EXHIBIT 10.61
THIS WARRANT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S)
FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 8 OF THIS WARRANT.
SHELLS SEAFOOD RESTAURANTS, INC.
WARRANT TO PURCHASE 4,454,015 SHARES
OF COMMON STOCK (this "Warrant")
Warrant No.: 002
Shells Seafood Restaurants, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, Banyon
Investment, LLC, a Delaware limited liability company (the
"LLC"), or registered assigns, is the registered holder of a
warrant (the "Warrant") to subscribe for and purchase four
million four hundred fifty four thousand and fifteen (4,454,015)
shares of the fully paid and nonassessable Common Stock (as
adjusted pursuant to Section 4 hereof, the "Warrant Shares") of
the Company, at the price of $0.16 per share (such price and such
other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to
as the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, (a)
the term "Common Stock" shall mean the Company's presently
authorized Common Stock, par value $.01 per share, and any stock
into or for which such Common Stock may hereafter be converted or
exchanged, (b) the term "Date of Grant" shall mean January
31, 2002, and (c) the term "Other Warrants" shall mean any
warrant issued upon transfer or partial exercise of this Warrant.
The term "Warrant" as used herein shall be deemed to include
Other Warrants unless the context hereof or thereof clearly
requires otherwise.
The Warrant evidenced by this warrant certificate is a portion of
a series of like warrants (collectively, the "Series Warrants")
exercisable for the purchase of an aggregate of 8,908,030shares
of the Company's Common Stock (the "Series Warrant Shares")
(equal to sixty six and two-thirds percent (66 2/3%%) of the
Company's issued and outstanding Common Stock, calculated on a
fully-diluted basis (excluding shares issuable to employees and
directors under outstanding stock options and shares issuable
upon conversion of the Series A Preferred Stock presently
outstanding), on the Date of Grant, which Series Warrants are
evidenced by certificates of like tenor (the "Series Warrant
Certificates") that have been issued pursuant to that certain
Securities Purchase Agreement dated of even date herewith (the
"Securities Purchase Agreement"), between the Company, its
subsidiaries, Shells Investment Partners, LLC and Banyon
Investment, LLC.
1. Term. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time after January 31,
2003 (the "Initial Exercise Date") and from time to time
thereafter through and including the close of business on January
31, 2005 (the "Expiration Date"); provided, however, that in the
event that any portion of this Warrant is unexercised as of the
Expiration Date, the terms of Section 2(b), below, shall apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant.
Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the holder hereof, in whole or
in part and from time to time after the Initial Exercise Date, by
the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company of an
amount equal to the then applicable Warrant Price multiplied by
the number of Warrant Shares then being purchased. The person or
persons in whose name(s) any certificate(s) representing shares
of Common Stock shall be issuable upon exercise of this Warrant
shall be deemed to have become the holder(s) of record of, and
shall be treated for all purposes as the record holder(s) of, the
shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on
the date or dates upon which this Warrant is exercised. In the
event of any exercise of the rights represented by this Warrant,
certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any
event within thirty (30) days after such exercise and, unless
this Warrant has been fully exercised, a new Warrant representing
the portion of the Warrant Shares, if any, with respect to which
this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event
within such thirty (30)-day period.
b. Automatic Conversion. In the event that any portion of this
Warrant is unexercised as of the Expiration Date, such portion of
this Warrant shall be deemed to have been converted automatically
into shares of Common Stock pursuant to the terms of Section 11.2
below immediately prior to the close of business on the
Expiration Date (or, in the event that the Expiration Date is not
a business day, the immediately preceding business day) (the
"Automatic Conversion Date") and the person entitled to receive
the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the holder of record of such
Warrant Shares as of the close of business on such Automatic
Conversion Date. This Warrant shall be deemed to be surrendered
to the Company on the Automatic Conversion Date, by virtue of
this Section 2(b) and without any action by the holder of this
Warrant or any other person. As promptly as practicable on or
after the Automatic Conversion Date and in any event within
thirty (30) days thereafter, the Company at its expense shall
issue and deliver to the person or persons entitled to receive
the same a certificate or certificates for the number of Warrant
Shares issuable upon such conversion.
3. Stock Fully Paid; Reservation of Shares. All Warrant Shares
that may be issued upon the exercise of the rights represented by
this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from
all taxes (other than any taxes determined with respect to, or
based upon, the income of the person to whom such shares are
issued), liens and charges (other than liens or charges created
by actions of the holder of this Warrant or the person to whom
such shares are issued), and pre-emptive rights with respect to
the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at
all times have authorized, and reserved for the purpose of the
issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the occurrence of certain
events, as follows:
a. .Adjustment for Initial Errors. The Company hereby
acknowledges that the 8,908,030 Series A Warrant Shares
constituting the initial number of securities purchasable upon
the exercise of the Series Warrants (the "Exercise Quantity") was
based upon the Company's representations as to the amount of
outstanding Common Stock (on a fully diluted basis excluding
shares issuable pursuant to employee and director stock options
and shares issuable upon conversion of the Series A Preferred
Stock presently outstanding)on the Date of Grant, as set forth in
Section 12(i) below, and upon an intention that the full exercise
of the Series Warrants would result in the holder obtaining
shares of Common Stock constituting 66 2/3%of the Company's
issued and outstanding Common Stock, calculated on a fully
diluted basis (excluding shares issuable pursuant to employee and
director stock options), on the Date of Grant. If for any reason
it shall hereafter be determined that the actual amount of Common
Stock outstanding as of the Date of Grant caused the calculation
of the Exercise Quantity to be erroneous, then the Company or the
holder (whichever shall discover such error) shall notify the
other of such determination and the Company shall forthwith
reissue the Warrant or the Series Warrants, as the case may be,
with an appropriate proportional adjustment in said number to be
effective from the Date of Grant.
b. Reclassification or Merger. In case of any eclassification,
change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another
corporation (other than a merger with another corporation in
which the Company is the acquiring and the surviving corporation
and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant),
or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing
corporation, as the case may be, shall duly execute and deliver
to the holder of this Warrant a new Warrant (in form and
substance satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a
total purchase price not to exceed that payable upon the exercise
of the unexercised portion of this Warrant, and in lieu of the
shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such
reclassification, change or merger by a holder of the number of
shares of Common Stock then purchasable under this Warrant. Such
new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for
in this Section 4. The provisions of this Section 4(b) shall
similarly apply to successive reclassifications, changes, mergers
and transfers.
c. Subdivision or Combination of Shares. If at any time while
this Warrant remains outstanding and unexpired the Company shall
subdivide or combine its outstanding shares of Common Stock, the
Warrant Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination, effective
at the close of business on the date the subdivision or
combination becomes effective.
d. Stock Dividends. If at any time while this Warrant is
outstanding and unexpired the Company shall pay a dividend with
respect to Common Stock payable in Common Stock, then the Warrant
Price shall be adjusted, from and after the date of determination
of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination
by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to
such dividend, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately
after such dividend.
e. Sales to Affiliates. If at any time while this Warrant is
outstanding and unexpired the Company shall sell or grant shares
of its equity securities or rights, options, warrants or
convertible or exchangeable securities of the Company to any
Affiliate of the Company, in all instances at below fair market
value, then the Warrant Price shall be reduced, from and after
the date of such sale, to the lesser of (i) the price to such
Affiliate of the Company and (ii) that price determined by
multiplying the Warrant Price in effect immediately prior to such
date of sale by a fraction (x) the numerator of which shall be
the total number of shares of Common Stock outstanding
immediately prior to such dividend, and (y) the denominator of
which shall be the total number of shares of Common Stock
outstanding immediately after such sale. The number of shares
for which the Warrant is exercisable shall be proportionately
increased so that the aggregate Warrant Price shall remain the
same. In the event such sale is not so consummated, the Warrant
Price shall again be adjusted to the Warrant Price that would
then be in effect if the Affiliate of the Company had not so
purchased such shares, but such subsequent adjustment shall not
affect the number of Warrant Shares issued upon any exercise of
the Warrant prior to the date such subsequent adjustment was
made. As used herein, "Affiliate of the Company" shall mean (1)
any Person (other than Shells Investment Partners, LLC, Banyon
Investment, LLC or any Affiliate of either entity) that directly
or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Company, (2)
any owner, shareholder or director of the Company, and (3) any
spouse or any person related by birth or marriage to any
Affiliate of the Company described in clauses (1) and (2) above
and "Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
f. Rights Offerings. In case the Company shall, at any time
after the Date of Grant, issue rights, options or warrants to the
holders of equity securities of the Company, entitling
them to subscribe for or purchase shares of Common Stock (or
securities convertible or exchangeable into Common Stock) at a
price per share of Common Stock (or having a conversion or
exchange price per share of Common Stock if a security
convertible or exchangeable into Common Stock) less than the fair
market value per share of Common Stock on the record date for
such issuance (or the date of issuance, if there is no record
date), the Warrant Price to be in effect on and after such record
date (or issuance date, as the case may be) shall be determined
by multiplying the Warrant Price in effect immediately prior to
such record date (or issuance date, as the case may be) by a
fraction (i) the numerator of which shall be the number of shares
of Common Stock outstanding on such record date (or issuance
date, as the case may be) plus the number of shares of Common
Stock which the aggregate offering price of the total number of
shares of such Common Stock so to be offered (or the aggregate
initial exchange or conversion price of the exchangeable or
convertible securities so to be offered) would purchase at such
fair market value on such record date (or issuance date, as the
case may be) and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding on such record date
(or issuance date, as the case may be) plus the number of
additional shares of Common Stock to be offered for subscription
or purchase (or into which the convertible securities to be
offered are initially exchangeable or convertible). In case such
purchase or subscription price may be paid in part or in whole in
a form other than cash, the fair value of such consideration
shall be determined by the Board of Directors of the Company in
good faith as set forth in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary.
Such adjustment shall be made successively whenever such an
issuance occurs; and in the event that such rights, options,
warrants, or convertible or exchangeable securities are not
so issued or expire or cease to be convertible or exchangeable
before they are exercised, converted, or exchanged (as the case
may be), then the Warrant Price shall again be adjusted to be the
Warrant Price that would then be in effect if such issuance had
not occurred, provided however, the Company shall adjust the
number of Warrant Shares issued upon any exercise of this Warrant
after the adjustment required pursuant to this Section 4(f) but
prior to the date such subsequent adjustment is made, in order to
equitably reflect the fact that such rights, options, warrants,
or convertible or exchangeable securities were not so issued or
expired or ceased to be convertible or exchangeable before they
were exercised, converted, or exchanged (as the case may be).
g. Special Distributions. In case the Company shall fix a
record date for the making of a distribution to all holders of
shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is
the surviving corporation) or evidences of indebtedness or assets
(other than dividends and distributions referred to in Sections
4(c) and 4(d) above and other than cash dividends) or of
subscription rights, options, warrants, or exchangeable or
convertible securities containing the right to subscribe for or
purchase shares of any class of equity securities of the Company
(excluding those referred to in Section 4(e) above), the Warrant
Price to be in effect on and after such record date shall be
adjusted by multiplying the Warrant Price in effect immediately
prior to such record date by a fraction (i) the numerator of
which shall be the fair market value per share of Common Stock on
such record date, less the fair value (as determined by the Board
of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or
Assistant Secretary) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription
rights, options, warrants, or exchangeable or convertible
securities applicable to one (1) share of the Common Stock
outstanding as of such record date, and (ii) the denominator of
which shall be such fair market value per share of Common Stock.
Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so
made, the Warrant Price shall again be adjusted to be the Warrant
Price which would then be in effect if such record date had not
been fixed, but such subsequent adjustment shall not affect the
number of Warrant Shares issued upon any exercise of this Warrant
prior to the date such subsequent adjustment was made.
h. Other Issuances of Securities. In case the Company or any
Subsidiary shall, at any time after the Date of Grant, issue
shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding (i)
shares, rights, options, warrants, or convertible or exchangeable
securities or issued in any of the transactions described in
Sections 4(b), 4(c), 4(d), 4(e), 4(f) or 4(g) above, (ii) shares
issued upon the exercise of such rights, options or warrants or
upon conversion or exchange of such convertible or exchangeable
securities, (iii) this Warrant and any shares issued upon
exercise thereof, (iv) shares or options issued to employees or
directors of the Company, (v) warrants issued as compensation or
in lieu of payment in connection with legitimate business
arrangements and (vi) shares issues upon conversion of the shares
of the Company's preferred stock outstanding on the date of this
Warrant), at a price per share of Common Stock (determined in the
case of such rights, options, warrants, or convertible or
exchangeable securities by dividing (x) the total amount
receivable by the Company in consideration of the sale and
issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration
payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock
covered by such rights, options, warrants, or convertible or
exchangeable securities) lower than the fair market value per
share of Common Stock on the date the Company fixes the offering
price of such shares, rights, options, warrants, or convertible
or exchangeable securities, then the Warrant Price shall be
adjusted so that it shall equal the price determined by
multiplying the Warrant Price in effect immediately prior thereto
by a fraction (i) the numerator of which shall be the sum of (A)
the number of shares of Common Stock outstanding immediately
prior to such sale and issuance plus (B) the number of shares of
Common Stock which the aggregate consideration received
(determined as provided below) for such sale or issuance would
purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such sale and
issuance. Such adjustment shall be made successively whenever
such an issuance is made. For the purposes of such adjustment,
the maximum number of shares of Common Stock which the holder of
any such rights, options, warrants or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall
be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company
therefor shall be deemed to be the consideration received
by the Company for such rights, options, warrants, or convertible
or exchangeable securities, plus the minimum consideration or
premium stated in such rights, options, warrants, or convertible
or exchangeable securities to be paid for the shares of Common
Stock covered thereby. In case the Company shall sell and issue
shares of Common Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the price per
share of Common Stock and the consideration received by the
Company for purposes of the first sentence of this Section 4(h),
the Board of Directors of the Company shall determine, in good
faith, the fair value of said property, and such determination
shall be described in a duly adopted board resolution certified
by the Company's Secretary or Assistant Secretary. In case the
Company shall sell and issue rights, options, warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock together with
one (1) or more other securities as a part of a unit at a price
per unit, then in determining the price per share of Common Stock
and the consideration received by the Company for purposes of the
first sentence of this Section 4(h), the Board of Directors of
the Company shall determine, in good faith, which determination
shall be described in a duly adopted board resolution certified
by the Company's Secretary or Assistant Secretary, the fair value
of the rights, options, warrants, or convertible or exchangeable
securities then being sold as part of such unit. Such adjustment
shall be made successively whenever such an issuance occurs, and
in the event that such rights, options, warrants, or convertible
or exchangeable securities expire or cease to be convertible or
exchangeable before they are exercised, converted, or exchanged
(as the case may be), then the Warrant Price shall again be
adjusted to the Warrant Price that would then be in effect if
such sale and issuance had not occurred, but such subsequent
adjustment shall not affect the number of Warrant Shares issued
upon any exercise of the Warrant prior to the date such
subsequent adjustment is made.
i. Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Warrant Shares purchasable hereunder
shall be adjusted, to the nearest whole share, to the product
obtained by multiplying the number of Warrant Shares purchasable
immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which
shall be the Warrant Price immediately thereafter.
j. Determination of Fair Market Value. For purposes of this
Section 4, "fair market value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean (i) if
shares of Common Stock are traded on a national securities
exchange (an "Exchange"), the weighted average of the closing
prices of a share of the Common Stock of the Company on the
last five (5) trading days prior to the Determination Date
reported on such Exchange as reported in The Wall Street Journal
(weighted with respect to the trading volume with respect to each
such day), (ii) if shares of Common Stock are not traded on an
Exchange but trade in the over-the-counter market and such shares
are quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), (A) the average of the
last sale prices reported on NASDAQ or (B) if such shares are an
issue for which last sale prices are not reported on NASDAQ, the
average of the closing bid and ask prices, in each case on the
last five (5) trading days (or if the relevant price or
quotation did not exist on any of such days, the relevant price
or quotation on the next preceding business day on which there
was such a price or quotation) prior to the Determination Date as
reported in The Wall Street Journal, or (iii) if no price can be
determined on the basis of the above methods of valuation, then
the judgment of valuation shall be determined in good faith by
the Board of Directors of the Company, which determination shall
be described in a duly adopted board resolution certified by the
Company's Secretary or Assistant Secretary. If the Board of
Directors of the Company is unable to determine any Valuation (as
defined below), or if the holders of at least fifty percent (50%)
of all of the Warrant Shares then issuable hereunder
collectively, the "Requesting Holders") disagree with the Board's
determination of any Valuation by written notice delivered to the
Company within five (5) business days after the determination
thereof by the Board of Directors of the Company is communicated
to holders of the Warrants affected thereby, which notice
specifies a majority-in-interest of the Requesting Holders'
determination of such Valuation, then the Company and a majority-
in-interest of the Requesting Holders shall select a mutually
acceptable investment banking firm of national reputation which
has not had a material relationship with the Company or any
officer of the Company within the preceding two (2) years, which
shall determine such Valuation. Such investment banking firm's
determination of such Valuation shall be final, binding and
conclusive on the Company and the holders of all of the Warrants
issued hereunder and then outstanding. Any and all costs and
fees of such investment banking firm shall be borne equally by
the Company and the Requesting Holders, however, if the Valuation
is within 90% of either party's valuation, then the other party
shall pay all of the costs and fees of such investment banking
firm. For purposes of this Section 4(j), the term "Valuation"
shall mean the determination, to be made initially by the Board
of Directors of the Company, of the fair market value per share
of Common Stock pursuant to clause (iii) above.
k. Subsequent Changes. If, at any time after any adjustment of
the Warrant Price shall have been made hereunder as the result of
any issuance, sale or grant of any rights, options, warrants or
convertible or exchangeable securities, any of such rights,
options or warrants or the rights of conversion or exchange
associated with such convertible or exchangeable securities shall
expire by their terms or any of such rights, options, warrants or
convertible or exchangeable securities shall be repurchased by
the Company or a Subsidiary for a consideration per underlying
share of Common Stock not exceeding the amount of such
consideration received by the Company in connection with the
issuance, sale or grant of such rights, options, warrants or
convertible or exchangeable securities, the Warrant Price then in
effect shall forthwith be increased to the Warrant Price that
would have been in effect if such expiring right, option or
warrant or rights of conversion or exchange or such repurchased
rights, options, warrants or convertible or exchangeable
securities had never been issued. Similarly, if at any time
after any such adjustment of the Warrant Price shall have been
made pursuant to Section 4(h) above (i) any additional aggregate
consideration is received or becomes receivable by the Company in
connection with the issuance of exercise of such rights, options,
warrants or convertible or exchangeable securities or (ii) there
is a reduction in the conversion or exchange ratio applicable to
such convertible or exchangeable securities so that fewer shares
of Common Stock will be issuable upon the conversion or exchange
thereof or there is a decrease in the number of shares of Common
Stock issuable upon exercise of such rights, options or warrants
(except where such reduction or decrease results from a
combination of shares described in Section 4(c) above), the
Warrant Price then in effect shall be forthwith readjusted to the
Warrant Price that would have been in effect had such changes
taken place at the time that such rights, options, warrants or
convertible or exchangeable securities were initially issued,
granted or sold. In no event shall any readjustment under this
Section 4(k) affect the validity of any Warrant Shares issued
upon any exercise of this Warrant prior to such readjustment.
5. Notice of Adjustments. Whenever the Warrant Price or the
number of Warrant Shares purchasable hereunder shall be adjusted
pursuant to Section 4 hereof, the Company shall deliver to the
holder of this Warrant a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant
Price and the number of Warrant Shares purchasable hereunder
after giving effect to such adjustment.
6. Dividends. The Company shall not make any dividend or
distribution to its shareholders prior to the Initial Exercise
Date. After the Initial Exercise Date, in the event that the
Company shall fix a record date for the making of any dividend or
distribution to holders of shares of Common Stock, the Company
shall notify the holder of the Warrants, in writing, at least 30
days in advance of the record date for the proposed dividend or
distribution.
7. Fractional Shares. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder, but in
lieu of such fractional shares the Company shall make a cash
payment therefor based on the fair market value (as determined in
accordance with Section 4(j) above) of a share of Common Stock on
the date of exercise.
8. Compliance with Securities Act; Disposition of Warrant or
Warrant Shares.
a. Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant and the shares of
Common Stock to be issued upon exercise hereof are being acquired
for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Common Stock
to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act. Upon
exercise of this Warrant, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to
Exhibit A hereto, that the shares of Common Stock so purchased
are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all shares of Common
Stock issued upon exercise of this Warrant (unless registered
under the Securities Act) shall be stamped or imprinted with a
legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A
NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THE
WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's business affairs and
financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable
decision to acquire this Warrant. The holder has executed a
confidentiality agreement and will hold all information governed
by that agreement in accordance with the terms of such agreement.
The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the
resale in connection with, any "distribution" thereof for
purposes of the Securities Act.
(2) The holder understands that this Warrant and the Warrant
Shares have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature
of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the SEC,
the statutory basis for such exemption may be unavailable if the
holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the
minimum capital gains period specified under applicable tax laws,
for a deferred sale, for or until an increase or decrease in the
market price of the Warrant and the Warrant Shares, or for a
period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and the
Warrant Shares must be held indefinitely unless subsequently
registered under the Securities Act and any applicable state
securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof (or from an
affiliate of such issuer), in a non-public offering subject to
the satisfaction of certain conditions, if applicable, including,
among other things: the availability of certain public
information about the Company, the resale occurring not less than
one (1) year after the party has purchased and paid for the
securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities
being sold during any three-month period not exceeding the
specified limitations stated therein.
(5) The holder further understands that at the time it wishes to
sell this Warrant and the Warrant Shares there may be no public
market upon which to make such a sale, and that, even if such a
public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144 and 144A, and
that, in such event, the holder may be precluded from selling
this Warrant and the Warrant Shares under Rule 144 and 144A even
if the one (1)-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some
other registration exemption will be required; and that,
notwithstanding the fact that Rule 144 and 144A is not exclusive,
the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 and
144A will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
b. Exchange. This Warrant may be exchanged, without payment of
any service charge, for one (1) or more new Warrants of like
tenor exercisable for the same aggregate number of shares of
Common Stock upon surrender to the Company by the registered
holder hereof in person or by legal representative or by attorney
duly authorized in writing and, upon issuance of the new Warrant
or Warrants, the surrendered Warrant shall be cancelled and
disposed of by the Company.
c. Disposition of Warrant or Warrant Shares. With respect to
any offer, sale or other disposition of this Warrant, or any
Warrant Shares acquired pursuant to the exercise of this
Warrant prior to registration of such Warrant or Warrant Shares,
the holder hereof and each subsequent holder of this Warrant
agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written
opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition
may be effected without registration or qualification (under the
Securities Act as then in effect or any federal or state law then
in effect) of this Warrant or such Warrant Shares and indicating
whether or not under the Securities Act certificates for this
Warrant or such Warrant Shares to be sold or otherwise disposed
of require any restrictive legend as to applicable restrictions
on transferability in order to ensure compliance with applicable
law. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly
as practicable, shall notify such holder that such holder may
sell or otherwise dispose of this Warrant or such Warrant Shares,
all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this
Section 8(c) that the opinion of counsel for the holder is not
reasonably satisfactory to the Company, the Company shall so
notify the holder promptly after such determination has been
made and neither this Warrant nor any Warrant shall be sold or
otherwise disposed of until such disagreement has been resolved.
The foregoing notwithstanding, this Warrant or such Warrant
Shares may (i) as to such federal laws, be offered, sold or
otherwise disposed of in accordance with Rule 144 and 144A under
the Securities Act, provided that the Company shall have been
furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of
Rule 144 and 144A have been satisfied and (ii) be offered, sold,
distributed or otherwise transferred to Affiliates of the LLC
without regard to this Section 8, but only if the Company is in
receipt of an opinion of counsel as to the permissibility of such
transfer under federal and state securities laws and an investor
representation letter from the transferee, in form and substance
reasonably satisfactory to the Company . Each certificate
representing this Warrant or the Warrant Shares thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as
to the applicable restrictions on transferability in order to
ensure compliance with such laws, unless in the aforesaid opinion
of counsel for the holder, such legend is not required in order
to ensure compliance with such laws. The Company may issue stop
transfer instructions to its transfer agent or, if acting as its
own transfer agent, the Company may stop transfer on its
corporate books, in connection with such restrictions. As used
herein, "Affiliate of the LLC" shall mean (x) any owner,
shareholder, partner or member of the LLC, and (y) any other
Person that directly or indirectly, through one or more
intermediaries, Controls or is Controlled by or is under common
Control with the LLC.
9. Rights as Stockholders; Information. Except as otherwise
set forth in Section 6 above, no holder of this Warrant, as such,
shall be entitled to vote or be deemed the holder of Common Stock
or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a
stockholder of the Company or any right to vote for the election
of the directors or upon any matter submitted to stockholders at
any meeting thereof, or to receive notice of meetings, until this
Warrant shall have been exercised and the Warrant Shares
purchasable upon the exercise hereof shall have become
deliverable, as provided herein. The foregoing notwithstanding,
the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed
to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the
stockholders.
10. Registration Rights.
10.1 Demand Registration Rights.
a. The Company covenants and agrees that at any time after
January 1, 2003 and after receipt of a written request (a "Demand
Registration Request") from the holder(s) of Registrable
Securities (as defined below) (together, the "Securityholders")
constituting at least fifty percent (50%) of the Registrable
Securities on such date and then eligible for inclusion in a
registration pursuant to this Section 10.1, stating that the
Initiating Securityholders (as defined below) desire and intend
to have the Company register (a "Demand Registration") all or a
portion of the Registrable Securities held by them under such
circumstances, the Company shall give notice (the "Registration
Notice") to all of the Securityholders within thirty (30) days of
the Company's receipt of such registration request, and the
Company shall cause to be included in such registration
all Registrable Securities requested to be included therein by
any such Securityholder by notice received by the Company within
fifteen (15) days after such Registration Notice is sent by the
Company (subject to the provisions of the final sentence of this
Section 10.1(a)). After such fifteen (15)-day period, the
Company shall file as promptly as practicable a registration
statement and use its reasonable best efforts to cause such
registration statement to become effective under the Securities
Act and remain effective for six (6) months or such shorter
period as may be required if all such Registrable Securities
covered by such registration statement are sold prior to the
expiration of such six (6)-month period; provided, however, that
no request may be made pursuant to this Section 10.1(a) if within
six (6) months prior to the date of such request a registration
statement pursuant to this Section 10.1(a) shall have been
declared effective by the SEC; provided, further, that, subject
to the following sentence, the Company shall not be obligated to
effect any such registration pursuant to this Section 10.1 after
the Company has effected one (1) such registration pursuant to
this Section 10.1; provided, further, that to the extent that any
Registrable Securities requested to be included in the initial
registration requested under this Section 10.1(a) are not so
included as a result of the provisions of the final sentence of
this Section 10.1(a), the Company shall be obligated to effect
one (1) additional registration pursuant to this Section 10.1.
Furthermore, at any time that the Company shall be eligible to
file a registration statement on Form S-3, each Securityholder
that then owns fifteen percent (15%) or more of the Registrable
Securities then outstanding (a "Substantial Holder") that shall
make a written request to the Company shall be entitled to have
all or any number of such Securityholder's Registrable Securities
included in a registration with the SEC in accordance with the
Securities Act for an offering on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act (a "Shelf
Registration" and such request a "Shelf Registration Request");
provided, however, that the Company shall be obligated to effect
no more than such number of Shelf Registrations as may be
necessary to provide each and every Substantial Holder with the
right to request one (1) Shelf Registration. Each Securityholder
making a demand for registration under this Section 10.1 is
referred to herein as an "Initiating Securityholder." For
purposes of this Section 10, a registration shall not be deemed
to have been effected hereunder unless a registration statement
including at least eighty-five percent (85%) of the Registrable
Securities requested to be included therein has been declared
effective and, subject to Section 10.3(b) hereof, remained
effective (i) in the case of a Demand Registration for a period
of six (6) months (or such shorter period as is permitted in the
second sentence of this Section 10.1) and (ii) in the case of a
Shelf Registration, for a period of one (1) year or until all of
the Registrable Securities included in such registration
statement have been sold. In the event of an underwritten
offering pursuant to this Section 10.1, if the managing
underwriter of such offering shall advise the Securityholders in
writing that, in its opinion, the distribution of a specified
portion of the securities requested to be included in
the registration would materially adversely affect the
distribution of such securities by increasing the aggregate
amount of the offering in excess of the maximum amount of
securities which such managing underwriter believes can
reasonably be sold in the contemplated distribution within a
price range acceptable to the Initiating Securityholders, then
the securities to be included in the registration shall be
limited to such number as can be sold within such price range and
shall be included in the following order: (i) first, pro rata
among the Registrable Securities requested to be included therein
by the Securityholders, according to the number of Registrable
Securities requested to be included by each such Securityholder
requesting inclusion therein, and (ii) then, such other
securities requested to be included therein by the Company and
the holders of such other securities holding registration
rights, pro rata among the Company and the holders of such other
securities according to the number of securities requested to be
included by the Company and each such holder requesting inclusion
therein.
b. For purposes of this Section 10.1, the Securityholders who
have requested registration of Common Stock to be acquired upon
the exercise of Warrants not theretofore exercised shall furnish
the Company with an undertaking that they or the underwriters or
other persons to whom such Warrants will be transferred have
undertaken to exercise such Warrants and to sell, transfer or
otherwise dispose of the Warrant Shares received upon exercise of
such Warrants in such registration.
c. [intentionally omitted]
d. As used in this Warrant, the term "Registrable Securities"
means the shares of Common Stock issued or issuable on exercise
of the Series Warrants; provided, however, that the Registrable
Securities shall not include any shares that as of the date in
question have theretofore been registered and sold pursuant to
the Securities Act or that have been sold to the public pursuant
to Rule 144 or any similar rule promulgated by the SEC pursuant
to the Securities Act, and, provided, further, the Company shall
have no obligation hereunder to register any Registrable
Securities if the Company shall deliver to the holders requesting
such registration an opinion of counsel reasonably satisfactory
to such holders and their counsel to the effect that the
proposed sale or disposition of all of the Registrable Securities
for which registration was requested does not require
registration under the Securities Act for a sale or disposition
in a single public sale, and offers to remove any and all legends
restricting transfer from the certificates evidencing such
Registrable Securities.
10.2 Incidental Registration.
a. The Company covenants and agrees with the Securityholders
that in the event that the Company proposes after the Date of
Grant to file a registration statement under the Securities Act
with respect to any of its equity securities (other than pursuant
to registration statements on Form S-4 or Form S-8 or any
successor or similar forms), whether or not for its own account,
then the Company shall give written notice of such proposed
filing to all Securityholders promptly (and in any event at least
twenty (20) days before the anticipated filing date). Such
notice shall offer to such Securityholders, together with others
who have similar rights, the opportunity to include in such
registration statement such number of Registrable Securities as
they may request. The Company shall consult with, and to the
extent determined to be nondetrimental use its reasonable good
faith efforts to cause the managing underwriter of a proposed
underwritten offering (unless the offering is an underwritten
offering of a class of the Company's equity securities other
than Common Stock and the managing underwriter has advised the
Company in writing that, in its view, the inclusion in such
offering of Common Stock could materially adversely affect such
offering) to permit the holders of Registrable Securities
requested to be included in the registration to include such
Registrable Securities in the proposed offering and the Company
shall use its reasonable best efforts to include such Registrable
Securities in such proposed offering on the same terms and
conditions as any similar securities of the Company included
therein. All Securityholders proposing to distribute Registrable
Securities through such underwriting shall enter into an
underwriting agreement in customary form with the representative
of the underwriter or underwriters. The foregoing
notwithstanding, in the case of a firm commitment offering on
underwriting terms appropriate for such a transaction, other than
a registration requested by Securityholders pursuant to Section
10.1, if any such managing underwriter of recognized standing
shall advise the Company and the Securityholders in writing that,
in its view, the distribution of all or a specified portion of
the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by
the Company could materially adversely affect the distribution of
such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such
managing underwriter believes can reasonably be sold in the
contemplated distribution at a price acceptable to the Company or
the securityholders initiating such registration, then the
securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be included
in the following order: (i) first, the securities the Company
proposes to include therein, and (ii) second, Registrable
Securities requested to be included in such registration by
Securityholders pursuant to this Section 10.2 together with all
other securities requested to be included therein by holders
having registration rights, pro rata among the holders of such
securities according to the number of securities requested to be
included by each such holder requesting inclusion therein.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders)
requests, pursuant to rights granted to such holder or holders,
that the Company file a registration statement for the public
offering of securities and the Company and the other holders of
the Company's securities (including the Securityholders) who
have rights to be included in such registration, request to be
included in such registration and the managing underwriter of
such offering shall advise the Company and the holders requesting
inclusion in the offering that, in its opinion, the distribution
of a specified portion of the securities requested to be included
in the registration could materially adversely affect the
distribution of such securities by increasing the aggregate
amount of the offering in excess of the maximum amount of
securities which such managing underwriter believes can
reasonably be sold in the contemplated distribution then, the
securities to be included in the registration shall be included
in the following order: (i) first, the securities the Company
proposes to include therein; (ii) second, all of the securities
requested to be included therein by the holder or holders making
the initial request for the registration, and (iii) third,
Registrable Securities requested to be included in such
registration by Securityholders pursuant to this Section 10.2
together with all other securities requested to be included
therein by holders having registration rights, pro rata among the
holders of such securities according to the number of securities
requested to be included by each such holder requesting inclusion
therein. For purposes of this Section 10.2(b), the Company
agrees to request for inclusion in the registration only that
number of securities that the Company intends, in good faith, to
sell, if all such securities so requested by the Company were
permitted to be included by the managing underwriter in such
registration and sold pursuant thereto.
10.3 Company's Obligations.
a. In connection with the registration of Registrable
Securities on behalf of the holders thereof (such Securityholders
being referred to herein as "Sellers") in accordance with
Section 10.1 or Section 10.2 above, the Company agrees to:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such
registration statement to become and remain effective as provided
herein; (ii) enter into a cross-indemnity agreement, in customary
form, with each underwriter, if any; (iii) subject to the
provisions of Section 10.1 and Section 10.2 regarding
reductions in Registrable Securities to be included in a
registration, include in the registration statement filed with
the SEC, the Registrable Securities for which requests for
registration have been made; and promptly after filing of such a
registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to each Seller
copies of all such documents so filed including, if requested,
documents incorporated by reference in the registration
statement; and notify each Seller of any stop order issued or
threatened by the SEC and use its best efforts to prevent the
entry of such stop order or to remove it if entered;
(iv) prepare and file with the SEC such amendments of and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for such period as required
herein, and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the Sellers set forth in such
registration statement; (v) furnish to each Seller and each
underwriter, if any, without charge, such number of copies of the
registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus
included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller
may reasonably request in order to facilitate the disposition of
the Registrable Securities proposed to be sold by such Seller;
(vi) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or Blue Sky
laws of such jurisdictions as any Seller or any such underwriter
reasonably requests in writing and keep such registrations or
qualifications in effect for so long as such registration
statement remains in effect and do any and all acts and things
which may be reasonably necessary or advisable to enable such
Seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Seller; provided, however,
that the Company shall not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise
be required to qualify, or subject itself to taxes, in all
instances, but for this Section 10.3(a)(vi), or (B) consent to
general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when a prospectus relating
to such Seller's Registrable Securities is required to be
delivered under the Securities Act, of the occurrence of any
event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material
fact or omits to state any material fact necessary to make the
statements therein not misleading, and as soon as practicable
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary
to make the statements therein not misleading; (viii) cause all
such Registrable Securities to be listed on any Exchange or
NASDAQ on which similar securities issued by the Company are then
listed; (ix) provide a transfer agent, registrar and CUSIP number
for all such Registrable Securities not later than the effective
date of such registration statement; (x) to the extent of an
underwritten offering, enter into an underwriting agreement in
customary form and take all such other actions that the Sellers
or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities; (xi) make available for inspection by the Sellers
and one (1) counsel acting for them, any underwriter
participating in any disposition pursuant to such registration
statement, and any counsel retained by any such underwriter, all
pertinent financial and other information and corporate documents
of the Company reasonably requested, and cause the Company's
officers, directors and employees to supply all information
reasonably requested by any such Seller, underwriter or counsel
in connection with such registration statement; (xii) with
respect to any underwritten offering, use its reasonable good
faith efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and
covering such matters of the type customarily covered by "cold
comfort" letters as the Sellers or any underwriter may reasonably
request; (xiii) with respect to an underwritten offering, use its
reasonable good faith efforts to obtain an opinion of counsel to
the Company, addressed to the Sellers and any underwriter,
in customary form and including such matters as are customarily
covered by such opinions in underwritten registered offerings of
equity securities as the Sellers or any underwriter may
reasonably request, such opinion to be reasonably satisfactory in
form and substance to a majority in interest of the Sellers; and
(xiv) otherwise use its commercially reasonable good faith
efforts to comply with all applicable rules and regulations of
the SEC, and make available to its securityholders, as soon as
reasonably practicable, an earnings statement covering the period
of at least twelve (12) months subsequent to the effective date
of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder.
b. Any other provisions of this Section 10 notwithstanding,
upon receipt by the Securityholders of a written notice signed by
the chief executive officer or chief financial officer of the
Company to the effect set forth below, the Company shall not be
obligated during a reasonable period of time (not to exceed one
hundred twenty (120) days) thereafter to effect any registrations
pursuant to this Section 10, at any time at which, in the
Company's reasonable judgment, (i) there is a development
involving the Company or any of its affiliates which is material
but which has not yet been publicly disclosed or (ii) sales
pursuant to the registration statement would materially and
adversely affect an underwritten public offering for the account
of the Company or any other material financing project or a
proposed or pending material merger or other material acquisition
or material business combination or material disposition of the
Company's assets, to which the Company or any of its affiliates
is, or is expected to be, a party. In the event a registration
is postponed in accordance with this Section 10.3(b), (x) the
Company must (unless otherwise instructed by those holders who
requested such registration) file the requested registration
within six (6) months from the date the Company first received
the request of the holders, (y) the Company may not defer the
filing of a requested registration pursuant to this Section
10.3(b) more than once in any twelve (12)-month period, and (z)
there shall be added to the period during which the Company is
obligated to keep a registration effective the number of days for
which the registration was postponed pursuant to this Section
10.3(b).
c. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant
hereto, furnish the Company with such information regarding such
Seller, the number of the Registrable Securities owned by it, and
the intended method of distribution of the Registrable Securities
proposed to be sold by such Seller as the Company may from time
to time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
Section 10.3(a)(vii) above, such Seller shall forthwith
discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until
such Seller's receipt of copies of the supplemented or amended
prospectus contemplated by Section 10.3(a)(vii) above and, if so
directed by the Company, such Seller will deliver to the Company
(at the Company's expense) all copies, other than permanent file
copies in such Seller's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of
such notice. In the event the Company shall give any such
notice, the period mentioned in Section 10.3(a)(iv) above shall
be extended by the number of days during the period from and
including the date of giving of such notice to and including the
date when each Seller shall have received the copies of the
supplemented or amended prospectus contemplated by Section
10.3(a)(vii) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller
by name or otherwise as the Seller of any securities of the
Company unless such reference to such Seller is required by the
Securities Act or any similar federal statute then in force.
10.4 All expenses incident to the Company's performance of or
compliance with this Warrant, including without limitation all
registration and filing fees, fees and expenses relating to
filings with any Exchange, fees and expenses of compliance with
securities or Blue Sky laws in jurisdictions reasonably requested
by any Seller or underwriter pursuant to Section 10.3(a)(vi)
(including reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable
Securities), all word processing, duplicating and printing
expenses, messenger and delivery expenses, fees and disbursements
of counsel for the Company and one (1) counsel for the Sellers
(selected by those Sellers owning a majority of the Registrable
Securities included in such registration), independent public
accountants (including the expenses of any special audit or "cold
comfort" letters required by or incident to such performance) and
underwriters (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar
securities industry professionals attributable to the securities
being registered, which discounts, commissions or fees with
respect to any Seller's respective shares shall be paid by
such Seller, and legal expenses of any person other than the
Company and the Sellers, but including liability insurance if the
Company so desires), all the Company's internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties),
the expense of any annual audit, the expense of any liability
insurance (if the Company determines to obtain such insurance)
and the fees and expenses incurred in connection with the listing
of the securities to be registered on any Exchange and/or NASDAQ
on which such securities issued by the Company are then listed,
the reasonable fees and expenses of any special experts
(including attorneys) retained by the Company (if it so desires)
in connection with such registration and fees and expenses of
other persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne by the
Company.
10.5 In connection with the preparation and filing of each
registration statement under the Securities Act pursuant to this
Section 10, the Company shall give the Sellers under such
registration statement, their underwriters, if any, and their
respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each
amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities
to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such Sellers'
and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities
Act, subject to execution of a confidentiality agreement
reasonably acceptable to the Company.
10.6 Indemnification
a. In the event of any registration of any securities of the
Company under the Securities Act, the Company shall, and hereby
does, indemnify and hold harmless, to the extent permitted by
applicable law, in the case of any registration statement filed
pursuant to Section 10.1 or Section 10.2, the Seller of any
Registrable Securities covered by such registration statement,
its directors, officers, employees and agents, each other person
who participates as an underwriter in the offering or sale of
such Registrable Securities and each other person, if any, who
controls such Seller or any such underwriter within the meaning
of the Securities Act against any losses, claims, damages, or
liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which such
Seller or any such director or officer or employee or agent or
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under
which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made not misleading, and the
Company shall reimburse such Seller and each such director,
officer, employee, agent, underwriter and controlling person for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
liability, action, or proceeding; provided, however, that the
Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding,
whether commenced or threatened in respect thereof), or expense
arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment, or supplement in
reliance upon and in conformity with written information
furnished to the Company by the indemnified party for the
express purpose of use in the preparation thereof and, provided,
further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or
action or proceeding, whether commenced or threatened, in respect
thereof), or expense arises out of such person's failure to send
or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the
Securities Act to the person asserting an untrue statement or
alleged untrue statement or omission or alleged omission if such
statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such Seller or any
such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such
Registrable Securities by such Seller.
b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement
filed pursuant to Section 10.3, such prospective Seller shall,
and hereby does, indemnify and hold harmless the Company, its
directors, officers, employees and agents, each other person who
participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who
controls the Company or any such underwriter within the meaning
of the Securities Act against any losses, claims, damages, or
liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which the
Company or any such director or officer or employee or
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under
which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and such
prospective Seller shall reimburse the Company and any such
director, officer, employee, agent, underwriter or controlling
person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, liability, action, or proceeding if, and only if, such
statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly
executed by such Seller specifically stating that it is for
use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus,
amendment, or supplement. In no event shall the liability of any
Seller hereunder be greater in amount than the dollar amount of
the proceeds received by such Seller upon the sale of the
Registrable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Company or any such director, officer, employee, agent,
underwriter or controlling person and shall survive the transfer
of such Registrable Securities by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar
securities industry professionals participating in the
distribution to the same extent as provided above with respect to
information so furnished in writing by such persons specifically
for inclusion in any prospectus or registration statement.
d. Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim
referred to in this Section 10.6, such indemnified party shall,
if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the
failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section
10.6, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any
such action is brought against an indemnified party, unless in
such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel
reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in
connection with the defense thereof. If, in the indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnified party may assume the defense of such
claim, jointly with any other indemnified party that reasonably
determines such conflict of interest to exist, and the
indemnifying party shall be liable to such indemnified parties
for the reasonable legal fees and expenses of one counsel for all
such indemnified parties and for other expenses reasonably
incurred in connection with the defense thereof incurred by the
indemnified party. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any
judgment or enter into any settlement of any such action which
does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release
from all liability, or a covenant not to xxx, in respect of such
claim or litigation. No indemnified party shall consent to entry
of any judgment or enter into any settlement of any such action
the defense of which has been assumed by an indemnifying party
without the consent of such indemnifying party.
e. Indemnification and contribution similar to that specified
in this Section 10.6 (with appropriate modifications) shall be
given by the Company and each Seller with respect to any required
registration or other qualification of Registrable Securities
under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
f. The indemnification required by this Section 10.6 shall be
made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
g. If the indemnification provided for in this Section 10.6
from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages,
liabilities, or expenses referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of losses, claims, damages,
liabilities, or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
indemnified party in connection with the actions which resulted
in such losses, claims, damages, liabilities, or expenses,
as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party
shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities, and expenses referred to above
shall be deemed to include any unreimbursed legal or other fees
or expenses reasonably incurred by such party in connection with
any investigation or proceeding. In no event shall the liability
of any Seller hereunder be greater in amount than the dollar
amount of the proceeds received by such Seller upon the sale of
the Registrable Securities giving rise to such contribution
obligation. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 10.6(g)
were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in this Section 10.6(g). 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 or entity who was not guilty of such
fraudulent misrepresentation.
10.7 Market Stand-Off Agreement. If requested by the managing
underwriter of an offering for which securities of such
Securityholder have been registered, a Securityholder shall not
sell or otherwise transfer or dispose of any Registrable
Securities held by such Securityholder (other than those included
in the registration) during such period following the effective
date of such registration as is usual and customary at such time
in similar public offerings of similar securities as determined
by such managing underwriter and set forth in a letter delivered
to such Securityholder, so long as the officers, directors and
all holders of five percent (5%) or more of the shares of Common
Stock or any securities convertible into or exchangeable for
shares of Common Stock of the Company are also required to so
withhold their shares for such period. The obligations described
in this Section 10.7 shall not apply to offerings pursuant to a
registration statement on Form S-4 or Form S-8 or any successor
or similar form.
10.8 Assignment of Rights; Termination. The rights granted under
this Section 10 shall be deemed assigned to the transferee of any
of the Registrable Securities and, in all instances, will
terminate on the three (3) year anniversary of the Expiration
Date.
11. Additional Rights.
11.1 Mergers. In the event that the Company undertakes to (i)
sell, lease, exchange, convey or otherwise dispose of all or
substantially all of its property or business, or (ii) merge into
or consolidate with any other corporation (other than a wholly-
owned Subsidiary), or effect any transaction (including a merger
or other reorganization) or series of related transactions, in
which more than fifty percent (50%) of the voting power of the
Company is disposed of, the Company will use its best efforts to
provide at least thirty (30) days notice of the terms and
conditions of the proposed transaction. The Company shall
cooperate with the holder in consummating the sale of this
Warrant in connection with any such transaction.
11.2 Right to Convert Warrant into Common Stock; Net Issuance.
a. Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion
thereof (the "Conversion Right") into shares of Common Stock as
provided in this Section 11.2 at any time or from time to time
during the term of this Warrant. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall
deliver to the holder (without payment by the holder of any
exercise price or any cash or other consideration) that number of
shares of fully paid and nonassessable Common Stock equal to the
quotient obtained by dividing (i) the value of this Warrant
(or the specified portion hereof) on the Conversion Date (as
defined in Section 11(b) hereof), which value shall be equal to
(A) the aggregate fair market value of the Converted Warrant
Shares issuable upon exercise of this Warrant (or the specified
portion hereof) on the Conversion Date less (B) the aggregate
Warrant Price of the Converted Warrant Shares immediately prior
to the exercise of the Conversion Right by (ii) the fair market
value of one (1) share of Common Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as
follows:
X= A - BY
Where: X = the number of shares of Common Stock that may be
issued to holder
Y = the fair market value (FMV) of one (1) share of Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
No fractional shares shall be issuable upon exercise of the
Conversion Right, and, if the number of shares to be issued
determined in accordance with the foregoing formula is other than
a whole number, the Company shall pay to the holder an amount in
cash equal to the fair market value of the resulting fractional
share on the Conversion Date.
b. Method of Exercise. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal
office of the Company together with a written statement
specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section
11(a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"). Certificates for the
shares issuable upon exercise of the Conversion Right and, if
applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date.
c. Determination of Fair Market Value. For purposes of this
Section 11.2, "fair market value" of a share of Common Stock
shall have the meaning set forth in Section 4(j) above,
provided however, if the shares of Common Stock are traded, then
"fair market value" shall be determined by the closing price, the
last sales price or the average of the closing bid and ask
prices, as applicable, on the date of exercise.
12. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows:
a. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and has all required power and authority to own and
operate its properties and assets, to carry on its business as
now conducted and proposed to be conducted, to issue this
Warrant, and to carry out the transactions contemplated hereby
and thereby.
b. The Company is in good standing wherever necessary to carry
on its present business and operations, except in jurisdictions
in which the failure to be in good standing has not had and
reasonably could not be expected to have a Material Adverse
Effect.
c. As of the closing Date, The Company has no Subsidiaries
other than as set forth on Schedule 4.1(c) to the Securities
Purchase Agreement.
d. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and the rules of law or principles at equity
governing specific performance, injunctive relief and other
equitable remedies;
e. The Warrant Shares have been duly authorized and reserved
for issuance by the Company and, when issued in accordance with
the terms hereof, will be validly issued, fully paid and
nonassessable;
f. The rights, preferences, privileges and restrictions granted
to or imposed upon the Common Stock and the holders thereof are
as set forth in the certificate of incorporation of the Company,
as amended to the Date of Grant (as so amended, the "Charter"), a
true and complete copy of which has been delivered to the
original holder of this Warrant;
g. The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be, inconsistent with
the Charter or by-laws of the Company, do not and will not
contravene, in any material respect, any governmental rule or
regulation, judgment or order applicable to the Company, and do
not and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or
other instrument of which the Company is a party or by which it
is bound or require the consent or approval of, the giving of
notice to, the registration or filing with or the taking of any
action in respect of or by, any Federal, state or local
government authority or agency or other person, except for the
filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby;
h. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any
governmental commission, board or authority which, if adversely
determined, will have a material adverse effect on the ability of
the Company to perform its obligations under this Warrant;
i. The authorized capital stock of the Company, and the number
of such shares issued and outstanding, are set forth on Schedule
4.1(d) of the Securities Purchase Agreement immediately prior to
the Date of Grant. All such outstanding shares have been validly
issued and are fully paid, nonassessable shares free of
preemptive rights;j. Except as set forth on Schedule 4.1(d) of the
Stock Purchase Agreement, there are no subscriptions, rights,
options, warrants, or calls relating to any shares of the
Company's capital stock, including any right of conversion or
exchange under any outstanding security or other instrument; and
k. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any security convertible into or
exchangeable for any of its capital stock.
13. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by
an instrument in writing signed by the party against which
enforcement of the same is sought, except that the provisions of
Section 10 hereof may be amended with the consent of the Company
and the holders of Registrable Securities constituting a
majority of the Registrable Securities then outstanding. For
purposes of Section 10 and this Section 13, "Registrable
Securities then outstanding" shall mean, with respect to a
specified determination date, the Registrable Securities owned
(beneficially or of record) by all Securityholders on such date.
14. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall
be deemed to have been duly given (i) on the date of service if
served personally on the party to whom notice is to be given,
(ii) on the day of transmission if sent by facsimile transmission
to the number shown on the books of the Company, and telephonic
confirmation of receipt is obtained promptly after completion of
transmission, (iii) on the day after delivery to Federal Express
or similar overnight courier, or (iv) on the fifth day after
mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and
properly addressed, return receipt requested, to each such holder
at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page
of this Warrant. Any party hereto may change its address for
purposes of this Section 15 by giving the other party written
notice of the new address in the manner set forth herein.
15. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the
Company's assets, and all of the obligations of the Company
relating to the Common Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and
agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will,
at the time of the exercise or conversion of this Warrant, in
whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights to which
the holder hereof shall continue to be entitled after such
exercise or conversion in accordance with this Warrant; provided,
that the failure of the holder hereof to make any such request
shall not affect the continuing obligation of the Company to the
holder hereof in respect of such rights.
16. Lost Warrants or Stock Certificates. The Company covenants
to the holder hereof that, upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate and, in the
case of any loss, theft or destruction, upon receipt of an
executed lost securities bond or indemnity reasonably
satisfactory to the Company, or in the case of any such
mutilation upon surrender and cancellation of such Warrant or
stock certificate, the Company will make and deliver a new
Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
17. Descriptive Headings. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant.
18. Governing Law. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Delaware.
19. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder
hereof contained herein shall survive the Date of Grant, the
exercise or conversion of this Warrant (or any part hereof) and
the termination or expiration of rights hereunder and shall
terminate three years after the date of this Agreement. All
agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they
are no longer operative.
20. Remedies. In case any one (1) or more of the covenants and
agreements contained in this Warrant shall have been breached,
the holders hereof (in the case of a breach by the Company), or
the Company (in the case of a breach by a holder), may proceed to
protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an
action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement
contained in this Warrant.
21. Acceptance. Receipt of this Warrant by the holder hereof
shall constitute acceptance of and agreement to the foregoing
terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment
of its Charter or through any other means, 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 in order to protect the
rights of the holder of this Warrant against impairment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officer's thereunto duly
authorized.
SHELLS SEAFOOD RESTAURANTS, INC.,
a Delaware corporation
By: /s/
Xxxxxx Xxxxxx, Chief Financial Officer
Address: 00000 X. Xxxx Xxxxx Xxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Dated: January 31, 2002.
NOTICE TO FLORIDA RESIDENTS:
WHERE SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA
(EXCLUDING CERTAIN INSTITUTIONAL PURCHASERS DESCRIBED IN SECTION
517.061(7) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT)
(THE "ACT"), ANY SUCH SALE MADE PURSUANT TO SECTION 517.061(11)
OF THE ACT SHALL BE VOIDABLE BY THE PURCHASER EITHER WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH
PURCHASER TO THE ISSUER, OR AN AGENT OF THE ISSUER, OR AN ESCROW
AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS
LATER.
EXHIBIT A
NOTICE OF EXERCISE
To: SHELLS SEAFOOD RESTAURANTS, INC.
1. The undersigned hereby elects to purchase shares of
Common Stock of SHELLS SEAFOOD RESTAURANTS, INC. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or
names as are specified below:
_______________________________
(Name)
_______________________________
_______________________________
(Address)
3. The undersigned represents that the aforesaid shares are
being acquired for the account of the undersigned for investment
and not with a view to, or for resale in connection with,
the distribution thereof and that the undersigned has no present
intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
__________________________________
(Signature)
_____________________
(Date)
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: SHELLS SEAFOOD RESTAURANTS, INC.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities
(the "Securities"), the undersigned (the "Purchaser") represents
to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to
acquire the Securities. The Purchaser is purchasing the
Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933,
as amended (the "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of the Purchaser's investment intent
as expressed herein. In this connection, the Purchaser
understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated
solely upon a present intention to hold these Securities for the
minimum capital gains period specified under applicable tax laws,
for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any
other fixed period in the future.
(c) The Purchaser further understands that the Securities must
be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from registration is
otherwise available. In addition, the Purchaser understands that
the certificate evidencing the Securities will be imprinted with
the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and
144A, promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities"
acquired, directly or indirectly, from the issuer thereof (or
from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable,
including, among other things: The availability of certain public
information about the Company, the resale occurring not less than
one (1) year after the party has purchased and paid for the
securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities
being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes
to sell the Securities there may be no public market upon which to
make such a sale, and that, even if such a public market then
exists, the Company may not be satisfying the current public
information requirements of Rule 144 and 144A, and that, in such
event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the one-year minimum holding
period had been satisfied.
(f) The Purchaser further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied,
registration under the Securities Act, compliance with Regulation
A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will
have a substantial burden or proof in establishing that an
exemption from registration is available for such offers or sales,
and that such persons and their respective brokers who participate
in such transactions do so at their own risk.
Purchaser:
Date:
