REPRESENTATIVE WARRANT AGREEMENT
REPRESENTATIVE WARRANT AGREEMENT dated as of ____________, 1996, between
FRESHSTART VENTURE CAPITAL CORPORATION, a New York corporation (the "Company"),
and XXXXXX SECURITIES, INC. ("Xxxxxx").
W I T N E S S E T H
WHEREAS, in connection with a public offering (the "Offering") of up to
1,150,000 shares of Common Stock, $.01 par value (the "Common Stock") of the
Company pursuant to a registration statement (the "Registration Statement") on
Form N-5 (File No. 33- 86518), the Company desires to issue to Xxxxxx
Representative Warrants (the "Representative Warrants") to purchase an aggregate
of 100,000 shares (the "Shares") of Common Stock.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Company and Xxxxxx hereby agree as follows:
1. Issuance of Warrants: Form of Warrants; Execution of Warrants. The
Company shall issue, sell and deliver the Representative Warrants to Xxxxxx or,
at Xxxxxx' direction, to its bona fide officers or designees, for $5.00
concurrently with the Firm Shares closing date (the "Closing") under the
underwriting agreement, dated November___, 1996, between the Company and the
underwriters for which Xxxxxx will act as representative and certain other
parties (the "Underwriting Agreement") relating to the Offering. The
Representative Warrants shall be executed on behalf of the Company by the manual
or facsimile signature of its present or any future Chairman or President, under
its corporate seal affixed or in facsimile, and attested by the manual or
facsimile signature of its Secretary or Assistant Secretary.
2. Registration. The Representative Warrants shall be numbered and shall be
registered in a warrant register as they are issued. The Company shall be
entitled to treat the registered holder of any Representative Warrant (the
"Holder") as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Representative
Warrants on the part of any other Person (as hereinafter defined), and shall not
be liable for any registration or transfer of Representative Warrants that are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer or with
such knowledge of such facts that its participation therein amounts to bad
faith. The Representative Warrants shall be registered initially in the name of
"Xxxxxx Securities, Inc." in such denominations as Xxxxxx may request in writing
to the Company; provided, however, that prior to the Closing, Xxxxxx may
designate that the Representative Warrants be issued in varying amounts directly
to its bona fide officers or designees and not to Xxxxxx. Such designation will
only be made by Xxxxxx if it determines such issuances would not violate the
interpretation of the Board of Governors of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the review of corporate
financing arrangements.
3. Transfer of Warrants
3.1 The Representative Warrants may not be sold, assigned, transferred,
pledged or hypothecated (collectively, "transferred") for a period of one year
after the effective date of the Registration Statement, except to bona fide
officers of Xxxxxx. Subsequent to such one year period the Representative
Warrants may be transferred to any persons subject to compliance with the
provisions of Section 10 hereof. The Representative Warrants shall be
transferable only on the books of the Company maintained at its principal
executive office (the "Company Office") upon delivery thereof duly indorsed by
the Holder or by the Holder's duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or a copy thereof, duly certified, shall be deposited
and remain with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited and remain with
the Company in its discretion.
3.2 Upon any registration of transfer, the Company shall deliver a new
Representative Warrant or Representative Warrants to the Persons entitled
thereto. The Representative Warrants may be exchanged, at the option of the
Holder thereof, for other Representative Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Shares upon surrender to the Company or its duly authorized agent.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Representative Warrants to be transferred on its books to any Person, unless the
Holder or Holders thereof shall furnish to the Company evidence of compliance
with the Securities Act of 1933, as amended (the "Act"), in accordance with the
provisions of Section 10 of this Agreement.
4. Exercise of Warrants; Terms of Warrants
4.1 Each Representative Warrant shall entitle the Holder thereof to
purchase from the Company one share of Common Stock at a purchase price of $7.00
per share, payable in full at the time of exercise of the Representative
Warrant. Except as the context otherwise requires, the term "Exercise Price" as
used in this Agreement shall mean the purchase price of one share. Each
Representative Warrant may be exercised for a four-year period commencing on the
first anniversary of the effective date of the Registration Statement. The term
"Expiration Date" as used in this Agreement shall mean the latest time and date
at which the Representative Warrants may be exercised. After the Expiration
Date,
-2-
any unexercised Representative Warrants shall be void and all rights of Holders
with respect thereto shall cease.
4.2 During the period specified in and subject to the provisions of this
Section 4, Representative Warrants may be exercised by their surrender at the
Company Office with the election-to-purchase form set forth on (or attached to)
the Representative Warrant duly completed and executed, accompanied by payment
in full to the Company of the aggregate Exercise Price for each Share with
respect to which Representative Warrants are being exercised, which amounts
shall be paid in full, either in United States currency, by a bank cashier's
check or money order payable to the order of the Company or by wire transfer to
an account designated by the Company or pursuant to Section 4.3 hereof. Within
three (3) business days after the exercise of any Representative Warrants, the
Company shall issue a certificate or certificates for the number of full Shares
to which the Holder is entitled, registered in accordance with the instructions
set forth in the election-to-purchase form. All Shares shall be duly authorized,
validly issued, fully paid, nonassessable and free from all taxes, liens and
charges. Certificates representing such Shares shall be delivered by the Company
in such names and denominations as are required for delivery to, or in
accordance with the instructions of, the Holder.
4.3 In lieu of a monetary payment of the Exercise Price, a Holder may elect
to receive, without the payment of any additional consideration, Shares equal to
the value of his Representative Warrants or portion thereof by the surrender of
such Representative Warrants to the Company with the net issuance election
marked in the election-to-purchase form. Thereupon, the Company shall issue to
the Holder, such number of fully paid and nonassessable Shares as is computed
using the following formula:
X = Y(A-B)
----------
A
where X = the number of Shares to be issued to the Holder pursuant to this
Section 4.3.
Y = the number of Shares covered by his Representative Warrants in
respect of which the net issuance election is made pursuant to this
Section 4.3.
A = the fair market value of one share of Common Stock, as defined
below, as at the time the net issuance election is made pursuant to
this Section 4.3.
B = the Exercise Price in effect under this Representative Warrant at
the time the net issuance election is made pursuant to this Section
4.3.
The fair market value of a share of Common Stock shall be the per share last
sale price for the Common Stock on the trading day immediately preceding the day
the Company receives the duly completed election-to-purchase form as quoted on
the Nasdaq Small Cap Market or
-3-
such other quotation system or national securities exchange on which the Common
Stock is then principally traded.
4.4 Each Person in whose name any such certificate for Shares is issued
shall for all purposes be deemed to have become the holder of record of the
Shares represented thereby on the date upon which such Representative Warrants
were surrendered for exercise, accompanied by payment of the Exercise Price,
irrespective of the date of issuance or delivery of such certificate for Shares;
provided, however, that if, at the date of the surrender of such Representative
Warrants and payment of the Exercise Price, the transfer books for the Shares
purchasable upon the exercise of such Representative Warrants shall be closed,
the certificates for the Shares shall be issuable as of the date on which such
books shall next be opened (whether before or after the Expiration Date) and,
until such date, the Company shall be under no duty to deliver any certificate
for such Shares; provided further, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than twenty (20) days.
4.5 The Representative Warrants shall be exercisable, at the election of
the Holders thereof, in full or from time to time in part and, in the event that
less than all of the surrendered Representative Warrants are exercised, the
Company shall execute and mail, by first-class mail, within ten (10) days of the
date upon which the Representative Warrants were exercised, to the Holder of
such Representative Warrants or such other Person (as defined herein) as shall
be designated in the election to purchase, a new Representative Warrant
representing the number of full Representative Warrants not exercised. No
fractional Shares shall be issued; all issuances upon exercise would be rounded
to the nearest whole Share.
5. Payment of Taxes. The Company shall promptly pay all documentary stamp
taxes attributable to the issuance of Shares upon the exercise of any
Representative Warrants, but any transfer taxes that may be payable in
connection with the issuance of Representative Warrants or certificates for
Shares in any name other than that of the Holder of the Representative Warrants
surrendered shall be paid by such Holder.
6. Mutilated or Missing Representative Warrants. In case any of the
Representative Warrants shall be mutilated, lost, stolen or destroyed, the
Company shall issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Representative Warrant, or in lieu of and
substitution for the lost, stolen or destroyed Representative Warrant, a new
Representative Warrant of like tenor and representing an equivalent right or
interest; but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Representative Warrant.
Applicants for such substitute Representative Warrants shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
-4-
7. Reservation of Shares. The Company shall at times reserve and keep
available for issuance upon the exercise of Representative Warrants a number of
Shares that will be sufficient to permit the exercise in full of all outstanding
Representative Warrants. Continental Stock Transfer and Trust Company (the
"Transfer Agent") and every subsequent transfer agent for the Company's Common
Stock, or other securities issuable upon exercise of Representative Warrants,
shall be irrevocably authorized and directed at all times to reserve such number
of Shares as shall be required for such purpose. The Company will keep a copy of
this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for any of the Company's Shares or other securities issuable upon
the exercise of Representative Warrants. The Company shall supply the Transfer
Agent (and any such subsequent transfer agent) with duly executed certificates
for such purpose. All Representative Warrants surrendered upon the exercise
thereof shall be canceled and such canceled Representative Warrants shall
constitute sufficient evidence of the number of Shares that have been issued
upon the exercise of the Representative Warrants. After the Expiration Date, no
Shares shall be subject to reservation in respect of any unexercised
Representative Warrant.
8. Adjustments.
The Exercise Price and the number and kind of Shares shall be subject to
adjustment from time to time upon the happening of certain events as provided in
this Section 8.
8.1 If at any time prior to the full exercise of Representative Warrants
the Company shall (a) pay a dividend or make a distribution on its shares of
Common Stock in shares of Common Stock (other than cash dividends or
distributions out of surplus or earnings), (b) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares or (c)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record date of
such subdivision, combination, reclassification or recapitalization shall be
proportionately adjusted so that the Holder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised in
full immediately prior to such time, he would have owned upon such exercise and
been entitled to receive upon such dividend, subdivision, combination,
reclassification or recapitalization. Such adjustment shall be made successively
whenever any event listed in this Section 8.1 shall occur.
8.2 If the Company shall hereafter issue rights, options or warrants to all
holders of its outstanding Common Stock, without charge to such holders,
entitling them to subscribe for or purchase shares of Common Stock (or Common
Stock equivalents) at a price (or having a conversion price per share) less than
the lower of the Exercise Price or the current market price of the Common Stock
(as determined pursuant to Section 8.5 hereof) on the record date described
below, the Exercise Price then in effect shall be adjusted so that the Exercise
Price shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such sale or issuance (which date in the
event of distribution
-5-
to shareholders shall be deemed to be the record date set by the Company to
determine shareholders entitled to participate in such distribution) by a
fraction, the numerator of which shall be (i) the number of shares of Common
Stock outstanding on the date of such sale or issuance, plus (ii) the number of
additional shares of Common Stock which the aggregate consideration received by
the Company upon such issuance or sale (plus the aggregate of any additional
amount to be received by the Company upon the exercise of such rights or
warrants) would purchase at such current market price per share of the Common
Stock; and the denominator of which shall be (i) the number of shares of Common
Stock outstanding on the date of such issuance or sale, plus (ii) the number of
additional shares of Common Stock offered for subscription or purchase (or into
which the Common Stock equivalents so offered are convertible). Such adjustments
shall be made successively whenever such warrants or rights are issued. To the
extent that shares of Common Stock are not delivered (or Common Stock
equivalents are not delivered) after the expiration of such rights or warrants,
the Exercise Price shall be readjusted to the Exercise Price which would then be
in effect had the adjustments been made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or Common Stock equivalents) actually delivered.
8.3 In case the Company shall hereafter fix a record date for making a
distribution to the holders of Common Stock of assets or evidences of its
indebtedness (excluding cash dividends or distributions out of earnings and
dividends or distributions referred to in Section 8.1 hereof) or Common Stock
subscription rights, options or warrants for Common Stock or Common Stock
equivalents (excluding those referred to in Section 8.2 hereof), then in each
such case the Exercise Price in effect after such record date shall be adjusted
to the price determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the current market price per
share of Common Stock (as defined in Section 8.5 hereof), less the fair market
value (as determined by the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such Common Stock subscription
rights, options and warrants or of such Common Stock equivalents applicable to
one share of Common Stock, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such current market
price per share of Common Stock. Such adjustment shall be made successively
whenever the record date for such distribution is fixed and shall become
effective immediately after such record date.
8.4 Whenever the Exercise Price payable upon exercise of each
Representative Warrant is adjusted pursuant to Section 8.1, 8.2 or 8.3 hereof,
the Shares shall simultaneously be adjusted by multiplying the number of Shares
initially issuable upon exercise of each Warrant by the Exercise Price in effect
on the date thereof and dividing the product so obtained by the Exercise Price,
as adjusted.
8.5 For the purpose of any computation under this Section 8, the current
market price per share of Common Stock at any date shall be deemed to be the
average of
-6-
the daily closing price for five (5) consecutive trading days immediately
preceding such date. The closing sale or price for each day shall be the last
sale price regular way or, in case no such reported sales take place on such
day, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the representative closing sale or bid price as reported by
Nasdaq, or other similar organization if Nasdaq is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
8.6 No adjustments in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($.05)
in such price; provided, however, that any adjustments which by reason of this
Section 8.6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 8
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8.7 In the event that at any time, as a result of any adjustment made
pursuant to Section 8.1 hereof, the Holder thereafter shall become entitled to
receive any shares of the Company, other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of any Representative
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section 8.
9. Consolidation, Merger, Sale of Assets, Reorganization, etc. General
Provisions
9.1 In case the Company, after the Effective Date, (a) shall consolidate
with or merge into any other Person (as defined below) and shall not be the
continuing or surviving Person of such consolidation or merger, (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving person but, in connection with such
consolidation or merger, Common Stock or other securities shall be changed into
or exchanged for cash, stock, or other securities of any other Person or any
other property, (c) shall transfer, directly or indirectly through transactions
involving any of or all of its subsidiaries all or substantially all its
properties and assets to any other Person or (d) shall effect a capital
reorganization or reclassification of Common Stock or other securities, then,
and in the case or each such transaction, the Company shall make proper
provision such that the Holder of a Representative Warrant, upon the exercise
thereof at any time after the consummation of each such transaction, shall be
entitled to receive, at the Exercise Price in effect immediately prior to such
consummation, the highest amount of cash, securities or other property to which
such Holder would actually have been entitled as a shareholder of Common Stock
upon such consummation if such Holder had exercised this Representative Warrant
immediately prior thereto, subject to adjustments subsequent to such
consummation as nearly equivalent as possible to the adjustments provided for in
this Section 9; provided, however, that if prior to
-7-
the consummation of such transaction, a purchase tender or exchange offer shall
have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the Holder of the Representative
Warrants, by written notice to the Company signed on or before the date
immediately preceding the date of expiration of such purchase, tender or
exchange offer, declares an intention to exercise his Warrants in whole or in
part, such Holder shall be entitled, upon consummation of such offer, to receive
upon exercise the highest amount of cash, securities or other property to which
such Holder would actually have been entitled as a holder of the Shares under
the Representative Warrants if such Holder had exercised his Warrants prior to
the expiration of such purchase, tender, or exchange offer, and if all Shares
which such Holder would have owned as a result of such exercise had been
purchased pursuant to such purchase, tender or exchange offer. "Person" shall
mean an individual, a corporation, a partnership, a trust, an unincorporated
organization or a government or any agency or political subdivision thereof.
9.2 Assumption of Obligations. Notwithstanding anything contained in this
Agreement to the contrary, the Company shall not effect any of the transactions
described in subdivisions (a) through (d) of Section 9.1 unless prior to the
consummation thereof, each Person (other than the Company) that may be required
to deliver any cash, stock or other securities or other property upon the
exercise of Representative Warrants as provided herein shall assume, by written
instrument delivered to the Holders of the Representative Warrants, and
reasonably satisfactory to Xxxxxx or Holders of a majority in interest of the
Representative Warrants (i) the obligations of the Company under this Agreement
and the Representative Warrants (and if the Company shall survive the
consummation of any such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Agreement and the Representative Warrants) and (ii) the
obligation to deliver to such Holder such cash, stock or other securities or
other property as such Holder may be entitled to receive in accordance with the
provisions of this Section 9.
9.3 Other Dilutive Events. The Board of Directors of the Company shall have
an ongoing obligation to determine in good faith whether any event has occurred
as to which the provisions of Section 8 or this Section 9 shall not be strictly
applicable, but with respect to which the failure to make any adjustment to the
Exercise Price or the Shares would not fairly protect the purchase rights
represented by the Representative Warrant in accordance with the intent and
principles of this Agreement. In each case in which such determination shall be
made, the Company shall appoint a firm of independent public accountants,
reasonably acceptable to Xxxxxx or the Holders of a majority-in-interest of the
Representative Warrants, which shall give its opinion upon the adjustments, if
any, consistent with the intent and principles established in this Agreement
necessary to preserve without dilution the purchase rights represented by this
Agreement and the Representative Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holders and shall make the
adjustments described therein.
-8-
9.4 No Dilution or Impairment. The Company shall not, by amendment of its
Articles of Incorporation or By-Laws or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Agreement or the
Representative Warrants, but will at all times, whether or not requested to do
so, 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 in order to protect the
rights of the Holders against dilution or other impairment. Without limiting the
generality of the foregoing, the Company shall 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 upon the exercise of all Representative
Warrants from time to time outstanding.
9.5 Notice Evidence of Adjustments. Whenever any adjustment is made
pursuant to this Agreement, the Company shall promptly cause a notice setting
forth the details of the adjustment to be mailed to the Holders, at their last
addresses appearing in the Warrant register, and shall cause a certified copy
thereof to be mailed to the Transfer Agent. The Company shall retain a firm of
independent public accountants of recognized standing selected by the Board of
Directors (who may be the regular accountants employed by the Company) to make
any computation required by such adjustment and a certificate signed by such
firm shall accompany said notice and shall be conclusive evidence of the
correctness of such adjustment.
10. Restrictions of Dispositions. The Shares have not been registered under
the Act pursuant to the Registration Statement. Xxxxxx represents and warrants
to the Company that it understands that (a) the Shares may not be transferred
except pursuant to (i) a post-effective amendment to the effective Registration
Statement, (ii) another effective registration statement under the Act relating
thereto, or (iii) any available exemption from registration under the Act
permitting such disposition of securities and an opinion of counsel, reasonably
satisfactory to counsel for the Company, that an exemption from such
registration is available and (b) the Representative Warrants may not be
transferred except in accordance with the provisions of Section 3 hereof,
pursuant to an effective registration statement under the Act relating thereto
or pursuant to any available exemption from registration under the Act
permitting such disposition of securities and an opinion of counsel, reasonably
satisfactory to counsel for the Company, that an exemption from such
registration is available.
11. Certificates to Bear Legends. The Representative Warrants shall be
subject to a stop-transfer order and the certificate or certificates therefor
shall bear the following legend:
NEITHER THE REPRESENTATIVE WARRANTS NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF MAY BE SOLD OR TRANSFERRED PRIOR TO NOVEMBER___ 1997 (SUBJECT TO CERTAIN
LIMITED EXCEPTIONS), SUCH SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) A POST-EFFECTIVE
-9-
AMENDMENT TO THE REGISTRATION STATEMENT, (ii) ANOTHER EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT") RELATING THERETO OR (iii)
AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE, AND THE REPRESENTATIVE WARRANTS MAY NOT BE TRANSFERRED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3 OF THE REPRESENTATIVE WARRANT
AGREEMENT BETWEEN FRESHSTART VENTURE CAPITAL CORP. AND XXXXXX SECURITIES, INC.
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT RELATING THERETO
OR PURSUANT TO ANY AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT
PERMITTING SUCH DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
The Shares upon exercise of the Representative Warrants shall be subject to
a stop-transfer order and the certificate or certificates evidencing any such
Shares shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") PURSUANT TO A REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH SHARES MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION
STATEMENT, (ii) ANOTHER EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT RELATING
THERETO OR (iii) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE.
12. Registration Rights.
12.1 Demand Registration Rights. Upon written request of the then Holder(s)
of at least a majority of the Representative Warrants or Shares, if issued, made
at any time within the period commencing one (1) year and ending five (5) years
after the effective date of the Registration Statement, the Company shall file
within a reasonable period of time and, in any event, within sixty (60) days
after receipt of such written request, at its sole expense, on no more than two
occasions, a registration statement or a post effective amendment to any
previously filed registration statement that included the Shares under the Act
and the Investment Company Act of 1940, as amended (the "1940 Act") registering
the Shares for sale to the public and either must be declared effective. Within
fifteen (15) days after receiving any such notice, the Company shall give notice
to the other
-10-
Holders of the Representative Warrants and/or Shares acquired upon exercise of
the Representative Warrants advising that the Company is proceeding with such
post-effective amendment or registration statement, and offering to include
therein the Shares of such other Holders. The Company shall not be obligated to
so include the Shares of any such other Holder unless such other Holder shall
accept such offer by notice in writing to the Company within ten (10) days after
receipt of such notice from the Company. The Company shall use its best efforts,
through its officers, directors, auditors and counsel in all matters necessary
or advisable, to file and cause to become effective such post-effective
amendment or registration statement as promptly as practicable and for a period
of ninety (90) days thereafter to reflect in the post-effective amendment or
registration statement financial statements that are prepared in accordance with
Section 10(a)(3) of the Act and any facts or events arising that, individually
or in the aggregate, represent a fundamental and/or material change in the
information set forth in the post-effective amendment or registration statement
to enable any Holders of Representative Warrants to exercise Representative
Warrants and/or sell Shares during said ninety-day period. If the initiating
Holders intend to distribute the Shares covered by their request by means of an
underwriting they shall so advise the Company as part of their request made
pursuant to this Section 12.1 and the Company shall include such information in
the written notice referred to in this Section 12.1. In such event, the right of
any Holder to include its Shares in such registration shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Shares in such registration (unless otherwise mutually agreed upon by a
majority in interest of the initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall, together with the Company, enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the initiating Holders, which
underwriter shall be reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 12.1, if the underwriter advises the initiating
Holders and the Company in writing that marketing factors require a limitation
of the number of shares to be underwritten, then the Company shall so advise all
Holders of Shares which would otherwise be underwritten pursuant hereto, and the
number of Shares that may be included in the underwriting shall be allocated
among all Holders thereof, including the initiating Holders, on a pro rata basis
according to the number of Shares held by such Holders.
12.2 Other Registration Rights. If at any time within the period commencing
on the date hereof and ending six (6) years after the effective date of the
Registration Statement, the Company determines to file a registration statement
(other than a registration statement on Form S-8 or any other similar form) or a
post-effective amendment to the Registration Statement or any other registration
statement, covering the offer and sale of any securities of the Company, whether
for its own account or for the account of others, the Company shall (i) advise
each Holder of the Representative Warrant or Shares by written notice
("Registration Notice") at least four weeks prior to the proposed filing date of
any such registration statement or post-effective amendment to a registration
statement and (ii) upon request of the Holder by written notice to the Company
within fifteen (15) days after receipt of the Registration Notice, include in
any such registration statement or post-effective
-11-
amendment the Shares of such Holder, subject to the terms and conditions hereof.
If the registration statement or post-effective amendment to a registration
statement is with respect to a distribution in an underwritten offering, the
right of any Holder to include its Shares in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Shares in such registration may be limited to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall, together with the Company, enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the initiating
holders, which underwriter shall be reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 12.2, if the underwriter
advises the shareholders that desire to participate in such offering (including
the initiating holder) and the Company in writing that marketing factors require
a limitation of the number of shares to be underwritten, then the Company shall
so advise all Holders of Shares which would otherwise be underwritten pursuant
hereto, and the number of Shares that may be included in the underwriting shall
be allocated first to the Company and thereafter to the extent that any Shares
may be offered for the account of any shareholders among all holders thereof,
including the initiating holders, on a pro rata basis according to the number of
Shares held by such holders.
12.3 Action to be Taken by the Company. In connection with the registration
of Shares in accordance with Section 12.1, and Section 12.2 hereof, the Company
shall:
(a) bear the expenses of any registration under Section 12.1 or 12.2
hereof, including but not limited to legal, accounting and printing fees;
provided, however, that in no event shall the Company be obligated to pay
(i) any fees and disbursements of legal counsel retained by Holders of
Representative Warrants and/or Shares, or (ii) any underwriters' discount
or commission payable in respect of such Shares, payment of which shall, in
each case, be the sole responsibility of the Holders of the Shares;
(b) use its best efforts to register or qualify the Shares for offer
or sale under state securities or blue sky laws of such jurisdictions in
which the participating Holders propose to offer Shares, and to do any and
all other acts and things that may be necessary or advisable to enable the
Holders to consummate the proposed sale, transfer or other disposition of
such securities in any jurisdiction; and
(c) enter into a cross-indemnity agreement, in customary form, with
each underwriter, if any, and each Holder of Shares included in such
Registration Statement provided that, if so requested by the underwriter,
such Holders shall provide the underwriters with several indemnity
agreements as to information regarding such Holders.
-12-
12.4 Information by Holders. Each Holder shall provide, upon reasonable
request by the Company, information for inclusion in such Registration Statement
as may be required by the applicable rules and regulations of the Act.
13. Notices to Holders.
13.1 Nothing contained in this Agreement or in any of the Representative
Warrants shall be construed as to confer upon the Holders thereof the right to
vote or to receive dividends or to consent to receive notice as shareholders in
respect of the meetings of shareholders or the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company; provided, however, that in the event that a meeting of shareholders
shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, other than in connection with a consolidation,
merger, or sale of all, or substantially all, of its property, assets, business
and good will as an entirety, then and in that event the Company shall cause a
notice thereof to be sent by first- class mail, postage prepaid, at least twenty
(20) days prior to the date fixed as a record date or the date of closing the
transfer books in relation to such meeting, to each registered Holder of
Registration Warrants at such Holder's address appearing on the Warrant
register; but failure to mail or receive such notice or any defect therein or in
the mailing thereof shall not affect the validity of any action taken in
connection with such voluntary dissolution. If such notice shall have been so
given and if such a voluntary dissolution shall be authorized at such meeting or
any adjournment thereof, then from and after the date on which such voluntary
dissolution shall have been duly authorized by the shareholders, the purchase
rights represented by the Representative Warrants and all other rights with
respect thereto shall cease and terminate.
13.2 In the event the Company intends to make any distribution on or to
shareholders of its Common Stock, including, without limitation, any dividend or
distribution from earned surplus, any dividend or distribution of stock, assets
or evidences of indebtedness, any distribution to be made in connection with a
consolidation or merger in which the Company is the surviving corporation or any
distribution of shares of stock of any corporation at least a majority of whose
outstanding stock is owed by the Company, then the Company shall cause a notice
of its intention to make such distribution to be sent by first- class mail,
postage prepaid, at least twenty (20) days prior to the date fixed as a record
date or the date of closing the transfer books in relation to such distribution,
to each registered Holder of Representative Warrants at such Holder's address
appearing on the Warrant register, but failure to mail or to receive such notice
or any defect therein or in the mailing thereof shall not affect the validity of
any action taken in connection with such distribution or issuance.
14. Notices. Any notice or demand required by this Agreement to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
in writing and sent by first-class or registered mail, postage prepaid, or
transmitted by any standard form of telecommunication addressed as follows:
-13-
Freshstart Venture Capital Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: President
Any notice or demand required by this Agreement to be given or made by the
Company to or on the Holder of any Representative Warrant shall be sufficiently
given or made, whether or not such Holder receives the notice, if sent by
first-class or registered mail, postage prepaid, addressed to such Holder at his
last address as shown on the books of the Company.
15. Governing Law. The validity, interpretation and performance of this
Agreement of each Representative Warrant issued hereunder and of the respective
terms and provisions thereof shall be governed by the law of the State of New
York.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
FRESHSTART VENTURE CAPITAL CORP.
By: ___________________________
Name:
Title:
XXXXXX SECURITIES, INC.
By: ___________________________
Name:
Title:
-14-
EXHIBIT A
(Form of Representative Warrant Certificate)
NEITHER THE REPRESENTATIVE WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF MAY BE SOLD OR TRANSFERRED PRIOR TO _______ 1997 (SUBJECT TO CERTAIN
LIMITED EXCEPTIONS), SUCH SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT, (ii) ANOTHER
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ("THE ACT")
RELATING THERETO OR (iii) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE AND THE REPRESENTATIVE WARRANT MAY NOT BE TRANSFERRED
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 OF THE WARRANT AGREEMENT
BETWEEN FRESHSTART VENTURE CAPITAL CORP. AND XXXXXX SECURITIES, INC., PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT RELATING THERETO OR
PURSUANT TO ANY AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT PERMITTING
SUCH DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
No. ________ _______ Representative Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
On ________ __, 2001
FRESHSTART VENTURE CAPITAL CORP.
Representation Warrant Certificate
THIS CERTIFIES THAT for the value received, XXXXXX SECURITIES, INC., or
registered assigns, is the registered holder of the number of Representative
Warrants set forth above, each of which entitles the owner thereof to purchase
at any time from _____ __, 199_ until 5:00 p.m., New York City time on _____,
2001 (the "Expiration Date"), one share (the "Share") of Common Stock, $.01 par
value, of FRESHSTART VENTURE CAPITAL CORP., a New York corporation (the
"Company"), at a purchase price per Share (the "Exercise Price") equal to $7.00
upon presentation and surrender of
-15-
this Representative Warrant Certificate with the Form of Election to Purchase
duly executed. The number of Representative Warrants evidenced by this
Representative Warrant Certificate (and the number of Shares that may be
purchased upon exercise thereof) set forth above, and the Exercise Price set
forth above, are the number and Exercise Price as of the date of original
issuance of the Representative Warrant, based on the shares of Common Stock of
the Company as constituted at such date.
This Representative Warrant Certificate is subject to, and entitled to the
benefits of, all of the terms, provisions and conditions of an agreement dated
as of _____, 1996 (the "Representative Warrant Agreement") between the Company
and Xxxxxx Securities, Inc., which Representative Warrant Agreement is hereby
incorporated herein by reference and made a part hereof and to which
Representative Warrant Agreement reference is hereby made for full description
of the rights, limitations of rights, duties and immunities hereunder of the
Company and the holders of the Representative Warrant Certificates. Copies of
the Representative Warrant Agreement are on file at the principal office of the
Company.
This Representative Warrant Certificate, with or without other
Representative Warrant Certificates, upon surrender at the principal office of
the Company, may be exchanged for another Representative Warrant Certificate or
Certificates of like tenor and date evidencing Representative Warrants entitling
the holder to purchase a like aggregate number of Shares as the Representative
Warrant evidenced by the Representative Warrant Certificate. If the
Representative Warrant evidenced by this Representative Warrant Certificate
shall be exercised in part, the holder hereof shall be entitled to receive upon
surrender hereof another Representative Warrant Certificate or Certificates for
the number of whole Representative Warrants not exercised.
No holder of this Representative Warrant Certificate shall be entitled to
vote or to receive dividends or to consent or to receive notice as a shareholder
at the meetings of shareholders for the election of directors of the Company or
any other matter, or to any rights whatsoever as shareholder of the Company.
If this Representative Warrant Certificate shall be surrendered for
exercise within any period during which the transfer books for the Company's
Common Stock are closed for any purpose, the Company shall not be required to
make delivery of certificates for the Shares purchasable upon such exercise
until the date of the reopening of said transfer books.
-16-
IN WITNESS WHEREOF, Freshstart Venture Capital Corp. has caused the
signature (or facsimile signature) of its Chairman and Secretary to be printed
hereon and its corporate seal (or facsimile) to be printed hereon.
Dated: _______, 1996
FRESHSTART VENTURE CAPITAL CORP.
By:____________________________________
Name:
Title:
[Corporate Seal]
Attest:
--------------------------------
-17-
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Representation Warrant Certificates).
TO FRESHSTART VENTURE CAPITAL CORP.
FOR VALUE RECEIVED _______________________ hereby sells, assigns and
transfers unto _________ this Representative Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ______, to transfer the within Representative Warrant Certificate on
the books of the within-named Company, with full power of substitution.
DATED: _____________, 19
Signature___________________________
Signature Guaranteed:
NOTICE
The signature of the foregoing assignment must correspond to the name as
written upon the face of this Representative Warrant Certificate in every
particular, without alteration or enlargement or any change whatsoever.
-18-
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Representative Warrant
Certificates).
TO FRESHSTART VENTURE CAPITAL CORP.
The undersigned hereby irrevocably elects to exercise Representative
Warrants represented by this Representative Warrant Certificate to purchase
_____ Shares issuable upon the exercise of such Representative Warrants and
requests that certificates for such Shares be issued in the name of:
Please insert social security or other
identifying number
_______________________________
_______________________________
-------------------------------
(Please print name and address)
The undersigned elects to pay the Exercise Price for the Shares being
purchased by [check one]:
|_| Delivery of a check, money order or wire transfer pursuant to Section
4.2 of the Representative Warrant Agreement
|_| Net cashless exercise pursuant to Section 4.3 of the Representative
Warrant Agreement.
If such number of Representative Warrants shall not be all the Representative
Warrants evidenced by this Representative Warrant Certificate, a new
Representative Warrant Certificate for the balance remaining of such
Representative Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number
_______________________________
_______________________________
-19-
-------------------------------
(Please print name and address)
Dated: _______________, 19
-------------------------------
Signature
(Signature must conform in all aspects to name of holder as specified on the
face of this Representative Warrant Certificate)
Signature Guaranteed:
-20-
