Exhibit 10.14
WARRANT AGREEMENT
between
PCA INTERNATIONAL, INC.
and
United States Trust Company
of New York
---------------------------
Dated as of August 25, 1999
---------------------------
2
COMMON STOCK WARRANT AGREEMENT
TABLE OF CONTENTS*
Page
SECTION 1. Appointment of Warrant Agent ..................................2
SECTION 2. Warrant Certificates ..........................................2
SECTION 3. Execution of Warrant Certificates .............................2
SECTION 4. Registration and Countersignature .............................3
SECTION 5. Registration of Transfers and Exchanges .......................3
SECTION 6. Terms of Warrants; Exercise of Warrants .......................5
SECTION 7. Payment of Taxes ..............................................6
SECTION 8. Mutilated or Missing Warrant Certificates .....................7
SECTION 9. Reservation of Warrant Shares .................................7
SECTION 10. Obtaining Stock Exchange Listings .............................8
SECTION 11. Adjustment of Exercise Price and Number of Warrant
Shares Issuable .............................................8
(a) Adjustment for Change in Capital Stock ...........................8
(b) Adjustment for Rights Issue ......................................9
(c) Adjustment for Other Distributions ..............................10
(d) Adjustment for Common Stock Issue ...............................11
(e) Adjustment for Convertible Securities Issue .....................12
(f) Current Market Price ............................................13
(g) Consideration Received ..........................................14
(h) When De Minimis Adjustment May Be Deferred ......................14
(i) When No Adjustment Required .....................................14
(j) Notice of Adjustment ............................................15
(k) Voluntary Reduction .............................................15
(l) Notice of Certain Transactions ..................................15
(m) Reorganization of Company .......................................15
(n) Company Determination not Final .................................16
(o) Warrant Agent Disclaimer ........................................16
-------------
* This Table of Contents does not constitute a part of this Agreement or have
any bearing upon interpretation of any of its terms or provisions.
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(p) When Issuance or Payment May Be Deferred ........................16
(q) Adjustment in Number of Shares ..................................17
(r) Form of Warrants ................................................17
SECTION 12. No Dilution or Impairment, Capital and Ownership Structure ...17
SECTION 13. Fractional Interests .........................................18
SECTION 14. Notices to Warrant Holders ...................................18
SECTION 15. Merger, Consolidation or Change of Name of Warrant
Agent .....................................................20
SECTION 16. Warrant Agent ................................................20
SECTION 17. Change of Warrant Agent ......................................22
SECTION 18. Notices to Company and Warrant Agent .........................23
SECTION 19. Supplements and Amendments ...................................23
SECTION 20. Successors ...................................................24
SECTION 21. Termination ..................................................24
SECTION 22. New York Law; Submission to Jurisdiction, Waiver of
Jury Trial .................................................24
SECTION 23. Benefits of This Agreement ...................................24
SECTION 24. Counterparts .................................................24
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WARRANT AGREEMENT
WARRANT AGREEMENT (this "Agreement"), dated as of August 25, 1999,
between PCA INTERNATIONAL, INC., a North Carolina corporation (the "Company"),
and United States Trust Company of New York, as warrant agent (the "Warrant
Agent"). Capitalized terms used herein and not defined herein shall have the
meanings specified in the Bridge Loan Agreement described below.
RECITALS
WHEREAS, the Company, the guarantors listed on the signature pages
thereto as Guarantors (collectively, the "Guarantors"), NationsBridge, L.L.C.,
as administrative agent (the "Administrative Agent"), NationsBanc Xxxxxxxxxx
Securities LLC ("NMS"), as arranger (the "Arranger"), and the lenders referred
to therein (collectively, the "Lenders") have entered into a bridge loan
agreement, dated as of August 25, 1998 (the "Bridge Loan Agreement"), providing
for certain bridge loans to be made by the Lenders thereunder to the Company
(the "Bridge Loans"), which Bridge Loans will be evidenced by increasing rate
promissory notes of the Company (the "Bridge Notes").
WHEREAS, the Company has agreed that under specified circumstances set
forth in the Escrow Agreement (as summarized by the next two paragraphs), the
Administrative Agent and The Chase Manhattan Bank (in its capacity as an
Investment Bank, "Chase") or certain other parties may be entitled to receive
(on the terms and conditions set forth in the Escrow Agreement) warrants (the
"Warrants"), to purchase up to 5.0% of the fully-diluted capital stock of the
Company (calculated after giving effect to the exercise of such Warrants and all
other outstanding warrants, options and other convertible securities) (the
"Common Stock") at the time of issuance (the Common Stock or any security
substituted for the Common Stock issuable on exercise of the Warrants being
referred to herein as the "Warrant Shares"), at an initial exercise price of
$.20 per share (the "Exercise Price"), with each Warrant entitling the holder
thereof to purchase one Warrant Share. All references to the number of Warrants
in this Agreement are subject to adjustment as provided herein.
WHEREAS, the Company has agreed that the Administrative Agent shall be
entitled to receive, on the 541st day following the Closing Date, Warrants
representing 100% of the total Warrants placed in escrow, such that on such
541st day following the Closing Date all of the Warrants previously held in
escrow shall have been released.
WHEREAS, the Company has agreed that Warrants will be released from
escrow to NMS for itself and on behalf of CSI at the request of NMS in
consultation with CSI at any time on or after the one-year anniversary of the
Closing Date for resale in connection with an issuance of the Permanent
Securities, including to refinance Bridge Loans, Term Loans or Exchange Notes,
if NMS determines in consultation with CSI that such release is necessary or
advisable in connection with such refinancing, in such amounts as NMS deems
appropriate.
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WHEREAS, the Company has agreed to execute and deliver the Warrants to
an escrow agent on the date hereof and such escrow agent has agreed to deliver
the Warrants to the Administrative Agent and/or NMS, as applicable, in
accordance with an Escrow Agreement, dated August 25, 1999, among the Company,
the Guarantors, the Administrative Agent, NMS and United States Trust Company of
New York, as escrow agent.
WHEREAS, the Company has agreed to register the Warrants and the
Warrant Shares for public sale under the Securities Act of 1933, as amended (the
"Act"), pursuant to an Equity Registration Rights Agreement, dated as of August
25, 1999, among the Company, NationsBridge, L.L.C., Chase and NMS.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") to be delivered pursuant to this Agreement
shall be in registered form only and shall be substantially in the form set
forth in Exhibit A attached hereto.
SECTION 3. Execution of Warrant Certificates. Warrant Certificates, as
they are issued, shall be signed on behalf of the Company by its President,
Chief Financial Officer, Treasurer or Controller (each an "Officer"). Each such
signature upon the Warrant Certificates may be in the form of a facsimile
signature of the present or any future Officer and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any Person who shall have been an
Officer, notwithstanding the fact that at the time the Warrant Certificates
shall be countersigned and delivered or disposed of he shall have ceased to hold
such office.
In case any Officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such Officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such Person had not ceased
to be such Officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper Officer of the
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Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such Person was not such Officer.
Warrant Certificates shall be dated the date of the countersignature by
the Warrant Agent.
SECTION 4. Registration and Countersignature. The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrants shall not be countersigned by the Warrant Agent until they are released
from escrow pursuant to any of the provisions in Section 2 of the Escrow
Agreement. The Warrant Agent shall, upon written instructions of the Escrow
Agent acting under direction of the Administrative Agent or NMS, as the case may
be (which instructions, the Company agrees, shall be given upon the occurrence
of any event described in Section 2 of the Escrow Agreement resulting in a
release of the Warrants from escrow), countersign, and the Chief Financial
Officer of the Company shall issue and deliver, Warrants entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to above
in the recitals hereof which shall not exceed 254,150 Warrant Shares in the
aggregate and shall countersign and deliver Warrants as otherwise provided in
this Agreement.
The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
SECTION 5. Registration of Transfers and Exchanges. The Warrant Agent
shall from time to time register the transfer of any outstanding Warrant
Certificates upon the records to be maintained by it for that purpose, upon
surrender thereof accompanied (if so required by it) by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly executed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferees and the surrendered Warrant Certificate shall be canceled by the
Warrant Agent. Canceled Warrant Certificates shall thereafter be disposed of in
a manner satisfactory to the Company.
By their possession of the Warrant Certificates, the Warrant holders
shall be deemed to agree that prior to any proposed transfer of the Warrant or
of the Warrant Shares, if such transfer is not made pursuant to an effective
Registration Statement under the Act, or an opinion of counsel, reasonably
satisfactory in form and substance to the Company, that the Warrant or Warrant
Shares may be sold publicly without registration under the Act, the Warrant
holder will, if requested by the Company, deliver to the Company:
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(1) an investment covenant reasonably satisfactory to the Company
signed by the proposed transferee;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the Warrant
Shares;
(3) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order" with any
transfer agent or registrar with respect to the Warrant Shares;
(4) an agreement by such transferee to be bound by the provisions of
this Section 5 relating to the transfer of such Warrant or Warrant Shares; and
(5) an opinion of counsel, reasonably satisfactory in form and
substance to the Company, to the effect that the proposed transfer of the
Warrants or Warrant Shares (as the case may be) may be made without registration
under the Act.
The Warrant holders agree that each certificate representing Warrant
Shares will bear the following legend:
"THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS
OF SAID ACT HAVE BEEN COMPLIED WITH OR UNLESS THE COMPANY HAS RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Warrant Agent at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by such Warrant Agent in a manner
satisfactory to the Company.
The Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of this Section 5 and of Section 4 hereof, the new Warrant
Certificates required pursuant to the provisions of this Section 5.
SECTION 6. Terms of Warrants; Exercise of Warrants. Subject to the
terms of this Agreement, each Warrant holder shall have the right, which may be
exercised commencing at the opening of business on August 25, 1999 and until
5:00 p.m. New York City time on August 25, 2006, to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the holder may at
the time be entitled to receive in accordance with the terms of the Escrow
Agreement on exercise of such Warrants and payment of the Exercise Price then in
effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 p.m.,
New York City time, on August 25, 2006 shall
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become void and all rights thereunder and all rights in respect thereof under
this Agreement shall cease as of such time.
An exercisable Warrant may be exercised upon surrender to the Company
at the principal office of the Warrant Agent of the Warrant Certificate or
Certificates evidencing the Warrants to be exercised with the form of election
to purchase on the reverse thereof duly filled in and signed, which signature
shall be guaranteed by an institution which is a member of one of the following
recognized signature guarantee programs: (1) The Securities Transfer Agent
Medallion Program (STAMP); (2) The New York Stock Exchange Medallian Program
(MSP); or (3) The Stock Exchange Medallian Program (SEMP), and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price as
adjusted as herein provided, for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the aggregate Exercise Price
shall be made (i) in cash or by certified or official bank check payable to the
order of the Company, (ii) through the surrender of indebtedness or of debt or
preferred equity securities of the Company (including, without limitation,
Bridge Loans, Term Loans or Exchange Notes) having a fair market value as
determined in good faith by the Board of Directors of the Company equal to the
aggregate Exercise Price to be paid (the Company shall pay the accrued interest
or dividends on such surrendered debt or preferred equity securities in cash at
the time of surrender notwithstanding the stated terms thereof), (iii) by
tendering Warrants having a fair market value equal to the Exercise Price or
(iv) with any combination of (i), (ii) or (iii). For purpose of clause (iii)
above, the fair market value of the Warrants shall be determined as follows: (A)
to the extent the Common Stock is publicly traded and listed on the Nasdaq
National Market or a national securities exchange, the fair market value shall
be equal to the difference between (1) the Quoted Price of the Common Stock on
the date of exercise and (2) the Exercise Price; or (B) to the extent the Common
Stock is not publicly traded, or otherwise is not listed on a national
securities exchange, the fair market value shall be equal to the value per share
as determined in good faith by the Board of Directors of the Company pursuant to
Section 11(n).
Subject to the provisions of Section 7 hereof, upon such surrender of
Warrant Certificates and payment of the Exercise Price, the Company shall issue
and cause to be delivered with all reasonable dispatch but in no event later
than five Business Days after such surrender to or upon the written order of the
holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants together with cash as provided in Section 13;
provided, however, that if any consolidation, merger or lease or sale of assets
is proposed to be effected by the Company as described in subsection (m) of
Section 11 hereof, or a tender offer or an exchange offer for shares of Common
Stock of the Company shall be made, upon such surrender of Warrant Certificates
and payment of the Exercise Price as aforesaid, the Company shall, as soon as
possible, but in any event not later than two Business Days thereafter, issue
and cause to be delivered the full number of Warrant Shares issuable upon the
exercise of such Warrants in the manner described in this sentence together with
cash as provided in Section 13. Such certificate or certificates shall be deemed
to have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares
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as of the date of the surrender of such Warrant Certificates and payment of the
Exercise Price.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part and, in the event that a
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new Warrant Certificate or Certificates evidencing the remaining
Warrant or Warrants shall be issued, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrant Certificate or
Certificates pursuant to the provisions of this Section 6 and of Section 3
hereof, and the Company, whenever required by the Warrant Agent, will supply the
Warrant Agent with Warrant Certificates duly executed on behalf of the Company
for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be
disposed of by the Warrant Agent in a manner satisfactory to the Company. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such
Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the holders during
normal business hours at its office. The Company shall supply the Warrant Agent
from time to time with such numbers of copies of this Agreement as the Warrant
Agent may request.
SECTION 7. Payment of Taxes. The Company shall pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
Person or Persons requesting the issuance thereof shall 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.
SECTION 8. Mutilated or Missing Warrant Certificates. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may, in its discretion issue, and the Warrant Agent may countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant Certificates shall also comply
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with such other reasonable regulations and pay such other reasonable charges as
the Company or the Warrant Agent may prescribe.
SECTION 9. Reservation of Warrant Shares. The Company shall at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 13. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder pursuant to Section 14 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 11 or 12 hereof to reduce the Exercise Price below the then par value
(if any) of the Warrant Shares, the Company will take any reasonable corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
SECTION 10. Obtaining Stock Exchange Listings. The Company will from
time to time take all commercially reasonable action which may be necessary so
that the Warrant Shares, immediately upon their issuance upon the exercise of
Warrants, will be listed on the principal securities exchanges and markets
within the United States of America, if any, on which other shares of Common
Stock are then listed.
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 11 and under the
circumstances described in
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Section 12. For purposes of this Section 11, "Common Stock" means
shares now or hereafter authorized of any class of common stock of the Company
and any other stock of the Company, however designated, that has the right
(subject to any prior rights of any class or series of preferred stock) to
participate in any distribution of the assets or earnings of the Company without
limit as to per share amount.
(a) Adjustment for Change in Capital Stock. If the Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(3) combines its outstanding shares of Common Stock into
a smaller number of shares;
(4) makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any
shares of its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 11.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Rights Issue. If the Company issues any rights,
options or warrants entitling any Person to subscribe for Common Stock or
securities convertible into, or exchangeable or exercisable for, Common Stock at
an offering price which is less than the Current Market Price (as defined in
Section 11(f)) per share of Common Stock
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on the record date for such issuance (all of the foregoing, "Rights"),
the Exercise Price shall be adjusted in accordance with the formula:
S+NxP
---
M
E' = E x ---------
S+N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
S = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Current Market Price per share of Common Stock on the
record date.
For purposes of this subsection (b), the "offering price" shall include
the amount initially paid for such Rights plus the amount to be paid upon
exercise or conversion of such Rights.
The adjustment shall be made successively whenever any such Rights are
issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the Rights in the case of
Rights to be issued to the holders of Common Stock. If at the end of the period
during which such Rights are exercisable, not all Rights shall have been
exercised, the Exercise Price shall be immediately readjusted to what it would
have been if "N" in the above formula had been the number of shares actually
issued.
This subsection (b) does not apply to:
(1) Rights issued to Persons in a bona fide public offering
pursuant to a firm commitment underwriting or
(2) Rights issued to Persons who are not affiliates of the
Company in a bona fide private placement through a placement agent that
is a member firm of the National Association of Securities Dealers,
Inc. (the "NASD") (except to the extent that any discount from the
Current Market Price attributable to restrictions on transferability of
the Rights, as determined in good faith by the Board of Directors
pursuant to Section 11 (n) and described in a Board resolution which
shall be filed with the Warrant Agreement, shall exceed 10%).
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(c) Adjustment for Other Distributions. If the Company distributes to
all holders of its Common Stock any of its assets (including cash), debt
securities, preferred stock or any rights or warrants to purchase any such
securities, the Exercise Price shall be adjusted in accordance with the formula:
M - F
E' = E x ---------
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the Current Market Price per share of Common Stock on the
record date.
F = the fair market value determined in good faith by
the Board of Directors on the record date of the
assets, securities, rights or warrants to which a
holder of one share of Common Stock would be
entitled. The Board of Directors shall determine
the fair market value pursuant to Section 11(n)
based upon the trading prices of publicly traded
securities where applicable.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This subsection does not apply to rights, options, warrants or other
securities referred to in subsection (b) of this Section 11.
(d) Adjustment for Common Stock Issue. If the Company issues shares of
Common Stock for a consideration per share less than the Current Market Price
per share on the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted in accordance with the formula:
P
---
E' x E x S + M
----------
A
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
S = the number of shares outstanding immediately prior to the
issuance of such additional shares.
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P = the aggregate consideration received for the issuance of such
additional shares.
M = the Current Market Price per share on the date of issuance of
such additional shares.
A = the number of shares outstanding immediately after the issuance
of such additional shares.
The adjustment shall be made successively whenever any such issuance is
made and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (a), (b) and (c)
of this Section 11,
(2) the exercise of Warrants or options to purchase Common Stock, or
the conversion or exchange of other securities convertible or exchangeable for
Common Stock,
(3) Common Stock upon the exercise of rights or warrants issued to the
holders of Common Stock,
(4) Common Stock issued to shareholders of any Person that is not
affiliated with the Company and that merges into the Company in proportion to
their stock holdings of such Person immediately prior to such merger, upon such
merger,
(5) Common Stock issued to Persons in a bona fide public offering
pursuant to a firm commitment underwriting or
(6) Common Stock issued to Persons who are not affiliates of the
Company in a bona fide private placement through a placement agent that is a
member firm of the NASD (except to the extent that any discount from the Current
Market Price attributable to restrictions on transferability of the Common
Stock, as determined in good faith by the Board of Directors pursuant to Section
11(n) and described in a Board resolution which shall be filed with the Warrant
Agreement, shall exceed 10%).
(e) Adjustment for Convertible Securities Issue. If the Company issues
any securities convertible into or exchangeable for Common Stock (other than
securities issued in transactions described in subsections (b) and (c) of this
Section 11) for a consideration per share of Common Stock (based on the number
of shares of Common Stock initially deliverable upon conversion or exchange of
such securities) less than the Current Market Price per share on the date of
issuance of such securities, the Exercise Price shall be adjusted in accordance
with this formula:
P
-
E' = E x S + M
---------------
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S + D
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
S = the number of shares outstanding immediately prior
to the issuance of such securities.
P = the aggregate consideration received for the
issuance of such securities.
M = the Current Market Price per share on the date of
issuance of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for such securities at
the initial conversion or exchange rate.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had "D" in the above formula been
equal to the actual number of shares of Common Stock issued upon conversion or
exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders of any Person that is
not affiliated with the Company and that merges into the Company, or with a
subsidiary of the Company, in proportion to their stock holdings of such Person
immediately prior to such merger, upon such merger,
(2) convertible securities issued to Persons in a bona fide public
offering pursuant to a firm commitment underwriting or
(3) convertible securities issued to Persons who are not affiliates of
the Company in a bona fide private placement through a placement agent which is
a member firm of the NASD (except to the extent that any discount from the
Current Market Price attributable to restrictions on transferability of Common
Stock issuable upon conversion, as determined in good faith by the Board of
Directors pursuant to Section 1l(n) and described in a Board resolution which
shall be filed with the Warrant Agreement, shall exceed 10%).
16
(f) Current Market Price. The current market price per share of Common
Stock (the "Current Market Price") on any date is the average of the Quoted
Prices of the Common Stock for 30 consecutive trading days commencing 45 trading
days before the date in question. The "Quoted Price" of the Common Stock is the
last reported sales price of the Common Stock as reported by Nasdaq, National
Market System, or if the Common Stock is listed on a securities exchange, the
last reported sales price of the Common Stock on such exchange which shall be
for consolidated trading if applicable to such exchange. In the absence of one
or more such quotations, the Board of Directors of the Company shall determine
the Current Market Price pursuant to Section 11(n) in good faith on the basis of
such quotations.
(g) Consideration Received. For purposes of any computation respecting
consideration received pursuant to subsections (d) and (e) of this Section 11,
the following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions, discounts
or other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors pursuant to Section
11 (n), based upon the trading prices of publicly traded securities
where appropriate (irrespective of the accounting treatment thereof),
and described in a Board resolution which shall be filed with the
Warrant Agent; and
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (1) and (2) of
this subsection).
(h) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Price need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Price. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11(h) shall be made to the nearest
1/1000th of a cent or to the nearest 1/1000th of a share, as the case may be.
(i) When No Adjustment Required. No adjustment need be made for a
transaction referred to in Subsections (a), (b), (c), (d) or (e) of this Section
11 if Warrant
17
holders are to participate in the transaction on a basis and with notice that
the Board of Directors determines to be fair and appropriate in light of the
basis and notice on which holders of Common Stock participate in the
transaction.
No adjustment need be made for rights to purchase Common Stock pursuant
to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(j) Notice of Adjustment. Whenever the Exercise Price is adjusted, the
Company shall provide the notices required by Section 14 hereof.
(k) Voluntary Reduction. The Company from time to time may reduce the
Exercise Price by any amount for any period of time if the period is at least 20
days and if the reduction is irrevocable during the period; provided, however,
that in no event may the Exercise Price be less than the par value of a share of
Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail to
Warrant holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state the reduced Exercise Price and the period it will be in
effect.
A reduction of the Exercise Price does not change or adjust the
Exercise Price otherwise in effect for purposes of subsections (a), (b), (c),
(d) and (e) of this Section 11.
(l) Notice of Certain Transactions. If:
(1) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to subsections (a), (b), (c),
(d) or (e) of this Section 11 and if the Company does not arrange for
Warrant holders to participate pursuant to subsection (i) of this
Section 11;
(2) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (m) of this
Section 11; or
(3) there is a liquidation or dissolution of the Company;
then the Company shall mail to Warrant holders a notice stating the proposed
record date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
18
(m) Reorganization of Company. If the Company consolidates or merges
with or into, or transfers or leases all or substantially all its assets to, any
Person, upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the holder of a Warrant would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised the Warrant
immediately before the effective date of the transaction. Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than the Company, or the Person to which
such sale or conveyance shall have been made, shall enter into a supplemental
Warrant Agreement so providing and further providing for adjustments which shall
be as nearly equivalent as may be practical to the adjustments provided for in
this Section 11. The successor Company shall mail to Warrant holders a notice
describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of Warrants under
the supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement.
If this subsection (m) applies, subsections (a), (b), (c), (d) and (e)
of this Section 11 do not apply.
(n) Company Determination not Final. Any determination that the Company
or its Board of Directors must make pursuant to this Agreement shall be made in
good faith and shall be binding on the holders of Warrants, except as set forth
herein. The Company shall give the Warrant Agent and each holder of Warrants
written notice of any such determination by the Company or its Board of
Directors. If a majority of the holders of the Warrants do not agree with any
such determination by the Company or its Board of Directors, such holders may
request, in a notice delivered to the Company and the Warrant Agent not later
than 30 days after the date on which the holders received notice of such
determination from the Company, that such determination be made by an investment
banking firm (or, if an investment banking firm is generally not qualified to
render such a determination, an appraisal firm) of recognized national standing,
which determination shall be final and binding on the Company and the holders of
Warrants, absent manifest error.
(o) Warrant Agent Disclaimer. The Warrant Agent has no duty to
determine when an adjustment under this Section 11 should be made, how it should
be made or what it should be. The Warrant Agent has no duty to determine whether
any provisions of a supplemental Warrant Agreement under subsection (m) of this
Section 11 are correct. The Warrant Agent makes no representation as to the
validity or value of any securities or assets issued upon exercise of Warrants.
The Warrant Agent shall not be responsible for the Company's failure to comply
with this Section.
(p) When Issuance or Payment May Be Deferred. In any case in which this
Section 11 shall require that an adjustment in the Exercise Price be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the
19
Warrant Shares and other capital stock of the Company, if any, issuable
upon such exercise over and above the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis of the Exercise
Price and (ii) paying to such holder any amount in cash in lieu of a fractional
share pursuant to Section 13; provided, however, that the Company shall deliver
to such holder a due xxxx or other appropriate instrument evidencing such
holder's right to receive such additional Warrant Shares, other capital stock
and cash upon the occurrence of the event requiring such adjustment.
(q) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to this Section 11, each Warrant outstanding prior to
the making of the adjustment in the Exercise Price shall thereafter evidence the
right to receive upon payment of the adjusted Exercise Price that number of
shares of Common Stock (calculated to the nearest hundredth) obtained from the
following formula:
N' = N x E
-
E'
where:
N' = the adjusted number of Warrant Shares issuable upon
exercise of a Warrant by payment of the adjusted
Exercise Price.
N = the number or Warrant Shares previously issuable
upon exercise of a Warrant by payment of the
Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(r) Form of Warrants. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Agreement.
SECTION 12. No Dilution or Impairment, Capital and Ownership Structure.
If any event shall occur as to which the provisions of Section 11 are not
strictly applicable but the failure to make any adjustment would adversely
affect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such Section, then, in each such case, the
Company shall appoint an investment banking firm of recognized national standing
that does not have a direct or material indirect financial interest in the
Company or any of its subsidiaries, which has not been, and, at the time it is
called upon to give independent financial advice to the Company, is not (and
none of its directors, officers, employees, affiliates or stockholders are) a
promoter, director or officer of the Company or any of its subsidiaries, which
shall give their opinion upon the adjustment, if any, on a basis consistent with
the essential intent and principles established in Section 11, necessary to
preserve, without dilution, the purchase rights represented by the Warrants.
Upon receipt of such opinion, the Company will promptly
20
mail a copy thereof to the holders of the Warrants and shall make the
adjustments described therein.
The Company will not, by amendment of its certificate of incorporation
or through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
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 the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock on the exercise of the Warrants from time to time outstanding and
(b) will not take any action which results in any adjustment of the Exercise
Price if the total number of Warrant Shares issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares of
Common Stock then authorized by the Company's certificate of incorporation and
available for the purposes of issue upon such exercise. A consolidation, merger,
reorganization or transfer of assets involving the Company covered by Section 11
(m) shall not be prohibited by or require any adjustment under this Section 12.
SECTION 13. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 13,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the Exercise Price on the day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 14. Notices to Warrant Holders. Upon any adjustment of the
Exercise Price pursuant to Section 11, the Company shall promptly thereafter (i)
cause to be filed with the Warrant Agent (with proof of acknowledgment) a
certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company (which may be the regular
auditors of the Company) setting forth the Exercise Price after such adjustment
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of Warrant
Shares (or portion thereof) issuable after such adjustment in the Exercise
Price, upon exercise of a Warrant and payment of the adjusted Exercise Price,
which certificate shall be conclusive evidence of the correctness of the matters
set forth therein, and (ii) cause to be given to each of the registered holders
of the Warrant Certificates, at its address appearing on the Warrant register,
written notice of such adjustments by first-class mail, postage pre-paid. Where
appropriate, such notice may be given in advance and included as a part of the
notice required to be mailed under the other provisions of this Section 14.
21
In case:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants;
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of consolidated earnings or
earned surplus or dividends payable in shares of Common Stock or distributions
referred to in subsection (a) of Section 11 hereof);
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (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 a tender offer or exchange offer for shares of
Common Stock;
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company proposes to take any action (other than actions of the
character described in Section 11(a)) which would require an adjustment of the
Exercise Price pursuant to Section 11;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of the Warrant Certificates at its
address appearing on the Warrant register, at least 20 days (or 10 days in any
case specified in clause (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 14 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to
22
receive notice as shareholders in respect of the meetings of shareholders or the
election of Directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company.
SECTION 15. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
all or substantially all of the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor warrant agent
acceptable to the Warrant holders. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in case
at that time any of the Warrant Certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or
23
responsibility to the Company or to any holder of any Warrant Certificate in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(e) the Company agrees to pay to the Warrant Agent compensation as
shall be agreed to in writing from time to time by the Company and the Warrant
Agent for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of this Agreement except as a result of its negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take another action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or bad
faith.
(i) The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of any Warrant Certificate to make or cause to be made any
24
adjustment of the Exercise Price or number of the Warrant Shares or other
securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable, and makes no representation with respect
thereto. The Warrant Agent shall not be responsible for the Company's failure to
comply with this Section.
SECTION 17. Change of Warrant Agent. If the Warrant Agent shall become
incapable of acting as Warrant Agent, the Company shall appoint a successor to
such Warrant Agent, provided such successor is acceptable to the Warrant holders
pursuant to Section 15 hereof. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in writing of
such incapacity by the Warrant Agent or by the registered holder of a Warrant
Certificate, then the retiring Warrant Agent or the registered holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to such Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company. The Company,
with the consent of the Administrative Agent (as defined in the Bridge Loan
Agreement), shall be entitled at any time to remove the Warrant Agent and
appoint a successor to such Warrant Agent. Such successor to the Warrant Agent
need not be approved by the Company or the former Warrant Agent. After
appointment the successor to the Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor to the Warrant Agent any property at the
time held by it hereunder and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to give any notice
provided for in this Section 17, however, or any defect therein, shall not
affect the legality or validity of the appointment of a successor to the Warrant
Agent.
SECTION 18. Notices to Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the
registered holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
PCA International, Inc.
000 Xxxxxxxx-Xxxx Xxxx Xxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Chief Financial Officer
Facsimile No.: (000) 000-0000
25
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
In case the Company shall fall to maintain such office or agency or
shall fall to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant Certificate to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
United States Trust Company of New York
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Corporate Trust Administration
Facsimile: (000) 000-0000
SECTION 19. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Warrant Certificates in order to cure any ambiguity
or to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not in any
way adversely affect the interests of the holders of Warrant Certificates.
SECTION 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 21. Termination. This Agreement shall terminate at 5:00 p.m.,
New York City time on August 25, 2006. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been
exercised. The provisions of Section 16 shall survive such termination.
SECTION 22. New York Law; Submission to Jurisdiction, Waiver of Jury
Trial. THIS AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY
HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT
26
FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN
NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS WARRANT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY
HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 23. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any Person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrant Certificates.
SECTION 24. 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 all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
PCA INTERNATIONAL, INC.
By:________________________________
Name
Title: Chief Financial Officer
United States Trust Company of New York
By:_______________________
Name
Title:
27
EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
REGISTRATION PROVISIONS OF SAID ACT HAVE BEEN COMPLIED WITH OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
EXERCISABLE ON OR BEFORE August 25, 2006
No.___ Warrants to purchase __________ shares
Warrant Certificate
PCA INTERNATIONAL, INC.
This Warrant Certificate certifies that
, or registered assigns, is the registered holder of Warrants expiring August
25, 2006 (the "Warrants") to purchase
shares Common Stock, par value (the "Common Stock"), of PCA International, Inc.,
a North Carolina ("the Company"). Each Warrant entities the holder upon exercise
to receive from the Company, one fully paid and nonassessable share of Common
Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price")
of $.20 payable in lawful money of the United States of America upon surrender
of this Warrant Certificate and payment of the Exercise Price at the office or
agency of the Warrant Agent, but only subject to the conditions set forth herein
and in the Warrant Agreement referred to on the reverse hereof. The Exercise
Price and number of Warrant Shares issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time on
August 25, 2006, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
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This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
IN WITNESS WHEREOF, PCA International, Inc., has caused this Warrant
Certificate to be signed by Officers, each by a facsimile of his or her
signature, and has caused a facsimile of its corporate seal to be affixed
hereunto or imprinted hereon.
Dated: August 25, 1999
PCA INTERNATIONAL, INC.
By:___________________________
Name:
Title:
Countersigned:
Dated:
United States Trust Company of New York
as Warrant Agent
By:_________________________
Authorized Signatory
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[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring August 25, 2006 entitling the holder on
exercise to receive shares of Common Stock, no par value, of the Company (the
"Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement,
dated as of August 25, 1999 (the "Warrant Agreement"), duly executed and
delivered by the Company to United States Trust Company of New York, a banking
corporation with a New York State Charter, as warrant agent (the "Warrant
Agent"), 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, limitation of rights, obligations, duties and immunities thereunder of
the Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company.
Warrants may be exercised at any time on or after August 25, 1999. The
holder of Warrants evidenced by this Warrant Certificate may exercise them by
surrendering this Warrant Certificate, with the form of election to purchase set
forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Warrant Agent. In the event that
upon any exercise of Warrants evidenced hereby the number of Warrants exercised
shall be less than the total number of Warrants evidenced hereby, there shall be
issued to the holder hereof or his assignee a new Warrant Certificate evidencing
the number of Warrants not exercised. No adjustment shall be made for any
dividends on any Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration rights
with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in an Equity Registration Rights
Agreement dated as of August 25, 1999 (the "Equity Registration Rights
Agreement"), among the Company and certain investors named therein. A copy of
the Equity Registration Rights Agreement may be obtained by the holder hereof
upon written request to the Company or the Warrant Agent.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in Person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant
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Certificate or Warrant Certificates of like tenor evidencing in the aggregate a
like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent 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 in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof 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, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
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[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____________________ shares
of Common Stock and herewith tenders payment for such shares to the order of PCA
INTERNATIONAL, INC. in the amount of $_________________ in accordance with the
terms hereof. The undersigned requests that a certificate for such shares be
registered in the name of ________________________, whose address is
______________________________ and that such shares be delivered to
_____________________________ whose address is ___________________________. If
said number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of such shares be registered in the name of
_______________________, whose address is ___________________________ and that
such Warrant Certificate be delivered ________________________ to whose address
is _____________________________.
Signature:
Date:
Signature Guaranteed:
