereinafter provided, all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
This Warrant has been issued to First Source pursuant to the
Secured Credit Agreement (as hereinafter defined) in
consideration of the loans by Household Commercial Financial
Services, Inc. as provided therein.
Dated as of December 12, 1995.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . .
. . . . 1
ARTICLE II EXERCISE OF WARRANT . . . . . . . . . . . . . . . . .
. . . . 5
2.1 Right to Exercise, Number of Shares and Exercise
Price. . . . 5
2.2 Notice of Exercise; Issuance of Common Stock. . . . .
. . . . 6
2.3 Fractional Shares . . . . . . . . . . . . . . . . . .
. . . . 7
2.4 Continued Validity. . . . . . . . . . . . . . . . . .
. . . . 7
ARTICLE III REGISTRATION, TRANSFER AND EXCHANGE . . . . . . .
. . . . 8
ARTICLE IV ANTIDILUTION PROVISIONS AND RIGHTS UPON EXTRAORDINARY
TRANSACTIONS 9
4.1 Adjustment of Number of Shares Purchasable and
Exercise Price 9
(a) Adjustment to Exercise Price. . . . . . . . . . .
. . . . 9
(b) Adjustment to Number of Shares Issuable Pursuant
to this Warrant 10
(c) Minimum Adjustment. . . . . . . . . . . . . . . .
. . . . 10
(d) Maximum and Minimum Exercise Price. . . . . . . .
. . . . 11
4.2 Diluting Events and Related Matters . . . . . . . . .
. . . . 11
(a) Issuance of Stock . . . . . . . . . . . . . . . .
. . . . 11
(b) Issuance of Warrants, Options or Other Rights . .
. . . . 11
(c) Issuance of Convertible Securities. . . . . . . .
. . . . 12
(d) Dividends . . . . . . . . . . . . . . . . . . . .
. . . . 13
(e) Dividends in Securities . . . . . . . . . . . . .
. . . . 13
(f) Other Distribution. . . . . . . . . . . . . . . .
. . . . 13
(g) Reorganization, Reclassification,
Recapitalization, Merger or Sale of Company 14
(h) Splits and Combinations . . . . . . . . . . . . .
. . . . 14
(i) Readjustments . . . . . . . . . . . . . . . . . .
. . . . 14
(j) Determination of Consideration for Rights or
Options. . . 15
(k) Determination of Consideration upon Payment of
Cash, Property or Merger 15
(l) Record Date . . . . . . . . . . . . . . . . . . .
. . . . 15
(m) Shares Outstanding. . . . . . . . . . . . . . . .
. . . . 16
(n) Date of Determination . . . . . . . . . . . . . .
. . . . 16
(o) No Adjustment After Exercise. . . . . . . . . . .
. . . . 16
4.3 Rights of the Holder upon Rights Offering, Mergers,
Reorganizations and Other Transfers 16
(a) Participation in Rights Offerings . . . . . . . .
. . . . 16
(b) Participation in Stock Dispositions . . . . . . .
. . . . 16
4.4 Certificates, Notices and Consents. . . . . . . . . .
. . . . 17
4.5 No Implied Consent or Extension . . . . . . . . . . .
. . . . 18
ARTICLE V COVENANTS OF THE COMPANY. . . . . . . . . . . . . . .
. . . . 18
5.1 No Impairment . . . . . . . . . . . . . . . . . . . .
. . . . 18
5.2 Affirmative Covenants . . . . . . . . . . . . . . . .
. . . . 19
5.2.2 Disputed Financial Statements . . . . . . . . . .
. . . . 20
5.2.3 Budget. . . . . . . . . . . . . . . . . . . . . .
. . . . 21
5.2.4 Auditors' Reports . . . . . . . . . . . . . . . .
. . . . 21
5.2.5 Lender Information. . . . . . . . . . . . . . . .
. . . . 21
5.2.6 Litigation. . . . . . . . . . . . . . . . . . . .
. . . . 21
5.2.7 Default . . . . . . . . . . . . . . . . . . . . .
. . . . 21
5.2.8 Material Adverse Developments . . . . . . . . . .
. . . . 21
5.2.9 Other Information . . . . . . . . . . . . . . . .
. . . . 21
5.2.10 Auditors. . . . . . . . . . . . . . . . . . . . .
. . . . 21
5.2.11 Inspection and Meeting Rights; Budget Review. . .
. . . . 21
5.2.12 Accounting. . . . . . . . . . . . . . . . . . . .
. . . . 22
5.2.13 Insurance . . . . . . . . . . . . . . . . . . . .
. . . . 22
5.2.14 Payment of Taxes. . . . . . . . . . . . . . . . .
. . . . 22
5.2.15 Compliance With Laws. . . . . . . . . . . . . . .
. . . . 22
5.2.16 Preservation of Corporate Existence and Property;
Operations 22
5.2.17Holder as Observer . . . . . . . . . . . . . . . . . . . .
. . . . 23
5.2.18 Confidential Information. . . . . . . . . . . . .
. . . . 23
5.3 Negative Covenants. . . . . . . . . . . . . . . . . .
. . . . 23
(a) Distributions . . . . . . . . . . . . . . . . . .
. . . . 23
(b) Redemptions . . . . . . . . . . . . . . . . . . .
. . . . 23
(c) Security Issuances. . . . . . . . . . . . . . . .
. . . . 23
(d) Loans or Guarantees . . . . . . . . . . . . . . .
. . . . 24
(e) Mergers . . . . . . . . . . . . . . . . . . . . .
. . . . 24
(f) Asset Dispositions. . . . . . . . . . . . . . . .
. . . . 24
(g) Liquidation . . . . . . . . . . . . . . . . . . .
. . . . 24
(h) Acquisitions. . . . . . . . . . . . . . . . . . .
. . . . 24
(i) Related Party Arrangements. . . . . . . . . . . .
. . . . 24
(j) Subsidiaries. . . . . . . . . . . . . . . . . . .
. . . . 24
(k) Leases. . . . . . . . . . . . . . . . . . . . . .
. . . . 24
(l) Fiscal Year . . . . . . . . . . . . . . . . . . .
. . . . 24
(m) Securities of Subsidiary. . . . . . . . . . . . .
. . . . 25
(n) Compensation. . . . . . . . . . . . . . . . . . .
. . . . 25
(o) Public Offering . . . . . . . . . . . . . . . . .
. . . . 25
(p) Change in the Business. . . . . . . . . . . . . .
. . . . 25
(q) Bankruptcy, Etc.. . . . . . . . . . . . . . . . .
. . . . 25
(r) Capital Expenditures. . . . . . . . . . . . . . .
. . . . 25
ARTICLE VI RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT;
PREEMPTIVE RIGHTS 26
ARTICLE VII LISTING ON SECURITIES EXCHANGE. . . . . . . . . .
. . . . 26
ARTICLE VIII RESTRICTIONS ON TRANSFER. . . . . . . . . . . . .
. . . . 26
8.1 Notice of Proposed Transfer; Transfers Without
Registration . 26
8.2 Registration and Qualification. . . . . . . . . . . .
. . . . 27
(a) Piggyback Registration. . . . . . . . . . . . . .
. . . . 27
(b) Demand Registration . . . . . . . . . . . . . . .
. . . . 29
8.3 Registration and Qualification Procedures . . . . . .
. . . . 30
8.4 Allocation of Expenses. . . . . . . . . . . . . . . .
. . . . 31
8.5 Indemnification . . . . . . . . . . . . . . . . . . .
. . . . 32
8.6 Legend on Certificates. . . . . . . . . . . . . . . .
. . . . 33
8.7 Supplying Information . . . . . . . . . . . . . . . .
. . . . 34
8.8 Damages . . . . . . . . . . . . . . . . . . . . . . .
. . . . 34
8.9 Holdback Agreements . . . . . . . . . . . . . . . . .
. . . . 35
8.10 Rule 144 Reporting. . . . . . . . . . . . . . . . . .
. . . . 35
8.11 Consent for Additional Registration Rights. . . . . .
. . . . 36
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . .
. . . . 36
9.1 Nonwaiver and Expenses. . . . . . . . . . . . . . . .
. . . . 36
9.2 Holder Not a Stockholder. . . . . . . . . . . . . . .
. . . . 36
9.3 Notice Generally. . . . . . . . . . . . . . . . . . .
. . . . 36
9.4 Payment of Certain Expenses . . . . . . . . . . . . .
. . . . 36
9.5 Successors and Assigns. . . . . . . . . . . . . . . .
. . . . 36
9.6 Amendment . . . . . . . . . . . . . . . . . . . . . .
. . . . 36
9.7 Headings. . . . . . . . . . . . . . . . . . . . . . .
. . . . 37
9.8 GOVERNING LAW . . . . . . . . . . . . . . . . . . . .
. . . . 37
9.9 Subsidiaries. . . . . . . . . . . . . . . . . . . . .
. . . . 37
9.10 No Section 338 Election or Step-Up in Asset Value on
Books of the Company 38
9.11 Replacement . . . . . . . . . . . . . . . . . . . . .
. . . . 38
NOTICE OF EXERCISE FORM
ASSIGNMENT FORM
ARTICLE I
DEFINITIONS
The terms defined in this ARTICLE I, whenever used in this
Warrant, shall have the respective meanings hereinafter
specified. Whenever used in this Warrant, any noun or pronoun
shall be deemed to include both the singular and plural and to
cover all genders.
"Adjusted Operating Profits" means an amount equal to the
Net Income of the Company and its Subsidiaries for the period
specified before deduction of any amount which, in conformity
with generally accepted accounting principles, would be set forth
opposite the caption "income tax expense" (including deferred
income taxes) (or any like caption) on a consolidated income
statement of the Company, and excluding any amounts which, in
conformity with generally accepted accounting principles, would
be set forth opposite the captions, "extraordinary pre-tax gain"
and "extraordinary pre-tax loss" (or any like captions) on such
consolidated income statement, plus the amount which, in
accordance with generally accepted accounting principles, would
be set forth opposite the caption "interest expense" (or any like
caption) on such consolidated income statement, plus an amount
which, in conformity with generally accepted accounting
principles, is equal to any amortization or depreciation for such
fiscal period, to the extent the same are deducted from net
revenues, in conformity with generally accepted accounting
principles, in determining Net Income for such fiscal period.
"Affiliate" of any person means any other person which,
directly or indirectly, controls or is controlled by or is under
common control with, such person. A person shall be deemed to be
"controlled by" any other person if such other person possesses,
directly or-indirectly, power
(a) to vote 10% or more of the securities having ordinary
voting power, or if not having ordinary voting power, having at
the time voting power, for the election of directors of such
person; or
(b) to direct or cause the direction of the management and
policies of such person whether by contract or otherwise.
"Assignment" means the form of Assignment appearing at the
end of this Warrant.
"Basic Exercise Price" shall have the meaning provided in
Section 2.2 (b) (i).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's authorized Common Stock,
$0.01 par value, and any class of capital stock of the Company
now or hereafter authorized having the right to share in
distributions either of earnings or assets of the Company without
limit as to amount or percentage.
"Common Stock on a Fully Diluted Basis" means, at any date
as at 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, and shall include all
shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of
Common Stock (which issued and outstanding shares shall be
approximately 3,432,278 shares on the date this Warrant is
issued), and all shares issuable pursuant to the Company's
incentive stock option plan, restricted stock bonus plan,
long-term stock investment plan or director's formula award plan,
to the extent each of these plans has been previously approved by
First Source, or pursuant to an employee or director stock option
plan, restricted stock bonus or ownership plan, stock
appreciation plan or similar equity appreciation plan which the
Company may implement after receiving written approval of a
majority of the Holders in their sole discretion (which approval
must include First Source if First Source is a Holder) (whether
or not options or awards with respect to such shares have been
granted) or issuable upon exercise of any warrant (including this
Warrant), rights to subscribe for or options (whether or not
vested) to purchase Common Stock or Convertible Securities or
upon the conversion of any Convertible Securities. On the date
hereof, the number of shares of Common Stock on a Fully Diluted
Basis shall be 8,486,382 shares, including 3,150,000 shares of
Common Stock initially issuable pursuant to this Warrant.
"Common Stock Valuation Price" in effect as of any date
shall mean a per share value equal to the result obtained by
dividing
(a) an amount equal to (i) the product of the
Company's Adjusted Operating Profits for the four most recent
Quarterly Fiscal Periods of the Company (at the end of the
Quarterly Fiscal Period of the Company immediately preceding such
date) and seven (7) less (ii) the amount of Funded Indebtedness
(at the end of the Quarterly Fiscal Period of the Company
immediately preceding such date), plus (iii) the proceeds that
would be received by the Company upon exercise of all warrants,
rights to subscribe for or options to purchase Common Stock or
Convertible Securities or upon conversion of any Convertible
Securities, plus (iv) the fair market value of proceeds received
by the Company (other than proceeds in the form of services of
employees of the Company and cash proceeds, which are reflected
in the amount of Funded Indebtedness in clause (ii) above) upon
any issuances or sales by it of Common Stock, Convertible
Securities or warrants, rights to subscribe for or options to
purchase Common Stock or Convertible Securities, multiplied by a
fraction the numerator of which (which shall never be less than
zero) is four minus the number of full Quarterly Fiscal Periods
since such issuance or sale and the denominator of which is four,
by
(b) the number of shares of Common Stock on a Fully
Diluted Basis on such date,
all as determined by a firm of independent public accountants of
recognized standing selected by the Company and reasonably
acceptable to the Holder.
"Company" means Optek Technology, Inc., a Delaware
corporation.
"Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable for, with or without payment of additional
consideration in cash or property, shares of Common Stock, either
immediately or upon the arrival of a specified date or the
happening of a specified event.
"Default Rate" means at any time 4.50% plus the rate per
annum then most recently announced by The First National Bank of
Chicago, a national banking association ("FNBC"), as its
corporate base rate at Chicago, Illinois (or if such rate is not
being quoted by FNBC, the rate which is the successor to such
rate, and if FNBC is not quoting any such rate, the rate
conceptually equivalent to such rate which the domestic
commercial bank having the highest combined capital and surplus
of any bank having its principal office in Chicago, Illinois is
quoting).
"Diluting Event" means any transaction or event which is
identified as a Diluting Event in Section 4.2(a) - (h).
"Exercise Period" means the period commencing on the Closing
Date and terminating at 5:00 p.m., Chicago time, on October 31,
1998.
"Exercise Price" means the price per share of Common Stock
as set forth in Section 2.1 as such price may be adjusted from
time to time pursuant to Article IV.
"Exercise Price" shall have the meaning provided in Section
4.1.
"First Alternative Exercise Price" shall have the meaning
provided in Section 2.1 (b)(ii).
"First Source" means First Source Financial, Inc., a
Delaware corporation.
"Funded Indebtedness" means all indebtedness of the Company
and its Subsidiaries, on a consolidated basis, if appropriate,
solely for money borrowed and owing, less the aggregate amount of
all cash and cash equivalents of the Company and its Subsidiaries
but not including the amount of any indebtedness of the Company
represented by Convertible Securities and not including
additional interest pursuant to Section 4.7 of the Secured Credit
Agreement.
"Holder" means the person in whose name this Warrant is
registered on the books of the Company maintained for such
purpose.
"Independent Counsel" means counsel to the Company, unless
counsel to the Holder disagrees in writing with the opinion or
advice of such counsel with respect to the issue in question
within 15 days after receipt of such opinion or advice, in which
case the Company and Holder shall select another counsel, not the
regular counsel of the Company or the Holder and experienced in
Securities Act matters, who shall render an opinion with respect
to the issue in question. The opinion or advice of such other
counsel so given shall be conclusive and binding on the Company
and the Holder. The legal fees and expenses of such other
counsel incurred in connection with the rendering of such opinion
shall be borne equally by the Holder and the Company.
"Market Value" per share of Common Stock on any date shall
mean the average of the daily market prices for the 30
consecutive trading days preceding such date. The market price
for each such day shall be the last sale price on such day on
such stock exchange on which such stock is listed or admitted to
trading, or, if no sale takes place on such day on any such
exchange, the average of the closing bid and asked prices on such
day and officially quoted on any such exchange, or, if the Common
Stock is not then listed or admitted to trading on any stock
exchange, the market price for each such business day shall be
the last sale price on such day if reported by the National
Association of Securities Dealers Automated Quotation System or,
if not so reported, the average of the reported closing bid and
asked price quotations for such day, as reported by the National
Association of Securities Dealers Automated Quotation System or,
if not so reported, as furnished by the National Quotation
Bureau, Inc., or, if such firm at the time is not engaged in the
business of reporting such prices, as furnished by any similar
firm then engaged in such business as selected by the Holder, or
if there is no such firm, as determined by any member of the
National Association of Securities Dealers, Inc. selected by the
Holder.
"Net Income" for any fiscal period of the Company shall mean
consolidated net income or loss of the Company and its
Subsidiaries (including, without limitation, Opcom), if any, as
it would appear on the consolidated statement of income of the
Company for such fiscal period prepared in accordance with
generally accepted accounting principles and as it may be
adjusted pursuant to Section 5.2.
"Notice of Cashless Exercise" shall have the meaning
provided in Section 2.2(b)(ii).
"Notice of Exercise" means the form of Notice of Exercise
appearing at the end of this Warrant.
"Organic Change" shall have the meaning provided in Section
4.3(b).
"Plan Adjusted Operating Profits" for any fiscal year shall
be the amount so identified in Schedule I hereto.
"Quarterly Fiscal Period" means a period comprised of
thirteen or fourteen weeks, as applicable, representing a fiscal
quarter of the Company, the first of which in any fiscal year
shall begin on the first day of the Company's fiscal year and the
remainder of which in such year shall begin on the day following
the termination of the preceding Quarterly Fiscal Period.
"Registration Agreement" shall have the meaning provided in
Section 8.2.
"Second Alternative Exercise Price" shall have the meaning
provided in Section 2.1 (b) (iii).
"Secured Credit Agreement" means the Amended and Restated
Secured Credit Agreement among the Company and First Source, as
successor-in-interest to Household Commercial Financial Services,
Inc., as the same may be amended, modified or supplemented from
time to time.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission promulgated thereunder, all as the
same shall be in effect from time to time.
"Shares" shall have the meaning provided in Section 2.1.
"Subsidiary" means a corporation, partnership or other
entity of which a person and/or such person's other Subsidiaries,
individually or in the aggregate, own, directly or indirectly,
such number of outstanding shares or other interests as have more
than 50% of the ordinary voting power (or, at the time
extraordinary powers are available to holders of shares or other
interests, such number of outstanding shares or other interests
as have more than 50% of voting power) for the election of
directors or the members of any similar governing body.
"Warrant" and "Warrants," including "this Warrant," mean (a)
the warrant dated as of the Closing Date issued to First Source
and (b) all warrants issued upon the partial exercise, transfer
or division of or in substitution for such warrant.
"Warrant Valuation Price" in effect as of any date shall
mean a per share value equal to the difference between the Common
Stock Valuation Price and the Exercise Price then in effect.
ARTICLE II
EXERCISE OF WARRANT
2.1 Right to Exercise, Number of Shares and Exercise Price.
Subject to and upon compliance with the conditions of this
ARTICLE II, the Holder shall have the right, at its option, at
any time and from time to time during the Exercise Period, to
exercise this Warrant in whole or in part.
The aggregate number of shares of Common Stock which may be
purchased from time to time during the Exercise Period by the
Holder upon exercise of this Warrant shall be as set forth below,
subject to adjustment as provided in ARTICLE IV hereof (the
"Shares"):
(a) The number of shares of Common Stock issuable upon the
exercise of the Warrant shall be 3,150,000 (subject to adjustment
as provided herein). The initial Exercise Price shall be fifty
cents ($0.50) (subject to adjustment as provided herein).
(b) On January 31 of each year (and applicable for the
period through and including January 30 of the next succeeding
year), the Exercise Price shall be adjusted to the extent
provided as follows:
(i) If the Company's cumulative Adjusted Operating
Profits for the period from November 1, 1993 through the end of
the most recently ended fiscal year are equal to or greater than
Plan Adjusted Operating Profits through the end of the most
recently ended fiscal year as set forth in Schedule I hereto,
then the Exercise Price through January 30 of the next succeeding
year shall be fifty cents ($0.50) (subject to adjustment as
provided herein) (the "Basic Exercise Price").
(ii) If the Company's cumulative Adjusted Operating
Profits for the period from November 1, 1993 through the end of
the most recently ended fiscal year are less than 100% of Plan
Adjusted Operating Profits but at least 90% of Plan Adjusted
Operating Profits for the period from November 1, 1993 through
the end of the most recently ended fiscal year as set forth on
Schedule I hereto, then the Exercise Price through January 30 of
the next succeeding year shall be twenty-five cents ($0.25)
(subject to adjustment as provided herein) (the "First
Alternative Exercise Price").
(iii) If the Company's cumulative Adjusted Operating
Profits for the period from November 1, 1993 through the end of
the most recently ended fiscal year are less than 90% of Plan
Adjusted Operating Profits through the end of the most recently
ended fiscal year as set forth on Schedule I hereto, then the
Exercise Price through January 30 of the next succeeding year
shall be one cent ($0.01) (the "Second Alternative Exercise
Price").
2.2 Notice of Exercise; Issuance of Common Stock. (a) To
exercise this Warrant, the Holder shall deliver to the Company at
its principal office at 0000 Xxxx Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxx
00000 Attention: President (i) a Notice of Exercise duly executed
by the Holder and specifying the number of shares of Common Stock
to be purchased and (ii) this Warrant.
(b) Payment of the Exercise Price shall be made in the
manner selected by the Holder as set forth below:
(i) At the option of the Holder, (A) by wire transfer
to an account in a bank located in the United States designated
for such purpose by the Company or (B) by certified or official
bank check payable to the order of the Company and drawn on a
member of the Chicago or New York Clearing House; or
(ii) In lieu of delivering the cash Exercise Price as
set forth in Section 2.2(b)(i), the Holder may instruct the
Company in writing ("Notice of Cashless Exercise") to deduct from
the number of shares of Common Stock that would otherwise be
issued upon such exercise a number of shares of Common Stock
equal to the quotient obtained from dividing
(x) the product obtained by multiplying (1) the
number of shares of Common Stock for which the Warrant is being
exercised and (2) the Exercise Price then in effect, by
(y) the Market Value of a share of Common Stock.
The Notice of Cashless Exercise may be given by completing the
appropriate box in the Notice of Exercise at the end of this
Warrant. Upon receipt of the cash payment described in Section
2.2(b)(i) or the Notice of Cashless Exercise described in Section
2.2(b)(ii), the Company shall, as promptly as practicable, and in
any event within five days thereafter, cause to be issued and
delivered to the Holder, or, subject to ARTICLE VIII, the
transferee designated in the Notice of Exercise, a certificate or
certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise registered in the name
of the Holder or the name of the transferee so designated.
(c) Unless otherwise requested by the Holder, 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 transferee so designated in the Notice of Exercise shall be
deemed to have become the holder of record of such shares for all
purposes, as of the close of business on the date the Notice of
Exercise, together with payment or Notice of Cashless Exercise as
herein provided, and this Warrant, are received by the Company.
(d) If this Warrant is exercised in part, the Company
shall, at the time of delivery of the certificate or certificates
for Common Stock, unless this Warrant has then expired, issue and
deliver to the Holder or the transferee so designated in the
Notice of Exercise a new Warrant evidencing the rights of the
Holder or such transferee to purchase the aggregate number of
shares of Common Stock for which this Warrant shall not have been
exercised, and this Warrant shall be cancelled.
2.3 Fractional Shares. The Company shall not issue
fractional shares of Common Stock or scrip representing
fractional shares of Common Stock upon exercise of this Warrant.
As to any fractional share of Common Stock which the Holder would
otherwise be entitled to purchase upon such exercise, the Company
shall purchase from the Holder such unissued fractional share at
a price equal to an amount calculated by multiplying such
fractional share (calculated to the nearest 1/100th of a share)
by the Common Stock Valuation Price, unless such Common Stock
Valuation Price is a negative amount, in which case such
fractional share shall be multiplied by its Exercise Price
determined in accordance with this Warrant. Payment of such
amount shall be made in cash or by check payable to the order of
the Holder at the time of delivery of any certificate or
certificates arising upon such exercise.
2.4 Continued Validity. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part,
shall continue to be entitled to all rights provided to holders
of Common Stock issuable on the exercise of this Warrant, whether
or not this Warrant has been fully exercised. The Company will,
at the time of the exercise of this Warrant, in whole or in part,
upon the request of the holder of the shares of Common Stock
issued upon the exercise thereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation
to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with
the provisions of this Warrant; 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.
ARTICLE III
REGISTRATION, TRANSFER AND EXCHANGE
The Company shall keep at the Company's principal office
referred to in Section 2.2 or at the offices of Xxxxxx & Xxxxxx,
P.C. in Dallas, Texas or at such other address as shall be
specified in a written notice to the Holder a register in which,
subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration, transfer and exchange
of this Warrant. The Company will 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.
Upon surrender for registration of transfer of this Warrant
at such office, the Company shall execute and deliver, in the
name of the designated transferee or transferees, one or more new
Warrants representing the right to purchase a like aggregate
number of shares of Common Stock. At the option of the Holder,
this Warrant may be exchanged for other Warrants representing the
right to purchase a like aggregate number of shares of Common
Stock upon surrender of this Warrant at such office. Whenever
this Warrant is so surrendered for exchange, the Company shall
execute and deliver the Warrants which the Holder making the
exchange is entitled to receive.
Every Warrant presented or surrendered for registration of
transfer or exchange shall be accompanied by an Assignment duly
executed by the holder thereof or its attorney duly authorized in
writing.
All warrants issued upon any registration of transfer or
exchange of warrants shall be the valid obligations of the
Company, evidencing the same rights, and entitled to the same
benefits as the warrants surrendered upon such registration of
transfer or exchange.
Upon receipt by the Company of evidence satisfactory to it
(in the exercise of reasonable discretion) of the ownership of
and the loss, theft, destruction or mutilation of this Warrant
and (in case of loss, theft or destruction) the written agreement
of the Holder to indemnify the Company (or, if the Holder is not
First Source Financial and if the Company reasonably requests, a
bond) against any resulting loss or expense and in case of
mutilation upon surrender and cancellation thereof, the Company
will execute and deliver in lieu thereof a new Warrant.
No service charge shall be made for any registration of
transfer or exchange of Warrants, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer as provided in Section 9.4.
The Company and any agent of the Company may treat the
person in whose name this Warrant is registered as the owner of
this Warrant for all purposes whatsoever, and neither the Company
nor any agent of the Company shall be affected by notice to the
contrary. This Warrant, if properly assigned, may be exercised
by a new holder without first having a new Warrant issued.
ARTICLE IV
ANTIDILUTION PROVISIONS AND RIGHTS UPON
EXTRAORDINARY TRANSACTIONS
4.1 Adjustment of Number of Shares Purchasable and
Exercise Price. Subject to the provisions of this ARTICLE IV,
the Basic Exercise Price, the First Alternative Exercise Price
and the Second Alternative Exercise Price at the time of any
calculation pursuant to this Article IV, and the number of shares
of Common Stock issuable upon exercise of this Warrant at the
time of any calculation pursuant to this Article IV (the
"Exercise Price") shall be subject to adjustment from time to
time as set forth below in the order set forth below. After
making any antidilution adjustment, pursuant to this Article IV,
the adjustments described in Section 4.1(d) must be made.
(a) Adjustment to Exercise Price. If a Diluting Event, as
identified in Section 4.2, occurs (unless otherwise specified in
Section 4.2), the Basic Exercise Price, the First Alternative
Exercise Price and the Second Alternative Exercise Price shall
each be reduced to the lower of the prices calculated by:
(i) Dividing (A) an amount equal to the sum of
(x) the number of shares of Common Stock on a Fully Diluted Basis
(but not including Shares issuable upon exercise of this Warrant)
immediately prior to such Diluting Event multiplied by the then
existing Basic Exercise Price, First Alternative Exercise Price
or Second Alternative Exercise Price, as applicable, plus (y) the
aggregate consideration, if any, received or deemed to be
received by the Company upon such Diluting Event, by (B) the
total number of shares of Common Stock on a Fully Diluted Basis
(but not including Shares issuable upon exercise of this Warrant)
immediately after such Diluting Event; and
(ii) Multiplying the then existing Basic Exercise
Price, First Alternative Exercise Price or Second Alternative
Exercise Price, as applicable, by a fraction (a) the numerator of
which is (x) the sum of (i) the number of shares of Common Stock
on a Fully Diluted Basis immediately prior to such Diluting Event
(but not including shares of Common Stock issuable upon exercise
of this Warrant) multiplied by the Common Stock Valuation Price
immediately prior to such Diluting Event plus (ii) the aggregate
consideration, if any, deemed to be received by the Company upon
such Diluting Event, divided by (y) the total number of shares of
Common Stock on a Fully Diluted Basis immediately after such
Diluting Event (but not including shares of Common Stock issuable
upon exercise of this Warrant), and (b) the denominator of which
shall be the Common Stock Valuation Price immediately prior to
such Diluting Event.
Notwithstanding the foregoing, if the Common Stock Valuation
Price is less than or equal to zero, the Basic Exercise Price and
the First Alternative Exercise Price and the Second Alternative
Exercise Price shall be reduced in accordance with clause (i)
above.
(b) Adjustment to Number of Shares Issuable Pursuant to
this Warrant. Upon any adjustment of the Basic Exercise Price,
First Alternative Exercise Price and the Second Alternative
Exercise Price as provided in this Section 4.1 or Section 4.2,
the Holder shall thereafter be entitled upon exercise of this
Warrant under Section 2.1 to receive, at the Exercise Price in
effect after such adjustment (which may be the Basic Exercise
Price, the First Alternative Exercise Price or Second Alternative
Exercise Price):
(i) If the Warrant Valuation Price in effect
immediately prior to and after a Diluting Event are each positive
numbers, the number of shares of Common Stock (calculated to the
nearest 1/100th of a share) which, when multiplied by the Warrant
Valuation Price in effect immediately after the Diluting Event
(and after giving effect to the number of shares of Common Stock
issuable upon the exercise of this Warrant as determined under
this clause (i) immediately after the Diluting Event), shall
equal the product of (A) the Warrant Valuation Price in effect
immediately prior to such Diluting Event and (B) the number of
shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such Diluting Event.
(ii) If the Warrant Valuation Price in effect
immediately prior to or after a Diluting Event is not a positive
number, the number of shares of Common Stock (calculated to the
nearest 1/100th of a share) which, when multiplied by the
Exercise Price per share of Common Stock in effect immediately
after the Diluting Event, shall equal the product of (A) the
Exercise Price per share of Common Stock immediately prior to
such Diluting Event and (B) the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
Diluting Event.
The Company shall not engage in any Diluting Event if as a
result of such event and the adjustment pursuant to this Section
4.1 (b), an ownership change would occur within the meaning of
Section 382 of the Internal Revenue Code of 1986, as amended, or
any successor provision. If notwithstanding the foregoing, a
Diluting Event inadvertently occurs which would result in such an
ownership change if the full adjustments provided herein were
made, then the number of shares subject to this Warrant shall
only be adjusted to the extent possible without causing such an
ownership change, and notwithstanding such partial adjustment,
the Holder shall retain all applicable rights with respect to
breach of the foregoing sentence.
(c) Minimum Adjustment. In the event any adjustment of the
Exercise Price pursuant to this Section 4.l shall result in an
adjustment of the Basic Exercise Price, the First Alternative
Exercise Price or the Second Alternative Exercise Price of less
than $0.01 per share of Common Stock, no such adjustment shall be
made, 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 $0.01 or more per share of Common Stock;
provided, however, that upon any adjustment of the Exercise Price
resulting from (i) the declaration of a dividend upon, or the
making of any distribution in respect of, any stock of the
Company payable in Common Stock or Convertible Securities or (ii)
the reclassification, by subdivision, combination or otherwise,
of the Common Stock into a greater or smaller number of shares,
the foregoing figure of $0.01 per share (or such figure as last
adjusted) shall be proportionately adjusted; and provided
further, that upon exercise of this Warrant: the Company shall
make all necessary adjustments not theretofore made to the
Exercise Price up to and including the date upon which this
Warrant is exercised.
(d) Maximum and Minimum Exercise Price. At no time shall
the Exercise Price per share of Common Stock exceed $0.50 except
as provided in subsection (g) or (h) of Section 4.2. Subject to
Article V, at no time shall the Exercise Price per share of
Common Stock be less than the par value per share of Common
Stock.
4.2 Diluting Events and Related Matters. Except as
otherwise expressly provided, upon the occurrence of a Diluting
Event, as identified in subsections (a)-(h) below, the Exercise
Price shall be adjusted as set forth in Section 4.1:
(a) Issuance of Stock. If the Company shall issue or sell
any shares of Common Stock, including any treasury shares but
excluding (i) any shares issued pursuant to warrants or options
outstanding on the date hereof (at prices not less than the
prices at which such warrants and options are exercisable on the
date hereof), (ii) any shares issued pursuant to the Company's
existing incentive stock option plan or restricted stock bonus
plan, directors formula award plan or long term stock incentive
plan, in each case as in effect and in an amount permitted on the
date hereof, whether or not options or awards with respect to
such shares have been granted and (iii) any shares issuable
pursuant to an employee or director stock option plan, restricted
stock bonus or ownership plan, stock appreciation plan or similar
equity appreciation plan which the Company may implement after
receiving the written approval of a majority of the Holders in
their sole discretion (which approval must include First Source
if First Source is a Holder) whether or not options or awards
with respect to such shares have been granted for the
consideration per share less than (x) the Exercise Price in
effect immediately prior to the time of such issue or sale or (y)
the Common Stock Valuation Price in effect immediately prior to
the time of such issue or sale, then a Diluting Event shall have
occurred and the Exercise Price shall be adjusted as set forth in
Section 4.1.
(b) Issuance of Warrants, Options or Other Rights.
(i) Characterization of Transaction for
Antidilution Adjustment. In case the Company shall in any manner
grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of Common Stock or for the purchase of
Convertible Securities (but excluding options or awards granted
pursuant to the Company's existing incentive stock option plan,
restricted stock bonus plan, directors' formula award plan or
long term stock incentive plan, in each case as in effect and in
an amount permitted on the date hereof or granted pursuant to an
employee or director stock option plan, restricted stock bonus or
ownership plan, stock appreciation plan or similar equity
appreciation plan which the Company may implement after receiving
the written approval of a majority of the Holders in their sole
discretion (which approval must include First Source if First
Source is a Holder) in amounts permitted pursuant to the approval
described above), whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which shares
of Common Stock are issuable upon the exercise of such rights or
options or upon conversion or exchange of such Convertible
Securities shall be less than (1) the Exercise Price in effect
immediately prior to the time of the granting of such rights or
options, or (2) the Common Stock Valuation Price existing
immediately prior to the time of such granting of such rights or
options, then a Diluting Event shall have occurred and the
maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon conversion or exchange
of the maximum amount of such Convertible Securities issuable
upon the exercise of such rights or options shall (as of the date
for adjustment required by subsection (n) below) be deemed to be
outstanding and to have been issued for such price per share.
Except as otherwise specified in Section 4.2 (i), no further
adjustments described in Section 4.1 of the Exercise Price shall
be made upon the actual issuance of such Common Stock or of such
rights or options or upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.
(ii) Adjustment to Price. The price per share for
which shares of Common Stock are issuable upon the exercise of
such rights or options or upon conversion or exchange of such
Convertible Securities shall be determined by dividing (1) 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 payable
to the Company upon the exercise of such rights or options, plus,
in the case of such Convertible Securities, the minimum aggregate
amount of additional consideration if any, payable upon the
conversion or exchange thereof plus the net amount received or
receivable upon the issuance of such Convertible Securities (in
each case without double counting), by (2) the total maximum
number of shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such
rights or options.
(c) Issuance of Convertible Securities.
(i) Characterization of Transaction for
Antidilution Adjustment. in case the Company shall in any manner
issue or sell (whether directly or by assumption in a merger or
otherwise) any Convertible Securities, whether or not the rights
to convert or exchange thereunder are immediately exercisable,
and the price per share for which shares of Common Stock are
issuable upon such conversion or exchange shall be less than (1)
the Exercise Price in effect immediately prior to the time of
such issue or sale or (2) the Common Stock Valuation Price
existing immediately prior to the time of such issuance or sale,
then a Diluting Event shall have occurred and the Exercise Price
shall be adjusted as provided in Section 4.1 and the maximum
number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall (as of the date
for adjustment required by subsection (n) below) be deemed to be
outstanding and to have been issued for such price per share.
Except as otherwise specified in Section 4.2(i), (x) no further
adjustments of the Exercise Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (y) if any such issue or sale of such
Convertible Securities is made upon exercise of any rights to
subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Exercise
Price have been or are to be made pursuant to other provisions of
Sections 4.1 and 4.2, no further adjustment of the Exercise Price
shall be made by reason of such issue or sale.
(ii) Adjustment to Price. The price per share
for which shares of Common Stock are issuable upon such
conversion or exchange shall be determined by dividing (1) 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 (2) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities.
(d) Dividends. In case the Company shall declare, in
any 12-month period, dividends upon the Common Stock (excluding a
dividend payable in Common Stock referred to in subsection (e)
below or in warrants, rights or Convertible Securities referred
to in subsection (b) or (c) above) which in the aggregate is in
excess of either 50% of Net Income for such 12- month period or
15% of the net worth of the Company (as shown on the most recent
year end consolidated balance sheet to be delivered pursuant to
ARTICLE V hereof), then a Diluting Event shall have occurred and
the Basic Exercise Price and the First Alternative Exercise Price
in effect immediately prior to the declaration of such dividend
shall each be reduced by an amount equal to the aggregate amount
of such dividends in excess of (x) the lesser of (a) 50% of Net
Income for such 12-month period and (b) 15% of Net Worth divided
by (y) all outstanding shares of Common Stock with respect to
which such dividend is payable. Such reductions shall take
effect as of the date on which a record date is established for
the purpose of such dividend, or, if a record date is not
established, the date as of which the holders of Common Stock of
record entitled to such dividend are to be determined.
Appropriate readjustment of the Basic Exercise Price and the
First Alternative Exercise Price shall be made in the event that
any dividend referred to in this subsection (d) shall be lawfully
abandoned.
(e) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or
Convertible Securities, then a Diluting Event shall have
occurred, and such Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or
distribution, shall be deemed to have been issued or sold without
consideration.
(f) Other Distribution. In case the Company shall
distribute or grant to the holders of shares of Common Stock
(whether or not on a pro rata basis) any evidence of its
indebtedness or any assets (including any such distribution made
in connection with a consolidation or merger in which the Company
is the continuing corporation) or rights or options to subscribe
or purchase any such evidence of its indebtedness or assets
(excluding rights or options to subscribe or purchase Common
Stock or Convertible Securities), then a Diluting Event shall
have occurred and the Basic Exercise Price, the First Alternative
Exercise Price and the Second Alternative Exercise Price in
effect immediately prior to such distribution or grant shall each
be reduced by an amount equal to the aggregate amount of such
distribution divided by the number of outstanding shares of
Common Stock with respect to which such distribution was made
immediately prior to such distribution, and other adjustments
shall be made as set forth in Section 4.1 hereof. Such
reductions shall take effect as of the date on which a record
date is established for the purpose of such distribution or
grant, or, if a record date is not established, the date as of
which the holders of Common Stock of record entitled to such
distribution or grant are to be determined.
(g) Reorganization, Reclassification, Recapitalization,
Merger or Sale of Company. In case the Company or a successor
thereto issues Common Stock, options, other rights or Convertible
Securities in connection with any consolidation or merger of the
Company or any of its Subsidiaries with or into another
corporation or in connection with the sale or other disposition
of all or substantially all of the business or assets of the
Company or any of its Subsidiaries and the consideration per
share realized by the Company by reason of any such transaction,
determined as applicable in accordance with subsection (k) of
this Section 4.2, is less than (i) the Exercise Price in effect
immediately prior to such event, or (ii) the Common Stock
Valuation Price in effect immediately prior to such event, then a
Diluting Event shall have occurred and the Exercise Price shall
be adjusted as set forth in Section 4.1.
(h) Splits and Combinations. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares, then a Diluting
Event shall have occurred and the Exercise Price in effect
immediately prior to such combinations, notwithstanding Section
4.1, shall be adjusted as follows: Each of the Basic Exercise
Price, the First Alternative Exercise Price and the Second
Alternative Exercise Price in effect immediately after such event
shall equal the product of (a) the Basic Exercise Price, the
First Alternative Exercise Price or the Second Alternative
Exercise Price, as applicable, in effect immediately prior to
such event and (b)(i) the number of outstanding shares of Common
Stock immediately prior to such event, divided by (ii) the number
of outstanding shares of Common Stock immediately after such
event. The number of shares of Common Stock issuable upon the
exercise of the Warrant immediately after such event shall equal
the product of (c) the number of shares of Common Stock issuable
upon the exercise of the Warrant immediately prior to such event
and (d) (i) the number of outstanding shares of Common Stock
immediately after such event, divided by (ii) the number of
shares of outstanding Common Stock immediately prior to such
event.
(i) Readjustments. In the event (i) the purchase price
provided for in any rights or options referred to in subsection
(b) above, or (ii) the additional consideration, if any, payable
upon the conversion or exchange of Convertible Securities
referred to in subsection (b) or (c) above or (iii) the rate at
which any Convertible Securities referred to in subsection (b) or
(c) above are convertible into or exchangeable for Common Stock
shall change (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in
effect at the time of such event shall forthwith be readjusted to
the Exercise Price which would have been in effect at such time
had such rights, options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or exercise rate, as the case ray be, at the time
initially granted, issued or sold. On the expiration of any such
option or right or the termination of any such right to convert
or exchange such Convertible Securities, the Exercise Price then
in effect hereunder shall forthwith be readjusted to the Exercise
Price which would have been in effect at the time of such
expiration or termination had such right, option or Convertible
Security never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding.
(j) Determination of Consideration for Rights or Options.
In case any rights or options to purchase any shares of Common
Stock or Convertible Securities shall be issued in connection
with the issue or sale of other securities of the Company,
together comprising one integral transaction in which no specific
consideration is allocated to the rights or options, such rights
or options shall be deemed to have been issued without
consideration.
(k) Determination of Consideration upon Payment of Cash,
Property or Merger. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any
such Common Stock or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor,
after deduction of any accrued interest, dividends or any
expenses incurred or any underwriting commissions or concessions
paid or allowed by the Company in connection therewith. In case
any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or
Convertible Securities shall be issued for a consideration other
than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair market
value of such other consideration on the date of issue of such
securities, as determined in good faith by the Board of Directors
of the Company, less any expenses incurred by the Company in
connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase such
Common Stock or Convertible Securities shall be issued in
Connection with any merger or consolidation in which the Company
and its Subsidiary, if applicable, survive, the amount of
consideration therefor shall be deemed to be the fair market
value thereof on the date of issue, as determined in good faith
by the Board of Directors of the Company, or such portion of the
assets and business of the non-surviving corporation as the Board
of Directors shall attribute to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event
of any consolidation or merger of the Company or any of its
Subsidiaries in which the Company or its Subsidiary, if
applicable, does not survive or in the event of any sale or other
disposition of all or substantially all of the business or assets
of the Company or any of its Subsidiaries for stock or other
securities of any corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the
actual exchange ratio on which the transaction was predicated and
for a consideration equal to the fair market value on the date of
such transaction of such stock or securities of the other
corporation.
(l) Record Date. In case the Company shall establish a
record date of the holders of the Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution
payable in Common Stock or in Convertible Securities or (ii) to
subscribe for or purchase Common Stock or Convertible Securities,
then effective as of such record date such Common Stock or
Convertible Securities shall be deemed to have been issued or
sold. Appropriate readjustment of the Basic Exercise Price and
the First Alternative Exercise Price shall be made in the event
that any dividend, distribution or subscription referred to in
this subsection (l) shall be lawfully abandoned.
(m) Shares Outstanding. Except as provided to the contrary
herein, the number of shares of Common Stock deemed to be
outstanding for purposes of Section 4.2(d), (f) and (h) at any
given time shall be the number of shares of Common Stock actually
issued and outstanding at such time, plus any shares of Common
Stock issuable in respect of scrip certificates which have been
issued in lieu of fractional shares of Common Stock.
(n) Date of Determination. For purposes of Section 4.1 and
4.2, the date as of which the Exercise Price shall be adjusted
shall be the earlier of the date upon which the Company shall (1)
enter into a firm contract for the issuance of shares of Common
Stock, rights or other options or Convertible Securities, as the
case may be, or (2) issue such shares of Common Stock, rights or
other options or Convertible Securities, as the case may be.
(o) No Adjustment After Exercise. After this Warrant is
exercised in whole or in part, the holder of any Common Stock so
acquired shall not be entitled to any adjustment in the price or
number of shares so acquired by reason of any subsequent
occurrence which would result in an adjustment of the Exercise
Price, number of shares or other adjustments by operation of this
Article IV.
4.3 Rights of the Holder upon Rights Offering, Mergers,
Reorganizations and Other Transfers.
(a) Participation in Rights Offerings. In the event the
Company shall effect an offering of Common Stock or other stock
pro rata among its stockholders, the Holder shall be entitled, at
the Holder's option, regardless of whether the Warrant is
otherwise then exercisable, in lieu of the adjustments set forth
in Sections 4.1 and 4.2 to the extent that such option is
exercised by the Holder, to elect to participate in each and
every such offering as though this Warrant had been exercised and
the holder were, at the time of any such rights offering, then a
holder of that number of shares of Common Stock to which the
Holder is then entitled on the exercise hereof.
(b) Participation in Stock Dispositions. In the event that
the Company shall offer, approve, accept or recommend an
offering, sale, transfer, redemption, cancellation or other
disposition of Common Stock (including without limitation, by way
of any merger, capital reorganization, or reclassification or
recapitalization of the capital stock of the Company) to any
person (other than in any offering described in subsection (a)
above) or in the event that the Company liquidates or dissolves
following a sale or transfer of all or substantially all of its
assets to any entity, the Company shall arrange as part of such
offering, sale or other disposition for the participation of the
Holder, with respect to including this Warrant or the Shares
issuable upon exercise hereof in such offering, sale or other
disposition upon identical terms, without such Holder incurring
any liability under Section 16(b) of the Securities Exchange Act
of 1934, as amended, and after taking into account the Exercise
Price. Such participation shall be at the Holder's option,
regardless of whether the Warrant is otherwise then exercisable,
in lieu of the adjustments set forth in Sections 4.1 and 4.2, to
the extent such option is exercised by the Holder.
In case of the consolidation or merger of the Company or any
of its Subsidiaries with or into another corporation (each such
event is herein called an "Organic Change") and in which the
Holder does not participate as contemplated by the preceding
paragraph, then after any required adjustment in the Exercise
Price on account of such Organic Change, there shall thereafter
be deliverable upon the exercise of this Warrant or any portion
hereof (in lieu of or in addition to the number of shares of
Common Stock theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the
number of shares of Common Stock represented by that portion of
this Warrant so exercised would have been entitled upon such
Organic Change, and at the same aggregate Exercise Price, as
adjusted. Prior to and as a condition of the consolidation of
any Organic Change described, the Company shall make appropriate,
written adjustments in the application of the provisions herein
set forth satisfactory to the holders of the Warrants entitled to
not less than a majority of the shares of Common Stock issuable
upon the exercise thereof with respect to the rights and
interests of the holders of the Warrants so that the provisions
set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares of stock or other securities
or other property thereafter deliverable upon exercise of the
Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement between the Company and the successor
entity and be approved by the holders of the Warrants entitled to
not less than a majority of the shares of Common Stock issuable
upon the exercise thereof.
4.4 Certificates, Notices and Consents.
(a) Upon the occurrence of any Diluting Event requiring
adjustments of the Exercise Price pursuant to Sections 4.1 and/or
4.2, a certificate signed (i) by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company or (ii) by any
independent firm of certified public accountants of recognized
standing selected by, and at the expense of, the Company setting
forth in reasonable detail the events requiring' the adjustment
and the method by which such adjustment was calculated, shall be
mailed (by first class mail, postage prepaid) to the Holder
specifying the adjusted Exercise Price after giving effect to the
adjustment(s).
The certificate of any independent firm of certified public
accountants of recognized standing selected by the Board of
Directors of the Company and reasonably acceptable to the Holder
shall be conclusive evidence, absent manifest error, of the
correctness of any computation made under Sections 4.1 and/or
4.2.
(b) In case the Company after the date hereof shall propose
to (i) pay any dividend payable in stock to the holders of shares
of Common Stock or to make any other distribution to the holders
of shares of Common Stock, (ii) offer to the holders of shares of
Common Stock rights to subscribe for or purchase any additional
shares of any class of stock or any other rights or options or
(iii) effect any reclassification involving merely the
subdivision or combination of outstanding shares of Common Stock,
or (iv) any capital reorganization or any consolidation or
merger, or any sale or other disposition of all or substantially
all of the business or assets of the Company, or the liquidation,
dissolution or winding up of the Company or (v) engage in any
Diluting Event not otherwise mentioned in this subsection (b),
then, in each such case, the Company shall mail (by first class
mail, postage prepaid) to the Holder notice of such proposed
action, which shall specify the date on which the books of the
Company shall close, or a record date shall be established, for
determining holders of Common Stock entitled to receive such
stock dividends or other distribution of such rights or options,
or the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition,
liquidation, dissolution or winding up shall take place or
commence, as the case may be, and the date as of which it is
expected that holders of Common Stock of record shall be entitled
to receive securities or other property deliverable upon such
action, if any such date is to be fixed. Such notice shall be
mailed, in the case of any action covered by clause (i) or (ii)
above, at least 30 days prior to the date upon which such action
takes place, and, in the case of any action covered by clause
(iv) above, at lease 30 days prior to the date upon which such
action takes place and 30 days prior to any record date to
determine holders of Common Stock entitled to receive such
securities or other property.
(c) Failure to file any certificate or notice or to mail
any notice, or any defect in any certificate or notice, pursuant
to this Section 4.4, shall not affect the legality or validity of
the adjustment of the Exercise Price, the number of shares
purchasable upon exercise of this Warrant, or any transaction
giving rise thereto.
4.5 No Implied Consent or Extension. Nothing in this
Warrant is intended to permit any action or event which is
prohibited by the Secured Credit Agreement as long as such
Secured Credit Agreement remains in effect; nor shall the Secured
Credit Agreement or any provision or term thereof extend or apply
to any right or liability under this Warrant or any observance or
breach thereof. After all obligations under the Secured Credit
Agreement other than those that are distinct and exclusive to
this Warrant have been paid in full or otherwise satisfied by the
Company, no provision or term thereof shall extend or apply to
any right or liability under this Warrant or any observance or
breach thereof.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 No Impairment. The Company shall not, and shall not
permit its Subsidiaries to, directly or indirectly, 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
action 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 amount payable therefor upon
such exercise, (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 upon
the exercise of this Warrant and any required issuance of
additional shares of Common Stock pursuant to Sections 4.1 and
4.2, (c) 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 (except that compliance with applicable
securities and blue sky laws shall be governed by the provisions
of Article VII of this Warrant), (d) not issue any capital stock
of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding up of the Company or which has
disproportionately greater voting rights under any circumstance,
(e) not permit any Subsidiary of the Company to issue, sell or
transfer any capital stock or other equity interest in such
Subsidiary, or to sell all or substantially all of the assets of
such Subsidiary, to any person or entity other than the Company,
except in connection with an employee or director stock option
plan, restricted stock bonus or ownership plan, stock
appreciation plan or similar equity appreciation plan which the
Company or Opcom may implement after receiving the written
approval of a majority of the Holders (which approval must
include First Source if First Source is a Holder), (f) not
undertake any reverse stock split, combination, reorganization or
other reclassification of its capital stock which would have the
effect of making this Warrant exercisable for less than one share
of Common Stock, (g) not take or permit the taking of any action
which could subject the holder of this Warrant or shares of
Common Stock issuable upon exercise thereof to liability under
Section 16(b) of the Securities Exchange Act of 1934, as amended
and (h) not change the Company's fiscal year from a fiscal year
ending at the end of October as identified on Schedule I hereto.
5.2 Affirmative Covenants. So long as the Holder is the
owner of or is entitled upon the due exercise hereof during the
Exercise Period to purchase 1,039,500 shares of the Company's
Common Stock, the Company shall comply with the requirements of
this Section 5.2:
5.2.1 Delivery of Financial and Business
Information. The Company will deliver to the Holder:
(a) As soon as practicable after the end of each of the
first three Quarterly Fiscal Periods in each fiscal year of the
Company, and in any event within 45 days thereafter, two copies
of:
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter (reflecting, among
other things, Funded Indebtedness), and
(ii) consolidated statements of income, retained
earnings and cash flow of the Company and its Subsidiaries for
such quarter and (in the case of the second and third quarters)
for the portion of the fiscal year ending with such quarter;
setting forth in each case in comparative form the figures for
the corresponding periods in the previous fiscal year. Such
statements shall be (1) prepared in accordance with generally
accepted accounting principles consistently applied, (2) in
reasonable detail and (3) certified as complete and correct by
the principal financial or accounting officer of the Company;
(b) As soon as practicable after the end of each fiscal
year of the Company, and in any event within 90 days thereafter,
two copies of:
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such year, and
(ii) consolidated statements of income, retained
earnings and cash flow of the Company and its Subsidiaries for
such year;
setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and
accompanied by a report thereon by a firm of independent
certified public accountants of recognized standing selected by
the Company, which report shall state that such financial
statements fairly present the financial position of the company
being reported upon at the end of such year and the results of
their operations and changes in their financial position for such
year in conformity with generally accepted accounting principles
applied consistently (except for changes in accounting principles
with which such accountants concur) and that their examination of
such financial statements has been made in accordance with
generally accepted auditing standards, and accordingly included
such tests of the accounting records and other auditing
procedures as they considered necessary in the circumstances;
(c) Promptly upon their becoming available one copy of each
report, notice or proxy statement sent by the Company to its
stockholders generally, and of each regular or periodic report
(pursuant to the Securities Exchange Act of 1934, as amended) and
any registration statement, prospectus or written communication
(other than transmittal letters) (pursuant to the Securities
Act), filed by the Company with (i) the Commission or (ii) any
securities exchange on which shares of the Common Stock are
listed;
(d) With reasonable promptness, such other data and
information as from time to time may be reasonably requested by
the Holder; and
(e) Promptly upon, and in any event within 10 days after,
the adoption, initiation or undertaking of any plan, arrangement,
negotiations, intention or commitment to enter into any of the
transactions described in Sections 4.1, 4.2, or 4.3, notice of
any such transactions, including information in reasonable detail
pertaining to the terms, conditions and consummation of any such
transactions.
5.2.2 Disputed Financial Statements. The Holder
shall have the right at any time after receipt thereof to object
to any financial statements delivered to the Holder pursuant to
subsections (a) or (b) of Section 5.2.1 by specifying in writing
to the Company the nature of its objection, and, unless such
objection is resolved by agreement of the Company and the Holder,
the Company and the Holder shall each have the right to submit
the disputed financial statements to separate firms of
independent accountants of recognized standing for a joint
resolution (based upon written submissions) of the objection of
the Holder (which firms of independent accountants may, in either
case, be the firm of accountants regularly retained by the
Company or the Holder). If such firms cannot jointly resolve the
objection of the Holder, then, unless otherwise directed by
agreement of the Company and the Holder, such firms shall in
their sole discretion choose another firm of independent
certified public accountants of recognized standing not the
regular auditor of the Holder or of the Company, which firm shall
resolve such objection. In either case, the determination so
made shall be conclusive and binding on the Company solely for
purposes of this Warrant, the Holder and all persons claiming
under or through either of them, and any adjustment in the
disputed financial statements, the Common Stock Valuation Price
resulting from such determination shall be made. The cost of any
such determination shall be borne by the Company if it results in
an increase in the applicable Common Stock Valuation Price or by
the Holder if it results in no adjustment or a decrease in the
Common Stock Valuation Price;
5.2.3 Budget. The Company will deliver to the Holder
not less than thirty (30) days prior to the commencement of each
fiscal year, an annual business plan, including a budget and
detailed financial projections for the Company and its
Subsidiaries, for each month during such period (the "Budget"),
all in reasonable detail, together with underlying assumptions
and approved by a majority of the entire Board;
5.2.4 Auditors' Reports. The Company will deliver to
the Holder promptly upon receipt thereof, copies of all other
material reports, if any, submitted to the Company by independent
public accountants in connection with any annual or interim audit
of the books of the Company and its Subsidiaries made by such
accountants;
5.2.5 Lender Information. The Company will deliver to
the Holder a copy of each material financial statement, report,
notice or communication that the Company or any Subsidiary
delivers to any of their lenders or creditors;
5.2.6 Litigation. The Company will deliver to the
Holder promptly upon the Company's learning thereof, notice of
any litigation, suit or administrative proceeding that could
reasonably be expected to have a material adverse affect on the
Company's or any Subsidiary's business, affairs, assets,
prospects, operations, employee relations or condition, financial
or otherwise, whether or not the claim is considered by the
Company to be covered by insurance;
5.2.7 Default. The Company will deliver to the Holder
notice of any default under any senior or subordinated loan
agreements promptly upon the occurrence thereof;
5.2.8 Material Adverse Developments. The Company will
deliver to the Holder promptly upon the occurrence thereof,
notice of any event which has had, or could reasonably be
expected to have, a material adverse impact on the business,
affairs, assets, prospects, operations, employee relations or
condition, financial or otherwise, of the Company or any
Subsidiary, including, without limitation, the institution or
threat of any material litigation or investigation with respect
to the Company or any Subsidiary;
5.2.9 Other Information. The Company will deliver to
the Holder with reasonable promptness, all press releases issued
by the Company or any Subsidiary, any filings made with the
Commission by the Company or any Subsidiary and such other data
and information as from time to time may be reasonably requested
by First Source or such other data as the Company may from time
to time furnish to any of the holders of its securities;
5.2.10 Auditors. The Company will deliver to the
Holder promptly after the occurrence thereof, the engagement or
termination of any individual or firm that provides accounting
advice to the Company;
5.2.11 Inspection and Meeting Rights; Budget Review.
The Company will permit First Source to visit and inspect the
properties of the Company and its Subsidiaries, including,
without limitation, its and their books and records (and to make
extracts therefrom) and to discuss its and their affairs,
finances and accounts with its and their officers and personnel,
all at such reasonable times and as often as such party may
reasonably request. First Source also shall have the right to
meet with the Company's key management, including, without
limitation, Messrs. Filesi and Marley, on a quarterly basis, to
discuss the state of the Company's finances, business operations
and prospects, and any other matters relating to the affairs of
the Company and its Subsidiaries;
5.2.12 Accounting. The Company will maintain and will
cause each of its Subsidiaries to maintain a system of accounting
established and administered in accordance with GAAP and all
financial statements or information delivered under Section
5.2.1(a) and (b) (in the case of 5.2.1(b) exclusive of footnote
disclosures) will be prepared in accordance with GAAP;
5.2.13 Insurance. The Company agrees to maintain or
cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its assets and business and
the assets and business of its Subsidiaries against loss or
damage of the kinds customarily insured against by similarly
situated corporations of established reputation engaged in the
same or similar businesses, in adequate amounts, and at the
request of First Source shall furnish First Source with evidence
of the same;
5.2.14 Payment of Taxes. The Company agrees to pay or
cause to be paid all taxes, assessments and other governmental
charges levied upon any of its assets or those of its
Subsidiaries or in respect of its or their respective franchises,
businesses, income or profits, which if unpaid might become a
Lien upon any asset of the Company or any Subsidiary, before the
same become delinquent, except that (unless and until
foreclosure, distraint, sale or other similar proceedings shall
have been commenced) no such charge need be paid if being
contested in good faith and by appropriate measures promptly
initiated and diligently conducted if (a) a reserve or other
appropriate provision, if any, as shall be required by sound
accounting practice shall have been made therefor, and (b) such
contest does not have a material adverse effect on the financial
condition of the Company and no material assets are in imminent
danger of forfeiture;
5.2.15 Compliance With Laws. The Company agrees to use
its best efforts to comply, and shall use its best efforts to
cause each Subsidiary to comply, with all laws, rules,
regulations, judgments, orders and decrees of any governmental or
regulatory authority applicable to it and its respective assets,
and with all contracts, and agreements to which it is a party or
shall become a party, and to perform all obligations which it has
or shall incur, the violation of which would reasonably be
anticipated to have a material adverse effect on the business,
affairs, assets, prospects, operations or condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole;
5.2.16 Preservation of Corporate Existence and
Property; Operations. The Company agrees to preserve, protect,
and maintain, and cause each Subsidiary to preserve, protect, and
maintain, (a) its corporate existence, and (b) all rights,
franchises, accreditations, privileges, and properties the
failure of which to preserve, protect, and maintain would
reasonably be anticipated to have a material adverse effect on
the business, affairs, assets, prospects, operations, or
condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole;
5.2.17 Holder as Observer. The Company agrees at all
times to permit a representative of Holder to attend and observe
all meetings of Company's Board of Directors and each committee
thereof, and cause Holder to receive reasonably adequate notice
of all such meetings; provided, however, that Holder shall not be
entitled to attend or observe any portion of a meeting relating
solely and exclusively to action proposed to be taken by Company
with respect to Company's relationship with Holder. The Company
acknowledges and agrees that attendance by a designee of Holder
at any meeting of Company's Board of Directors or any committee
thereof shall not constitute approval by Holder of or consent by
Holder to any action authorized at such meeting, or constitute a
waiver or modification of any provision of this Warrant or any
right hereunder. The Company agrees to reimburse Holder for all
reasonable travel, lodging, and meal expenses incurred in
connection with the foregoing; and
5.2.18 Confidential Information. Holder acknowledges
that pursuant to the provisions of this Section 5.2, Holder may
receive insider information concerning the Company which Holder
may be precluded from acting upon by applicable securities and
other laws. Except as otherwise required by law or judicial
order or decree or by any governmental agency or authority, each
Person entitled to receive information regarding the Company and
its Subsidiaries under this Section 5.2 shall use its best
efforts to maintain the confidentiality of all nonpublic
information obtained by it hereunder; provided that each such
Person may disclose such information in connection with the sale
or transfer or proposed sale or transfer of this Warrant or of
any Common Stock, provided such Person's transferee or proposed
transferee agrees in writing to be bound by the provisions of
this Warrant and such disclosure would not materially and
adversely affect the Company.
5.3 Negative Covenants. So long as the Holder is the owner
of or is entitled upon the due exercise hereof during the
Exercise Period to purchase 1,039,500 shares of the Company's
Common Stock, the Company agrees that it will not effect any of
the following matters, unless, at any time, First Source shall
otherwise expressly consent in writing:
(a) Distributions. The direct or indirect
declaration or payment of any dividends or distributions upon any
of the Company's equity securities;
(b) Redemptions. The direct or indirect redemption,
purchase or other acquisition of any of the Company's or any
Subsidiary's equity securities (including, without limitation,
warrants, options and other rights to acquire equity securities)
if the total amount of such redemptions, purchases or other
acquisitions exceeds 3% of the Common Stock on a Fully Diluted
Basis during any 12 month period; provided that no Common Stock
held Messrs. Xxxxx X. Xxxx, Xxxxxx X. Xxxxxx, X. Xxxxxx Xxxxxx,
Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxx shall be redeemed
without the express written consent of First Source;
(c) Security Issuances. The authorization, issuance
or entering into any agreement providing for the issuance
(contingent or otherwise) of (X) any notes or debt securities
containing equity features (including, without limitation, any
notes or debt securities convertible into or exchangeable for
equity securities, issued in connection with the issuance of
equity securities or containing profit participation features) ,
or (Y) any equity securities (or any securities convertible into
or exchangeable for any equity securities) except (i) pursuant to
warrants and options outstanding on the date of this Warrant or
the Company's incentive stock option plan, restricted stock bonus
plan, long- term stock investment plan, or directors formula
award plan, to the extent each of these plans has been previously
approved by First Source, (ii) in connection with any transaction
permitted pursuant to Section 5.3(e) or 5.3(h) hereof, and (iii)
that up to 5% of the Common Stock on a Fully Diluted Basis may be
granted in connection with obtaining financing from any
subsequent lender;
(d) Loans or Guarantees. The making of any loans or
advances to, guarantees for the benefit of, or investments in,
any person or entity (other than a wholly-owned Subsidiary);
(e) Mergers. A merger, consolidation or
reorganization with any person or entity unless the Company shall
be the surviving entity and the transaction is permitted by
Section 5.3(h);
(f) Asset Dispositions. The sale, assignment,
transfer, lease or other disposition of more than 10% of the
consolidated assets of the Company and its wholly- owned
subsidiaries (computed on the basis of book value, determined in
accordance with generally accepted accounting principles, or fair
market value, determined by the Board of Directors in its
reasonable good faith judgment) in any transaction or series of
related transactions;
(g) Liquidation. The liquidation or dissolution of
the Company;
(h) Acquisitions. The acquisition of any interest
in any business (whether by a purchase of assets, purchase of
stock, merger or otherwise), if financial statements, for the
business acquired would be required under the provisions of Rule
3-05 of Regulation S-X promulgated by the Securities and Exchange
Commission;
(i) Related Party Arrangements. The entering into,
or permitting any Subsidiary to enter into, any material
transaction with any of the Company's or any Subsidiary's
officers, directors, employees or affiliates where such
transaction would be required to be reported under Item 404 of
Regulation S-K (excluding employment arrangements and agreements
entered into during the ordinary course of business);
(j) Subsidiaries. The establishment or acquisition
of any Subsidiary which is not wholly-owned by the Company;
(k) Leases. The entering into or becoming or
remaining liable in any way, whether directly or by assignment or
as a guarantor or other surety, for the obligations of a lessee
under any leases or other rental agreements under which the
amount of the aggregate lease payments for all such agreements
exceeds $750,000 on a consolidated basis in any fiscal year of
the Company;
(l) Fiscal Year. The changing of the Company's
fiscal year end from the last Friday of October.
(m) Securities of Subsidiary. The issuance or sale
of any shares of the capital stock, or rights to acquire shares
of the capital stock, of any Subsidiary to any person or entity
other than the Company or another wholly-owned Subsidiary;
(n) Compensation. The Company will not permit (x)
the salary and (y) other remuneration (which shall mean an amount
equal to (i) gross salary shown on the relevant Form W-2 or gross
income on the relevant Form 1099, plus accrued bonuses and
director's fees for such year, less (ii) base salary for such
year less (iii) accrued bonuses and director's fees for the
previous year and paid in the current year) excluding (z) any
amounts so recognized but attributable to exercise of options or
warrants or resale of Common Stock so acquired to be paid during
any Fiscal Year to the persons holding the positions listed in
Schedule I (or any successor of any thereof in the capacity shown
in Schedule I), to exceed, in the aggregate for each such person,
the amount for such person shown in Schedule I, to be adjusted as
of the first day of each Fiscal Year to an amount not to exceed
110% of the maximum allowable amount (as set forth in Schedule I
and subsequently adjusted) for the preceding Fiscal Year;
(o) Public Offering. The consummation of any public
offering of the Company's equity or debt securities;
(p) Change in the Business. The Company making a
fundamental change in business so that less than 75% of its
revenues are received from the manufacture and sale of
optoelectronic, magnetic, fiber optic and other sensor products;
(q) Bankruptcy, Etc. The making of an assignment
for the benefit of creditors; or petitioning or applying to any
tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Company or any subsidiary, or of any
substantial part of the assets of the Company or any subsidiary,
or commencing of any proceeding (other than a proceeding for the
voluntary liquidation and dissolution of any subsidiary) relating
to the Company or any subsidiary under any bankruptcy,
reorganization, arrangement, insolvency,readjustment of debt,
dissolution or liquidation law of any jurisdiction; and
(r) Capital Expenditures. The making of capital
expenditures in excess of an aggregate of $5,000,000 in any
fiscal year of the Company, unless such capital expenditures
shall have been provided for in an annual budget approved by the
Board of Directors for such fiscal year.
Upon the request of First Source, the Company will at any
time and from time to time during the period this Warrant is
outstanding acknowledge in writing, in form satisfactory to First
Source, the continued validity of this Warrant and the Company's
obligations hereunder.
ARTICLE VI
RESERVATION OF STOCK ISSUABLE ON EXERCISE OF
WARRANT; PREEMPTIVE RIGHTS
The Company will at all times reserve and keep available,
solely for issuance, sale and delivery upon the exercise of this
Warrant, a number of shares of Common Stock equal to the number
of full shares of Common Stock issuable upon the exercise of this
Warrant. All shares of Common Stock issuable upon the exercise
of this Warrant shall, when issued upon such exercise, (a) be
duly and validly authorized and issued, fully paid and
nonassessable, and (b) be free from all taxes, liens and charges
with respect to the issue thereof other than any stock transfer
taxes in respect of any transfer occurring contemporaneously with
such issue. No stockholder of the Company has or shall have any
preemptive rights to subscribe for such shares of Common Stock.
ARTICLE VII
LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any
securities exchange, it will during the Exercise Period, at its
expense, list thereon, maintain and, when necessary, increase
such listing of, all shares of Common Stock issued or, to the
extent permissible under the rules of the applicable securities
exchange or automated quotation system, issuable upon the
exercise of this Warrant so long as any shares of Common Stock
shall be so listed.
ARTICLE VIII
RESTRICTIONS ON TRANSFER
The conditions contained in the following sections of this
ARTICLE VIII are intended to insure compliance with the
Securities Act in respect of the transfer of Warrants or Common
Stock issuable upon the exercise of Warrants. Reference in this
ARTICLE VIII to shares of Common Stock issuable upon the exercise
of Warrants includes shares of Common Stock theretofore issued
upon the exercise of any Warrants which are then evidenced by
certificates required to bear the legend set forth in Section
8.6.
8.1 Notice of Proposed Transfer; Transfers Without
Registration. The Holder or the holder of any shares of Common
Stock issuable upon the exercise of this Warrant, by acceptance
hereof or thereof, agrees to give written notice to the Company,
prior to any transfer of this Warrant, such shares of Common
Stock or any portion thereof which bear the legend described in
Section 8.6, of its intention to make such transfer, which notice
shall include a brief description of such proposed transfer. A
copy of such notice shall be sent to Independent Counsel.
If in the opinion of Independent Counsel the proposed
transfer may be effected without registration or qualification
under any Federal or State law, such counsel shall, as promptly
as practicable, notify the Company and the Holder of such opinion
and of the terms and conditions, if any, to be observed in such
transfer, whereupon the Holder shall be entitled to transfer such
shares of Common Stock in accordance with the terms of the notice
delivered to the Company and the opinion of Independent Counsel.
In the event this Warrant shall be exercised as an incident to
such transfer, such exercise shall relate back and for all
purposes of this Warrant be deemed to have occurred as of the
date of such notice regardless of delays incurred by reason of
the provisions of this ARTICLE VIII which may result in the
actual exercise on any later date.
8.2 Registration and Qualification. The provisions of
Section 8.2 (a), 8.2 (b), and 8.9 below are subject to the terms
of the First Amended and Restated Registration Rights Agreement,
dated as of July 1, 1988 (the "Original Registration Agreement"),
among the Company, First Source and the stockholders listed
therein, as the same may be amended, modified or supplemented
from time to time with the consent required by Section 8.11 (the
"Registration Agreement"), and if, prior to an amendment of the
Original Registration Agreement as amended by any effective
amendment thereof, any conflict exists between the provisions of
the Original Registration Agreement as amended by any effective
amendment thereof, and Section 8.2 (a), 8.2 (b) and 8.9, the
applicable conflicting provisions of the Original Registration
Agreement as amended by any effective amendment thereof shall
control, but only to the extent of the conflict, and the holder
of any Warrant and the shares of Common Stock issuable upon
exercise thereof shall have the applicable conflicting rights
contained in the Original Registration Agreement as amended by
any effective amendment thereof but only to the extent of the
conflict, until such time as the Original Registration Agreement
as amended by any effective amendment thereof is so amended.
(a) Piggyback Registration. If the Company proposes
(whether on its own behalf or at the request of any other person
or entity) to register any security under the Securities Act on
any registration form (otherwise than for the registration of
securities to be offered and sold pursuant to (a) an employee
benefit plan, (b) a dividend or interest reinvestment plan, (c)
other similar plans or (d) reclassifications of securities,
mergers, consolidations and acquisitions of assets on Form S-4 or
any successor thereto) prescribed by the Commission permitting a
secondary offering or distribution, not less than 60 days prior
to each such registration, the Company shall give to the holders
of the Warrants or shares of Common Stock issuable upon the
exercise thereof written notice of such proposal which shall
describe in detail the proposed registration and distribution
(including those jurisdictions where registration or
qualification under the securities or blue sky laws is intended)
and, upon the written request of any holder of a Warrant or
shares of Common Stock issuable upon the exercise thereof given
within 30 days after the date of any such notice, proceed to
include in such registration such shares of Common Stock as have
been requested by any such holder to be included in such
registration; provided, however, that the Company shall not be
required to include fewer than 50,000 shares (subject to
adjustment upon any combination or split of shares or similar
event) of Common Stock in any such registration pursuant to this
Section 8.2(a). Any holder of a Warrant or shares of Common
Stock issuable upon the exercise thereof shall in its request
describe briefly the proposed disposition of such shares of
Common Stock. The Company will in each instance use its best
efforts to cause any shares of Common Stock issuable upon the
exercise of the Warrants (the holders of which shall have so
requested registration thereof) to be registered under the
Securities Act and qualified under the securities or blue sky
laws of any jurisdiction requested by a prospective seller, all
to the extent necessary to permit the sale or other disposition
thereof (in the manner stated in such request) by a prospective
seller of the securities so registered.
If the managing underwriter, who shall be selected by the
Company (subject to the approval, not unreasonably withheld, of a
majority of the holders that have requested registration (which
must include First Source if First Source is then a holder and
requesting registration)) to manage the distribution of the
shares of Common Stock being registered, advises the Company in
writing that, in its opinion, the inclusion of the shares of
Common Stock requested to be included in such registration by a
holder of a Warrant or shares of Common Stock issuable upon the
exercise thereof with the securities being registered by the
Company and other prospective sellers would materially adversely
affect the distribution of all such securities, then: (a) (i) if
such registration has been initially proposed by the Company, the
Company shall include in such registration the number of shares
proposed to be registered by the Company and by the holders of
the Warrants or shares of Common Stock issuable upon the exercise
thereof before including any other securities in the
registration, and, if an additional reduction in the number of
securities being registered is necessary, the Company shall
include in such registration such shares of the Company and the
holders of the Warrants or shares of Common Stock issuable upon
the exercise thereof pro rata based on the number of shares
originally proposed to be registered by the Company and by the
holders of the Warrants or shares of Common Stock issuable upon
the exercise thereof or (ii) if such registration has been
initially proposed by a holder of securities other than the
Company or the holders of Warrants or shares of Common Stock
issuable upon exercise thereof, the Company shall include in such
registration the number of shares proposed to be registered by
such other holder and the holders of Warrants or shares of Common
Stock issuable upon exercise thereof before including any other
securities in the registration and, if an additional reduction in
the number of securities being registered is necessary, the
Company shall include in such registration such shares of such
other holder and the holders of Warrants or shares of Common
Stock issuable upon exercise thereof pro rata based on the number
of shares originally proposed to be registered by such other
holder and by each holder of Warrants or shares of Common Stock
issuable upon exercise thereof; or (b) any holder of a Warrant or
shares of Common Stock issuable upon the exercise thereof may, at
its sole option, delay its offering and sale for a period not to
exceed 120 days after the effective date of such registration as
such managing underwriter shall reasonably request. In the event
of such delay, the Company: (i) shall use its best efforts to
effect any registration or qualification under the Securities Act
and the securities or blue sky laws of any jurisdiction as may be
necessary to permit such prospective seller to make its proposed
offering and sale following the end of such period of delay; and
(ii) during such period of delay and for at least 90 days
thereafter, shall not file or cause to be effected any other
registration of its capital stock or securities convertible into
or exchangeable or exercisable for any such capital stock,
whether on its own behalf or at the request of any other person
or entity, and shall not sell any shares of its capital stock or
securities convertible into or exchangeable or exercisable for
any such capital stock.
The holder of a Warrant or shares of Common Stock issuable
upon the exercise thereof who has requested shares of Common
Stock to be included in a registration pursuant to this Section
8.2(a) by acceptance hereof or thereof, agrees to execute an
underwriting agreement with such underwriter that is (i)
reasonably satisfactory to such holder and (ii) in customary
form.
Nothing in this Section 8.2(a) shall be deemed to require
the Company to proceed with any registration of its securities
after giving the notice herein provided.
(b) Demand Registration. The holders of the Warrants and
of any shares of Common Stock issuable upon the exercise thereof
may, on up to four separate occasions (unless such request is
withdrawn in accordance with the terms hereof) (the "Demands"),
require the Company to effect the registration of the Shares
pursuant to the provisions of this Section 8.2(b). Such Demands
"shall consist of two demands for which the Company shall pay all
the fees and expenses as set forth in Section 8.4 (the "Free
Demands") and two demands for which the holders shall pay their
proportionate share of the fees and expenses set forth in Section
8.4 (the "Charged Demands"). If the holders of the Warrants and
of any shares of Common Stock issuable upon the exercise thereof
representing a total of more than 50% of the shares of Common
Stock then issued and issuable upon the exercise of the Warrants
(which must include First Source if First Source is then a
holder) shall give notice to the Company to the effect that such
holders intend to (i) transfer all or any part of the Shares or
(ii) exercise all or any part of the Warrants and transfer all or
any part of the Shares under such circumstances that a public
distribution (within the meaning of the Securities Act) of the
Shares will be involved, then the Company shall (A) within 10
days after receipt of such notice, give written notice of the
proposed registration to the other holders of Warrants and shares
of Common Stock issuable upon exercise thereof, and (B) within 30
days after receipt of such notice, file a registration statement
pursuant to the Securities Act to the effect that such shares may
be sold under the Securities Act as promptly as is practicable
thereafter and the Company will use its best efforts to cause any
such registration to become effective and to keep the prospectus
included therein current for at least six months after the
effective date thereof or until the distribution shall have been
completed, whichever first occurs; provided, however, that such
holders shall furnish the Company with such appropriate
information (relating to the intention of such holders) in
connection therewith as the Company may reasonably request in
writing; and provided, further, that the Company shall not be
required to register fewer than 200,000 (subject to adjustment
upon any combination or split of shares or similar event) shares
of Common Stock in any registration pursuant to this Section
8.2(b). As long as the Company is not in default on its
obligations under Section 5.1.2(a) and (b), the Company's
obligation to file a registration statement, at any time when it
is impossible or impracticable to include the Company's fiscal
year-end financial statements as the most recent certified
financial statements required to be included therein, shall be
suspended until the Company's next fiscal year-end financial
statements are due in accordance with Section 5.1.2(b), unless
the request for registration pursuant to this Section 8.2(b) has
been withdrawn. The managing underwriter for offerings made
pursuant to this Section 8.2(b) shall be selected by the parties
requiring registration hereunder (which must include First Source
if First Source is then a holder and requesting registration),
subject to the consent, not unreasonably withheld, of the
Company.
If the managing underwriter for any offering made pursuant
to this Section 8.2(b) advises the Company in writing that, in
its opinion, the inclusion of all of the shares of Common Stock
requested to be included in such registration by the holders of
Warrants and shares of Common Stock issuable upon the exercise
thereof would materially adversely affect the distribution of all
such securities, then (a) there shall be included in such
registration shares of the holders of Warrants or shares of
Common Stock issuable upon the exercise thereof pro rata based on
the number of shares originally proposed to be registered by each
holder of Warrants or shares of Common Stock issuable upon the
exercise thereof or (b) any holder of a Warrant or shares of
Common Stock issuable upon the exercise thereof may, at its sole
option, delay its offering and sale for a period not to exceed
120 days after the effective date of such registration as such
managing underwriter shall reasonably request. In the event of
such delay, the Company (i) shall use its best efforts to effect
any registration or qualification under the Securities Act and
the securities or blue sky laws of any jurisdiction as may be
necessary to permit such prospective seller to make its proposed
offering and sale following the end of such period of delay; and
(ii) during such period of delay and for at least 90 days
thereafter, shall not file or cause to be effected any other
registration of its capital stock or securities convertible into
or exchangeable or exercisable for any such capital stock,
whether on its own behalf or at the request of any other person
or entity, and shall not otherwise sell any of its capital stock
or securities convertible into or exchangeable or exercisable for
any such capital stock. A registration shall not reduce the
number of Demands available to the holders under this Section
8.2(b) until such registration has become effective and the
holders of the Warrants or shares of Common Stock issuable upon
the exercise thereof participating in the demand registration are
able to register and sell at least 80% of the shares of Common
Stock originally requested to be included in such registration;
provided, however, that if in connection with a proposed Demand
made pursuant to Section 8.2(b) the holders of the Warrants or
shares of Common Stock issuable upon the exercise thereof
participating in the demand registration are able to register and
sell more than 50% but less than 80% of the shares of Common
Stock originally requested to be included in such registration,
the number of Free Demands shall be reduced by one, and the
number of Charged Demands shall be increased by one.
8.3 Registration and Qualification Procedures. Whenever
the Company is required by the provisions of Section 8.2 to use
its best efforts to effect the registration of any of its
securities under the Securities Act, the Company will, as
expeditiously as is possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and the prospectus current and
to comply with the provisions of the Securities Act with respect
to the sale of all securities covered by such registration
statement whenever the seller of such securities shall desire to
sell the same, including the offering or sale of such securities
on a continuous or delayed basis pursuant to Rule 415 under the
Securities Act as the same shall be in effect from time to time;
(c) furnish to each seller such number of copies of
preliminary prospectuses and prospectuses and each supplement or
amendment thereto and such other documents as each seller may
reasonably request in order to facilitate the sale or other
disposition of the securities owned by such seller in conformity
with (i) the requirements of the Securities Act and (ii) the
seller's proposed method of distribution;
(d) register or qualify the securities covered by such
registration statement under the securities or blue sky laws of
such jurisdictions within the United States as each seller shall
reasonably request, and do such other reasonable acts and things
as may be required of it to enable each seller to consummate the
sale or other disposition in such jurisdictions of the securities
owned by such seller; provided, however, that the Company shall
not be required to (i) qualify as a foreign corporation or
consent to a general and unlimited service of process in any such
jurisdictions, (ii) qualify as a dealer in securities or (iii)
register or qualify at its own expense securities of such seller
in any jurisdiction not described in the notice of the Company
referred to in the first paragraph of Section 8.2(a), in any case
in order to accomplish any of the foregoing;
(e) furnish, at the request of any seller on the date such
securities are delivered to the underwriters for sale pursuant to
such registration or, if such securities are not being sold
through underwriters, on the date the registration statement with
respect to such securities becomes effective, (i) 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 seller making such request, covering such legal
matters with respect to the registration in respect of which such
opinion is being given as the seller of such securities may
reasonably request and are customarily included in such opinion
and (ii) letters, dated, respectively, (1) the effective date of
the registration statement and (2) the date such securities are
delivered to the underwriters, if any, for sale pursuant to such
registration, from a firm of independent certified public
accountants of recognized standing selected by the Company,
addressed to the underwriters, if any, and to the seller making
such request, covering such financial, statistical and accounting
matters with respect to the registration in respect of which such
letters are being given as the seller of such securities may
reasonably request and are customarily included in such letters;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders as soon as reasonably
practicable, but not later than 16 months after the effective
date of the registration statement, an earnings statement
covering a period of at least 12 months beginning after the
effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(g) enter into and perform an underwriting agreement with
the managing underwriter, if any, selected as provided in Section
8.2, as the case may be, containing customary terms of offer and
sale of the securities, payment provisions, underwriting
discounts and commissions, representations, warranties,
covenants, indemnities, terms and conditions; and
(h) keep each seller advised in writing as to the
initiation and progress of any registration under Section 8.2, as
the case may be.
8.4 Allocation of Expenses. If the Company is required by
the provisions of Section 8.2 to use its best efforts to effect
the registration or qualification under the Securities Act or any
state securities or blue sky laws of any of the shares of Common
Stock issuable upon the exercise of the Warrants, the Company
will pay all expenses in connection therewith, including, without
limitation, (a) all expenses incident to filing with the National
Association of Securities Dealers, Inc., (b) registration fees,
(c) printing expenses, (d) the Company's accounting and legal
fees and expenses, (e) expenses of any special audits incident to
or required by any such registration or qualification, (f)
premiums for insurance in such amount, if any, deemed appropriate
by the managing underwriter and (g) expenses of complying with
the securities or blue sky laws of any jurisdictions in
connection with such registration or qualification; provided,
however, that the holders of any Warrant or shares of Common
Stock issuable upon exercise thereof participating in a Charged
Demand shall be liable for the amount of such expenses in
connection with such Charged Demand made pursuant to Section
8.2(b) equal to the product of (a) all such expenses and (b) the
proportion which the number of shares of Common Stock issuable
upon exercise of the Warrants for which registration has become
effective and which are sold pursuant to Section 8.2(b) bears to
the total number of all shares included in such registration; and
provided, further, that the Company shall not be liable for (1)
any discounts or commissions to any underwriter or (2) any stock
transfer taxes incurred in respect of the shares of Common Stock
issuable upon the exercise of the Warrants sold by the sellers.
8.5 Indemnification. In connection with any registration or
qualification of securities under Section 8.2 or 8.3, the Company
hereby indemnifies the Holder and the holders of any shares of
Common Stock issuable upon the exercise of the Warrants and each
underwriter thereof, including each person, if any, who controls
the Holder or such stockholder or underwriter within the meaning
of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation) caused by any untrue, or alleged untrue, statement
of a material fact contained in any registration statement,
preliminary prospectus, prospectus or notification or offering
circular (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or caused by any
omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information
furnished in writing to the Company by the Holder or any such
stockholder or underwriter expressly for use therein. The Holder
and the holders of any shares of Common Stock issuable upon the
exercise of the Warrants hereby indemnify the Company and each
officer, director and controlling person of the Company or
underwriter within the meaning of Section 15 of the Securities
Act against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) caused by any
untrue, or alleged untrue, statement of a material fact contained
in any registration statement, preliminary prospectus or
notification or offering circular (as amended or supplemented if
the Company shall have furnished any amendments or supplements
thereto) or caused by any omission, or alleged omission, to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only
to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance
upon and in conformity with information furnished in writing to
the Company by the Holder or any such stockholder expressly for
use therein.
Promptly upon receipt by a party indemnified under this
Section 8.5 of notice of the commencement of any action against
such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party under
this Section 8.5, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action,
but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may have to any indemnified
party, unless such failure shall materially adversely affect the
defense of such action. In case notice of commencement of any
such action shall be given to the indemnifying party as above
provided, the indemnifying party shall be entitled to participate
in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of
such action at its own expense, with counsel chosen by it and
satisfactory to such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (a)
the indemnifying party agrees to pay the same, (b) the
indemnifying party fails to assume the defense of such action
with counsel reasonably satisfactory to the indemnified party or
(c) the named parties to any such action (including any impleaded
parties) have been advised by such counsel that representation of
such indemnified party and the indemnifying party by the same
counsel would be inappropriate under applicable standards of
professional conduct (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf
of such indemnified party); provided that the indemnifying party
shall not be required to pay the fees and expenses of more than
one counsel to indemnified parties claiming indemnification
pursuant to this Section 8.5. No indemnifying party shall be
liable for any settlement entered into without its consent.
If the indemnification provided for in this Section 8.5
shall for any reason be unenforceable by an indemnified party,
although otherwise available in accordance with its terms, then
each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims,
damages, liabilities or expenses with respect to which such
indemnified party has claimed indemnification, in such proportion
as is appropriate to reflect the relative fault of the
indemnified party on the one hand and the indemnifying party on
the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.
The Company, each holder of the Warrants and each holder of
Shares of Common Stock issued upon the exercise thereof agree
that it would not be just and equitable if contribution pursuant
hereto were to be determined by pro rata allocation or by any
other method of allocation which does not take into account such
equitable considerations. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages,
liabilities or expenses referred to herein shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
against any action or claim which is the subject hereof. No
person guilty of fraudulent misrepresentation (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.
Each Holder of the Warrants and each holder of shares of
Common Stock issued upon the exercise thereof and bearing the
legend required by Section 8.6, by acceptance thereof, agrees to
the indemnification provisions of this Section 8.5.
8.6 Legend on Certificates. In case any shares of Common
Stock are issued upon the exercise in whole or in part of the
Warrants or are thereafter transferred, in either case under such
circumstances that no registration under the Securities Act is
required, each certificate representing such shares shall bear on
the face thereof the following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and any
transfer thereof is subject to the conditions specified in the
Warrant, dated as of December 12, 1995, which is an amendment and
restatement of the Warrant originally issued by Optek Technology,
Inc. (the "Company") to First Source Financial, Inc., dated as of
January 31, 1991. A copy of the form of such Warrant is on file
with the Secretary of the Company at 0000 Xxxx Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxx 00000 and will be furnished without charge by
the Company to the holder of this certificate upon written
request to the Secretary of the Company at such address.
In case (a) a registration statement covering shares of
Common Stock represented by a certificate bearing the legend
specified above becomes effective under the Securities Act or (b)
the Company receives an opinion of Independent Counsel that such
legend is no longer necessary on such certificate to protect the
Company from a violation of the Securities Act, the Company
shall, or shall instruct its transfer agent and registrar to,
issue in lieu thereof a new certificate or certificates for such
shares in the name of the holder of such shares without such
legend on the face thereof.
8.7 Supplying Information. The Company, the Holder and
each holder of shares of Common Stock issuable upon the exercise
of the Warrant shall cooperate with each other in supplying such
information as may be necessary for any of such parties to
complete and file any information reporting forms presently or
hereafter required by the Commission or any commissioner or other
authority administering the blue sky or securities laws of any
jurisdiction where shares of Common Stock are proposed to be sold
pursuant to Section 8.2 or 8.3.
8.8 Damages. In the event the Company fails to comply with
any provision of Section 8.2 or 8.3, upon written request of the
Holder of the Warrant or any holder of shares of Common Stock
issuable upon the exercise thereof, the Company shall promptly
obtain from an independent investment banking firm acceptable to
such person an opinion estimating the net proceeds which such
person would have received (after deducting underwriting
commissions and discounts and any other expenses that would have
been for the account of such Holder or holder of shares of Common
Stock in connection with the registration or qualification of
such shares of Common Stock) upon the sale of shares of Common
Stock proposed to be sold pursuant to such registration or
qualification. Such opinion of the independent investment
banking firm shall be (a) delivered in writing to the Company,
with a copy to such person, within 15 days after the date of the
request of such person to the Company and (b) conclusive and
binding on the Company and such person.
Within 21 days of receipt by the Company of such estimate,
if such person so elects, the Company shall pay to such person an
amount, equal to such estimated net proceeds related to the
Warrants or shares of Common Stock, as the case may be. Payment
of such amount shall be made at the option of such person, by
(i) wire transfer to an account in a bank located in the
United States designated by such person for such purpose or (ii)
a certified or official bank check drawn on a member of the
Chicago or New York Clearing House payable to the order of such
person. Upon payment to such person of such amount, such person
shall assign to the Company, this Warrant and, if issued, the
shares of Common Stock issued upon the exercise of this Warrant
proposed to be sold pursuant to the registration or qualification
in question, without any representation or warranty (other than
that such Holder has good and valid title thereto free and clear
of liens, claims, encumbrances and restrictions of any kind
arising by or through such Holder). If less than all of the
shares of Common Stock issuable upon exercise of this Warrant
were proposed to be sold pursuant to the registration or
qualification in question, the Company shall cancel the Warrant
and issue in the name of, and deliver to, the Holder, pursuant to
Section 2, a new Warrant for the shares of Common Stock issuable
upon the exercise thereof not required to be assigned to the
Company pursuant to the provisions of the preceding sentence.
The Company agrees that the amount of actual damages that would
be sustained by the Holder as a result of the failure of the
Company to comply with any provisions of Section 8.2 or 8.3 is
not capable of ascertainment on any other basis.
8.9 Holdback Agreements. The Company agrees: (i) not to
effect any public sale or distribution of or otherwise dispose of
any of its capital stock or securities convertible into or
exchangeable or exercisable for any such capital stock during the
seven days prior to or 135 days after the date any registration
pursuant to Section 8.2(a) or 8.2(b) has become effective, except
as part of such registration and except pursuant to any
registration of securities to be offered and sold pursuant to (A)
an employee benefit plan, (B) a dividend or interest reinvestment
plan, (C) other similar plans or (D) reclassifications of
securities, mergers, consolidations and acquisitions of assets on
Form S-4 or any successor thereto; and (ii) to cause each person
or entity which owns any capital stock of the Company as of the
date of this Warrant (other than persons or entities holding
nonrestricted stock that can be freely traded pursuant to Section
4(1) of the Securities Act and persons or entities who obtained
stock pursuant to a registration described in Section 8.9(i)(A),
(B), (C) or (D)) and each person or entity which purchases the
Company's capital stock or securities convertible into or
exchangeable or exercisable for any such capital stock at any
time after the date of this Warrant (other than in a public
offering and other than persons or entities holding nonrestricted
stock that can be freely traded pursuant to Section 4(1) of the
Securities Act and persons or entities who obtained stock
pursuant to a registration described in Section 8.9(i)(A), (B),
(C) or (D)) to agree not to effect any such public sale or
distribution during such period.
8.10 Rule 144 Reporting. With a view to making available to
the holders of Warrants and of shares of Common Stock issuable
upon exercise thereof the benefits of certain rules and
regulations of the Commission which may permit the sale of
Warrants or shares of Common Stock issuable upon exercise thereof
to the public without registration, the Company agrees to: (a)
make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act or
any successor rule or regulation from time to time in effect; (b)
file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act; and (c) furnish to the Holder or a holder of
Common Stock issuable upon exercise of Warrants forthwith upon
request a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 and the Exchange Act,
a copy of the most recent annual or quarterly report of the
Company filed with the Commission and such other reports and
documents of the Company and other information in the possession
of or reasonably obtainable by the Company as the Holder or such
holders my reasonably request in availing themselves of any rule
or regulation of the Commission allowing them to sell securities
without registration under the Securities Act.
8.11 Consent for Additional Registration Rights. The
Company shall not grant rights to register any of its securities
under the Securities Act to any person or entity, and shall not
permit the amendment, supplement or modification of any such
rights existing as of the Closing Date, without the consent of
the holders of Warrants and shares of Common Stock issuable upon
exercise thereof representing more than 50% of the shares of
Common Stock issued or issuable upon exercise of the Warrants
(which must include First Source if First Source is then a
Holder), except for the rights described by the Registration
Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 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, power or remedies. If
the Company fails to make, when due, any payments provided for
herein or fails to comply with any other provision of this
Warrant, the Company shall pay to the Holder (a) interest at the
Default Rate on any amounts due and owing to the Holder and (b)
such further amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys,
fees, incurred by the Holder in collecting any amounts due
pursuant to this Warrant or in otherwise enforcing any of its
rights, powers or remedies hereunder.
9.2 Holder Not a Stockholder. Except as otherwise provided
herein, prior to the exercise of this Warrant as hereinbefore
provided, the Holder shall not be entitled to any of the rights
of a stockholder of the Company, including, without limitation,
the right as a stockholder to (a) vote or consent, or (b) receive
dividends or any other distributions made to stockholders.
9.3 Notice Generally. Any notice, demand or delivery to be
made pursuant to the provisions of this Warrant shall be
sufficiently given or made if sent by first class mail, postage
prepaid, addressed to (a) the Holder at its last known address
appearing on the books of the Company maintained for such purpose
or (b) the Company at its principal office referred to in Section
2.2. The Holder and the Company nay each designate a different
address by notice to the other pursuant to this Section 9.3.
9.4 Payment of Certain Expenses. The Company shall pay all
expenses in connection with, and all taxes (other than stock
transfer taxes and income taxes) and other governmental charges
that may be imposed in respect of, the issue, sale and delivery
of (a) the shares of Common Stock issuable upon the exercise of
this Warrant or (b) this Warrant. The Company shall reimburse
First Source for all reasonable expenses incurred by First Source
in monitoring the Company's compliance with the affirmative and
negative covenants of this Warrant.
9.5 Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the Holder. The
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.
9.6 Amendment. This Warrant may not be modified or amended
except by an instrument in writing signed by the party against
which enforcement is sought.
9.7 Headings. The headings of the Articles and Sections of
this Warrant are for convenience of reference only and shall not,
for any purpose, be deemed a part of this Warrant.
9.8 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS FOR CONTRACTS ENTERED INTO AND TO
BE PERFORMED IN SUCH STATE.
9.9 Subsidiaries. The provisions of this Warrant referring
to "Subsidiaries" of the Company or to "consolidated" financial
statements shall only apply during such times as the Company has
one or more Subsidiaries.
9.10 No Section 338 Election or Step-Up in Asset Value on
Books of the Company. The Company acknowledges that the
definition of Adjusted Operating Profits is based upon the
assumption that neither the Company nor any of its Subsidiaries
will (or will be deemed to) make a Section 336 election under the
Internal Revenue Code of 1986, as amended, or otherwise write-up
the value of any of its assets on its books used for computing
Adjusted Operating Profits. The Company hereby agrees and
covenants that neither it nor any of its Subsidiaries will (or
will be deemed to) make any such election or write-up.
9.11 Replacement. This Warrant is an amendment and
restatement of, and is issued in replacement of, the warrant
dated as of January 20, 1994 which was issued to Household
Commercial Financial Services, Inc., and that warrant and its
predecessors and all rights thereunder are hereby cancelled and
terminated.
Dated as of December 12, 1995.
OPTEK TECHNOLOGY, INC.
By:
Its:
Attest:
Secretary
(AFFIX CORPORATE SEAL)
AGREED AND ACCEPTED TO:
FIRST SOURCE FINANCIAL, INC.
By:
Its:
NOTICE OF EXERCISE FORM,
(To be executed only upon partial
or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within Warrant for and purchases
_____________ shares of Common Stock of Optek Technology, Inc.
and
[Make appropriate selection by placing an "X" in the
box and completing the blank associated with that box]
(a) agrees to make payment therefor in the amount of
$__________,
(b) pursuant to Section 2.2(b)(ii) of the within
Warrant instructs and agrees that shares of Common Stock of Optek
Technology, Inc. be withheld in payment therefor,
all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or ______________
certificates in denominations of __________ shares) for the
shares of Common Stock of Optek Technology, Inc. hereby purchased
be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ___________________, whose address is
____________________, and if such shares of Common Stock shall
not include all the shares of Common Stock issuable as provided
in the within Warrant, that a new Warrant of like tenor for the
number of shares of Common Stock of Optek Technology, Inc. not
being purchased hereunder be issued in the name of and delivered
to [choose one] (a) the undersigned or (b) _________________
whose address is _____________________.
Dated:_______________________, 19___
By
(Signature of Registered
Holder)
Signature Guaranteed:
By
[Title)
NOTICE: The signature of this Notice of Exercise must
correspond exactly with the name of the Holder as specified on
the face of the within Warrant.
The signature to this Notice of Exercise must be
guaranteed by a commercial bank or trust company in the United
States or a member firm of the New York Stock Exchange.
SCHEDULE I
Compensation (Section 5.3(n))
Title
Maximum, Not
to Exceed
President, CEO
$250,000/yr*
Vice President
$175,000/yr*
Dir. Corp. Services
$175,000/yr*
Dir. Operations
$175,000/yr*
Dir. Marketing/R&D
$175,000/yr*
_______________________
* Maximum amount shown is for Fiscal Year Ending 1988, and
increases 10% per year.
