1
EXHIBIT 10.5
WARRANT AGREEMENT dated as of April 17, 2000 between
Xxxxxxx.xxx, Inc., a Minnesota corporation (the "Company") and Sands Brothers &
Co., Ltd., a Delaware corporation (hereinafter referred to variously as the
"Holder" or "Sands Brothers").
W I T N E S S E T H:
WHEREAS, the Company and Sands Brothers have entered into a
certain financial advisory agreement of even date herewith (hereinafter the
"Advisory Agreement"), pursuant to which Sands Brothers is entitled to receive
certain compensation, including, among other things, warrants ("Warrants") to
purchase a total of 1,000,000 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), upon and subject to the terms and conditions of
the Advisory Agreement.
NOW, THEREFORE, in consideration of the premises, the payment
by the Holder to the Company of TWENTY FIVE ($25.00) DOLLARS, the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agrees as
follows:
1. Grant; Vesting; Exercise Price.
ss.1.1 Grant. The Company hereby issues to the Holder
effective as of the date hereof, but exercisable as set forth in Section 1.2,
the right to purchase an aggregate of 1,000,000 shares of Common Stock, until 5
p.m. New York time on the applicable Expiration Date (as defined hereinafter),
subject to the terms and provisions contained in this Warrant Agreement and
exercisable in accordance with Section 1.2 hereof.
2
ss.1.2 Vesting. The Warrants shall vest and become exercisable
in accordance with the following schedule, provided that, all Warrants shall
terminate and become null and void upon the Expiration Date irrespective of the
exercisability thereof:
a. An aggregate of 250,000 Warrants ("Tranche 1") shall
vest and become exercisable by the Holder upon the
date hereof and shall be exercisable until the date
that is five years from the date hereof.
b. An aggregate of 100,000 Warrants ("Tranche 2") shall
vest and become exercisable by the Holder at the time
of each $1 Million of Financing Transaction (as
defined in the Advisory Agreement) up to $2.5 Million
of such Financing Transactions. For example, at the
time a single or series of Financing Transactions are
consummated in which $2.5 Million of gross proceeds
are raised, 250,000 Warrants shall immediately vest
and shall be exercisable until April 17, 2005.
c. An aggregate of 500,000 Warrants ("Tranche 3") shall
vest at the time of an aggregate of $10 Million of
Financing Transactions (including any Financing
Transactions that have been consummated in Tranche 2)
have been consummated. For example, at the time a
single or series of Financing Transactions are
consummated in which $10 Million of gross proceeds
are raised, 250,000 Warrants shall immediately vest
pursuant to Tranche 2 and 500,000 Warrants shall
immediately vest pursuant to Tranche 3, each of which
shall be exercisable until April 17, 2005.
2
3
ss.1.3 Exercise Price. The Warrants shall be exercisable at
exercise prices as set forth in Section 6 hereof, as adjusted from time to time
in accordance with Section 8.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibits A-1 and B-1 attached hereto and made
a part hereof, with such appropriate insertions, omissions, substitutions, and
other variations as required or permitted by this Agreement.
3. Exercise of Warrant.
ss.3.1 Method of Exercise. The Warrants initially are
exercisable at an initial exercise price ("Initial Exercise Price") (subject to
adjustment as provided in Section 8 hereof) per share of Common Stock set forth
in Section 6 hereof payable by certified or official bank check in New York
Clearing House funds, subject to adjustment as provided in Section 8 hereof.
Upon surrender of a Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the shares of Common Stock purchased at the Company's
principal offices in Ohio (presently located at 0000 Xxxxx Xxxxx Xxxxx, Xxxxx
000, Xxxxxxxxxx, Xxxx 00000) the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, subject to the terms and conditions herein, in whole or in part
(but not as to fractional shares of the Common Stock underlying the Warrants).
Warrants may be exercised to purchase all or part of the shares of Common Stock
represented thereby. In the case of the purchase of less than all the shares of
Common Stock purchasable under any Warrant Certificate,
3
4
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock.
ss.3.2 Exercise by Surrender of Warrant.
(a) In addition to the method of payment set forth in Section
3.1 and in lieu of any cash payment required thereunder, the Holder(s) of the
Warrants shall have the right at any time and from time to time to exercise the
Warrants in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 3.1 in exchange for the number of shares of Common
Stock equal to the product of (x) the number of shares to which the Warrants are
being exercised multiplied by (y) a fraction, the numerator of which is the
Market Price (as defined in Section 8.1 hereof) of the Common Stock less the
Exercise Price and the denominator of which is such Market Price.
(b) Solely for the purposes of this Section 3.2, Market Price
shall be calculated as the average of the Market Price for each of the five
trading days preceding the Notice Date.
4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock or other
securities, properties or rights underlying such Warrants, shall be made
forthwith (and in any event such issuance shall be made within five (5) business
days thereafter) without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance thereof, and
such certificates shall (subject to the provisions of Sections 5 and 7 hereof)
be issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall
4
5
have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
shares of Common Stock (and/or other securities, property or rights issuable
upon exercise of the Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof.
6. Exercise Price.
ss.6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the Initial Exercise Price of each
Warrant shall be as follows: (i) Tranche 1 and Tranche 2 shall have an Initial
Exercise Price of $1.625 per share of Common Stock for each of the 500,000
Warrants; and (ii) Tranche 3 shall have an Initial Exercise Price of $4.00 per
share of Common Stock for each of the 500,000 Warrants. The adjusted exercise
price shall be the price which shall result from time to time from any and all
adjustments of the Initial Exercise Price in accordance with the provisions of
Section 8 hereof.
5
6
ss.6.2 Exercise Price. The term "Exercise Price" herein shall
mean the Initial Exercise Price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
ss.7.1 Registration Under the Securities Act of 1933. The
Warrants and the shares of Common Stock issuable upon exercise of the Warrants
and any of the other securities issuable upon exercise of the Warrants have not
been registered under the Securities Act of 1933, as amended (the "Act") for
public resale. Upon exercise, in part or in whole, of the Warrants, certificates
representing the shares of Common Stock and any other securities issuable upon
exercise of the Warrants (collectively, the "Warrant Securities") shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act") for public resale, and may not be offered or sold
except pursuant to (i) an effective registration statement
under the Act, (ii) to the extent applicable, Rule 144 under
the Act (or any similar rule under such Act relating to the
disposition of securities), or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel to
the issuer, that an exemption from registration under such Act
is available.
For purposes of this Warrant Agreement, the term "Registrable Stock"
shall mean (i) any shares; (ii) any shares of Common Stock that may be issued
pursuant to those certain Warrants of even date herewith issued by the Company
to Sands Brothers & Co., Ltd. and its designees; (iii) any shares of Common
Stock issued to the Holder, relating to the Shares, by way of a stock split,
reorganization, merger or consolidation; and (iv) any Common Stock issued to the
Holder, relating to the Shares, as a dividend on the Shares.
ss.7.2 Piggyback Registration. If, at any time during the five
year period commencing six months after the date hereof, the Company proposes to
register any of its securities
6
7
under the Securities Act of 1933 ("the Act") (other than in connection with a
merger or pursuant to Form X-0, X-0 or comparable registration statement) it
will give written notice by registered mail, at least twenty (20) days prior to
the filing of each registration statement, to Sands Brothers and to all other
Holders of the Warrants and/or the Warrant Securities of its intention to do so.
If Sands Brothers or other Holders of the Warrants and/or Warrant Securities
notify the Company in writing within fifteen (15) days after receipt of any such
notice of its or their desire to include any such securities in such proposed
registration statement, the Company shall afford Sands Brothers and such Holders
of the Warrants and/or Warrant Securities the opportunity to have any such
Warrant Securities registered under such registration statement, but only to the
extent that such Warrant Securities cannot otherwise be sold without restrictive
legend under Rule 144(k). In connection with any offering involving an
underwriting of securities of the Company, the Company shall not be required
under this Section 7.2 to include any of the Holders' Registrable Securities in
such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
Persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the underwriting agreement relating
to such offering so requires, the Holders of Registrable Securities included in
the registration shall enter into letter agreements restricting the sale or
other disposition of Registrable Securities for the period specified in the
underwriting agreement, custody agreements and related agreements and xxxxx
xxxxxx of attorney relating to the sale and delivery of the Registrable
Securities all in customary form. Notwithstanding any other provision hereof to
the contrary, in the case of a registration pursuant to this Section 7.2, if the
underwriter advises the Company in writing that marketing factors require a
7
8
limitation of the number of securities to be underwritten, then the Company
shall so advise all Holders that have requested that Registrable Securities be
included in the registration, and the number of Registrable Securities that may
be included in the underwriting shall be in the same proportion (as nearly as
practicable) as the number of Registrable Securities as to which Holders shall
have initially requested inclusion in such registration bears to the total
number of securities of the Company (including such Registrable Securities) as
to which all persons that shall be entitled to request inclusion of such
securities in such registration shall initially so request such inclusion, or as
such persons (including such Holders) may otherwise agree.
ss.7.3 Registration Statement Filing.
(a) The Company shall cause to be filed within 30 days from
the date hereof a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for Sands Brothers and Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale of their
respective Warrant Securities for nine (9) consecutive months by such Holders
and any other Holders of the Warrants and/or Warrant Securities (which right is
in addition to the registration rights under Section 7.2 hereof), but only to
the extent that such Warrant Securities cannot be otherwise sold without
restrictive legend under Rule 144(k). The Company shall use its best efforts to
cause such registration statement to become effective within one hundred twenty
(120) days of the date hereof.
(b) Anything contained in this Warrant to the contrary
notwithstanding, in the event the Company fails to file such registration
statement with the Commission prior to the expira tion of the aforementioned 30
day period or (ii) cause such registration statement to become effective prior
8
9
to the expiration of the aforementioned 120 day period (except when the Company
is proceeding in good faith to cause the registration statement to become
effective in a timely manner and the failure to become effective is due solely
to delays at the Securities and Exchange Commission or other factors which are
outside of the Company's control), in addition to any other rights and
privileges of Holder, the Company shall issue an additional 250,000 Warrants to
the Holders which shall be in the form of Tranche 1 Warrants.
ss.7.4 Covenants of the Company With Respect to Registration.
In connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall pay all costs (excluding any
underwriting or selling commissions or other charges of any broker-dealer acting
on behalf of Holders or Holders' legal expenses), fees and expenses in
connection with all registration statements filed pursuant to Sections 7.2 and
7.3(a) hereof including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses. If the Company shall fail
to comply with the provisions of Section 7.4(a), the Company shall, in addition
to any other equitable or other relief available to the Holder(s), be liable for
any or all damages due to loss of profit sustained by the Holder(s) requesting
registration of its Warrant Securities.
(b) The Company will use reasonable efforts to take all
necessary action which may be required in qualifying or registering the Warrant
Securities included in a registration statement for offering and sale under the
securities or blue sky laws of the state requested by the Holder.
(c) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as
9
10
amended ("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement, provided that, there shall be no indemnification by the Company
pursuant to this Section 7.4(c) against any losses, claims, damages, expenses or
liabilities whatsoever arising out of or relating to in any manner any untrue
statement of a material fact in any such registration statement or any omission
of any material fact therefrom necessary to make the statements contained
therein not misleading in light of the circumstances under which they were made
to the extent but only to the extent that such untrue statements or omissions
relate to, or are based upon, any written information provided to the Company by
Sands Brothers or any Holder.
(d) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(e) The Company shall not permit the inclusion of any
securities other than the Warrant Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof without the prior written consent
of the Holders of the Warrants and Warrant Securities representing a Majority of
such securities (assuming an exercise of all of the Warrants).
(f) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement).
10
11
(g) If required under the Act, the Company shall as soon as
practicable after the effective date of the registration statement, and in any
event within 15 months thereafter, make "generally available to its security
holders" (within the meaning of Rule 158 under the Act) an earnings statement
(which need not be audited) complying with Section 11(a) of the Act and covering
a period of at least 12 consecutive months beginning after the effective date of
the registration agreement.
(h) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit the Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
shall reasonably request as it deems necessary to comply with applicable
securities laws or NASD rules.
(i) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including
11
12
without limitation, restricted shares of Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
(j) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities, shall mean in excess
of fifty percent (50%) of the then outstanding Warrants or Warrant Securities
that (i) are not held by the Company, an affiliate, officer, creditor, employee
or agent thereof or any of their respective affiliates, members of their family,
persons acting as nominees or in conjunction therewith or (ii) have not been
resold to the public pursuant to a registration statement filed with the
Commission under the Act.
8. Adjustments to Exercise and Number of Securities.
ss.8.1 Market Price. As used herein, the term "Market Price"
at any date shall be deemed to be the last reported sale price, or, in case no
such reported sale takes place on such day, the average of the last reported
sale prices for the last five (5) trading days, in either case as officially
reported by the principal securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the average closing bid price as
furnished by the NASD through NASDAQ or similar organization if NASDAQ is no
longer reporting such information, or if the Common stock is not quoted on
NASDAQ, as determined in good faith by resolution of the Board of Directors of
the Company, based on the best information available to it.
ss.8.2 Intentionally Deleted.
ss.8.3 Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
12
13
ss.8.4 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 8,
the number of Securities issuable upon the exercise of each Warrant shall be
adjusted to the nearest full amount by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Securities issuable upon exercise of the Warrants immediately prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
ss.8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event that the Company shall after the date hereof issue
securities with greater or superior voting rights than the shares of Common
Stock outstanding as of the date hereof, the Holder, at its option, may receive
upon exercise of any Warrant either shares of Common Stock or a like number of
such securities with greater or superior voting rights.
ss.8.6 Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities
13
14
and property receivable upon such consolidation or merger, by a holder of the
number of shares of Common Stock of the Company for which such warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for adjustments
which shall be identical to the adjustments provided in Section 8. The above
provision of this Subsection shall similarly apply to successive consolidations
or mergers.
ss.8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares
of Common Stock issuable upon the exercise of the Warrants; or
(b) If the amount of said adjustment shall be less than 2
cents ($.02) per Security, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
2 cents ($.02) per Security.
ss.8.8 Dividends and Other Distributions. In the event that
the Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they
14
15
would have been entitled to receive at the time of such dividend or distribution
as if the Warrants had been exercised immediately prior to such dividend or
distribution. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Subsection 8.8.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Securities in such denominations as shall
be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance
15
16
upon the exercise of the Warrants, such number of shares of Common Stock or
other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants shall be outstanding, the Company shall use
its best efforts to cause all shares of Common Stock issuable upon the exercise
of the Warrants to be listed (subject to official notice of issuance) on all
securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed and/or quoted NASDAQ.
12. Notice to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other manner, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
16
17
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchange for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of the closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice of any defect therein shall not affect the validity
of any action so taken.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the Holders, Sands Brothers & Co., Ltd., 00 Xxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 as shown on the books of the
Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written
17
18
agreement of the parties hereto. Any waiver, permit, consent or approval of kind
or character on the part of each Company or the Holder of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing.
15. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holder and their respective successors and assigns hereunder.
16. Assignment or Loss of Warrant.
(a) This Warrant is not assignable or transferable without
the written consent of the Company, except by operation of law or as provided in
(b) below.
(b) This Warrant shall not be transferable by Holder other
than to a "Permitted Transferee" (as defined below); provided, that any
Permitted Transferee shall be absolutely prohibited from transferring all or any
portion of this Warrant other than to Holder or another Permitted Transferee of
Holder; and provided further, that if Holder dies or becomes incapacitated, this
Warrant may be exercised by Holder's estate, legal representative or
beneficiary, as the case may be, subject to all other terms and conditions
contained in this Warrant.
(c) For purposes of this Agreement, Permitted Transferees
shall include officers, directors, shareholders and employees of Sands Brothers,
members of the "immediate family" (which shall be limited to Holder's spouse,
children, and parents) of Holder, to trusts for such person's own benefit and/or
for the benefit of members of Holder's immediate family; provided, that such
Permitted Transferees must agree in writing to be bound by all of the terms of
this Agreement to the same extent as Holder hereunder, in form acceptable to
counsel to the Company, including but not limited to restrictions on the
exercise of this Warrant and on transfers of the Warrant Securities, as
18
19
the case may be, following exercise of this Warrant, such that any Warrant
Securities so acquired shall be held subject to the terms of this Agreement.
Warrant Securities held by any Permitted Transferee shall be aggregated with
those held by the Permitted Transferee's transferor in order to determine the
number of shares subject to the provisions of this Agreement.
17. Governing Law; Submission to Jurisdiction. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all the purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing the conflicts of laws.
The Company and the Holder hereby agree that any action,
proceeding or claim against it arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, and the Holder hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to be
served upon any of the Company and the Holder (at the option of the party
bringing such action, proceeding or claim) may be served by transmitting a copy
thereof, by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address as set forth in Section 13 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
party so served in any action, proceeding or claim. The Company and the Holder
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
19
20
18. Entire Agreement; Modification. This Agreement and the
Advisory Agreement (to the extent portions thereof are referred to herein)
contain the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
21. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and the Holder.
22. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
20
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL]
Xxxxxxx.xxx, Inc.
By: /s/Xxxxxxx X. Xxxx
------------------------------
Title: Chief Executive Officer
Attest:
Secretary
SANDS BROTHERS & CO., LTD.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------
Authorized Officer
21
22
EXHIBIT A-1
FORM OF TRANCHE 1 AND TRANCHE 2 WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, APRIL 17, 2005
[Note: Tranche 2 Warrant shall be dated as per the timing of applicable
Financing Transactions]
No. Warrants
---- ----
WARRANT CERTIFICATE
This Warrant Certificate certifies that
, or registered assigns, is the registered holder of
Warrants, to purchase from the period commencing on the date hereof and
expiring at 5:30 p.m. New York time on the date that is the fifth year
anniversary of the date hereof ("Expiration Date"), up to fully-paid and
non-assessable shares of common stock, $.01 par value per share ("Common Stock")
of Xxxxxxx.xxx, Inc., a Minnesota corporation (the "Company"), at an initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $1.625 per share of Common Stock, upon surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, or by
surrender of this Warrant Certificate in lieu of cash payment, but subject to
the conditions set forth herein and in the Warrant Agreement dated April 17,
2000 between the Company and Sands Brothers & Co., Ltd. (the (the "Warrant
Agreement"). Payment of the Exercise Price shall be made by certified or
official bank check in New York Clearing House funds payable to the order of the
Company.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
- X-0 -
00
Xxx Xxxxxxxx evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax in
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings to them in the Warrant Agreement.
- A-2 -
24
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of April 17, 2000
Xxxxxxx.xxx, Inc.
By:
------------------------------------
Title:
Attest:
Secretary
- A-3 -
25
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase shares of
Common Stock at an exercise price of $ per share and herewith tenders in
payment for such Securities a certified or official bank check payable in New
York Clearing House Funds to the order of in the amount of $ ,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such Securities be registered in the name of whose
address is and that such Certificate be delivered to
whose address is .
Signature
--------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder)
- A-4 -
26
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of April 17, 2000 between Xxxxxxx.xxx, Inc. and SANDS
BROTHERS & CO., LTD. The Undersigned requests that a certificate for such
Securities be registered in the name of whose address is
and that such Certificate be delivered to whose
address is .
Signature
--------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
-------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder)
- A-5 -
27
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED here sells, assigns and
transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or other Identifying
Number of Assignee)
- X-0 -
00
XXXXXXX X-0
FORM OF TRANCHE 3 WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, April 17, 2005
No. Warrants
---- ----
WARRANT CERTIFICATE
This Warrant Certificate certifies that
, or registered assigns, is the registered holder of
Warrants, to purchase from the period commencing on the date hereof and
expiring at 5:30 p.m. New York time on April 17, 2005 ("Expiration Date"), up to
fully-paid and non-assessable shares of common stock, $.01 par value per
share ("Common Stock") of Xxxxxxx.xxx, Inc., a Minnesota corporation (the
"Company"), at an initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $4.00 per share of Common Stock, upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, or by surrender of this Warrant Certificate in
lieu of cash payment, but subject to the conditions set forth herein and in the
Warrant Agreement dated April 17, 2000 between the Company and Sands Brothers &
Co., Ltd. (the "Warrant Agreement"). Payment of the Exercise Price shall be made
by certified or official bank check in New York Clearing House funds payable to
the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
- B-1
29
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax in
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings to them in the Warrant Agreement.
- B-2
30
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of , 2000
----------
Xxxxxxx.xxx, Inc.
By:
---------------------------------
Title:
Attest:
Secretary
- B-3
31
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase shares of
Common Stock at an exercise price of $ per share and herewith tenders in
payment for such Securities a certified or official bank check payable in New
York Clearing House Funds to the order of in the amount of $ ,
all in accordance with the terms hereof. The undersigned requests that a
certificate for such Securities be registered in the name of whose
address is and that such Certificate be delivered to
whose address is .
Signature
---------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
-----------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder)
- B-4
32
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase shares of Common
Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of April 17, 2000 between Xxxxxxx.xxx, Inc. and SANDS
BROTHERS & CO., LTD. The Undersigned requests that a certificate for such
Securities be registered in the name of whose address is
and that such Certificate be delivered to whose
address is .
Signature
--------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
--------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder)
- B-5
33
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED here sells, assigns and
transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or other Identifying
Number of Assignee)
ACTUAL WARRANTS FOLLOW:
- B-6
