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JENKON INTERNATIONAL, INC.
and
MERIDIAN CAPITAL GROUP, INC.
XXXXXXXX, XXXXXX & COMPANY INCORPORATED
X.X. XXXXX & COMPANY INC.
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REPRESENTATIVES' WARRANT AGREEMENT
Dated as of July ___, 1998
REPRESENTATIVES' WARRANT AGREEMENT
THIS REPRESENTATIVES' WARRANT AGREEMENT (the "Agreement"), dated as of
July ___, 1998, is made and entered into by and between JENKON INTERNATIONAL,
INC., a Delaware corporation (the "Company"), MERIDIAN CAPITAL GROUP, INC.
and XXXXXXXX, XXXXXX & COMPANY INCORPORATED and X.X. XXXXX & COMPANY INC.
(collectively, the "Warrantholders" and each a "Warrantholder")).
The Company agrees to issue and sell, and the Warrantholders agree to
purchase, for the aggregate purchase price of $140, receipt of which is hereby
acknowledged by the Company, warrants, as hereinafter described (the
"Warrants"), to purchase up to an aggregate of 140,000 shares (the "Shares") of
the Company's Common Stock, $.001 par value (the "Common Stock"), in connection
with a public offering (the "Public Offering") by the Company of 1,400,000
shares of Common Stock, of which 1,100,000 shares are being sold by the Company
and 300,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"), pursuant to an Underwriting Agreement (the
"Underwriting Agreement"), dated as of July ___, 1998, among the Company, the
Selling Stockholders and the Warrantholders, as representatives of the several
Underwriters named in the Underwriting Agreement. The purchase and sale of the
Warrants shall occur on the Firm Closing Date, as defined in the Underwriting
Agreement, and be subject to the conditions to the Underwriters' obligations to
purchase shares of Common Stock thereunder.
In consideration of the foregoing, and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholders, for value received, hereby agree
as follows:
Section 1. TRANSFERABILITY AND FORM OF WARRANTS.
1.1 REGISTRATION. The Warrants shall be sold and issued to the
respective Warrantholders in the denominators shown on Schedule A to this
Agreement, shall be numbered and shall be registered on the books of the Company
when issued.
1.2 TRANSFER. The Warrants shall be transferable only on the
books of the Company maintained at its principal office in Vancouver,
Washington, or wherever its principal office may then be located, upon delivery
thereof duly endorsed by a Warrantholder or by its duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration or transfer, the Company shall
execute and deliver new Warrants to the persons entitled thereto.
1.3 LIMITATIONS ON TRANSFER OF THE WARRANTS. Subject to the
provisions of section 11 hereof, the Warrants shall not be sold, transferred,
assigned or hypothecated by a Warrantholder until one year after the effective
date of the registration statement filed in connection with the Public Offering,
except to (i) one or more persons, each of whom on the date of transfer is an
officer of any of the Warrantholders; (ii) a general partnership or general
partnerships, the general partners of which are any of the Warrantholders and
one or more persons, each of whom on the date of transfer is an officer of any
of the Warrantholders; (iii) a successor to a Warrantholder in merger or
consolidation; (iv) a purchaser of all or substantially all of a Warrantholder's
assets; or (v) any person receiving the Warrants from one or more of the persons
listed in this subsection 1.3 at such person's or persons' death pursuant to
will, trust or the laws of intestate succession. The Warrants may be divided or
combined, upon request to the Company by a Warrantholder, into a certificate or
certificates representing the right to purchase the same aggregate number of
Shares. Unless the context indicates otherwise, the term "Warrantholder" shall
include any transferee or transferees of the Warrants pursuant to this
subsection 1.3, and the term "Warrants" shall include any and all warrants
outstanding pursuant to this Agreement, including those
1.
evidenced by a certificate or certificates issued upon division, exchange,
substitution or transfer pursuant to this Agreement.
1.4 FORM OF WARRANTS. The text of the Warrants and of the form of
election to purchase Shares shall be substantially as set forth in Exhibit A
attached hereto. The number of Shares issuable upon exercise of the Warrants is
subject to adjustment upon the occurrence of certain events, all as hereinafter
provided. The Warrants shall be executed on behalf of the Company by its
President or by a Vice President, attested to by its Secretary or an Assistant
Secretary. A Warrant bearing the signature of an individual who was at any time
the proper officer of the Company shall bind the Company, notwithstanding that
such individual shall have ceased to hold such office prior to the delivery of
such Warrant or did not hold such office on the date of this Agreement.
The Warrants shall be dated as of the date of signature thereof by the
Company either upon initial issuance or upon division, exchange, substitution or
transfer.
1.5 LEGEND ON SHARES. Each certificate for Shares initially
issued upon exercise of the Warrants shall bear the following legend, unless, at
the time of exercise, such Shares are subject to an effective registration
statement under the Securities Act of 1933, as amended (the "Act"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH SECTION 11 OF THE AGREEMENT
PURSUANT TO WHICH THEY WERE ISSUED."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to an effective registration statement under
the Act of the securities represented thereby) shall also bear the above legend
unless, in the opinion of counsel satisfactory to the Company, the securities
represented thereby need no longer be subject to such restrictions.
Section 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the Warrantholder
to purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitled such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant certificate as so requested.
Section 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Subject to the terms of this Agreement, a Warrantholder
shall have the right, at any time during the period commencing at 9:00 A.M.,
California time, on __________, 1999 and ending at 5:00 P.M. California time, on
___________, 2003 (the "Termination Date"), to purchase from the Company up to
the number of fully paid and nonassessable Shares to which the Warrantholder may
at the time be entitled to purchase pursuant to the Warrants and this Agreement,
upon surrender to the Company, at its principal office, of the certificate
evidencing the Warrants to be exercised, together with the purchase form on the
reverse thereof duly filled in and signed, with signatures guaranteed, and upon
payment to the Company of the Warrant Price (as defined in and determined in
accordance with the provisions of this section 3 and sections 7 and 8 hereof),
for the number of Shares in respect of which
2.
such Warrants are then exercised, but in no event for less than 100 Shares
(unless less than an aggregate of 100 Shares are then purchasable under all
outstanding Warrants held by the Warrantholder).
(b) Payment of the aggregate Warrant Price shall be made in
cash or by check, or any combination thereof, or in the manner set forth in
paragraph (c) of this Section 3, upon such surrender of the Warrants and payment
of such Warrant Price as aforesaid and the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrantholder and in such name or names as the Warrantholder may designate a
certificate or certificates for the number of full Shares so purchased upon the
exercise of the Warrant, together with cash, as provided in section 9 hereof, in
respect of any fractional Share otherwise issuable upon such surrender. 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 securities as of the date of surrender of the Warrants and
payment of the Warrant Price, as aforesaid, notwithstanding that the certificate
or certificates representing such securities shall not actually have been
delivered or that the stock transfer books of the Company shall then be closed.
The Warrants shall be exercisable, at the election of the Warrantholder, either
in full or from time to time in part and, in the event that a certificate
evidencing the Warrants is exercised in respect of less than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining portion of the Warrants will be issued by the Company.
(c) At the option of a Warrantholder, in lieu of exercising
the Warrants by paying the Warrant Price in cash or by check, the Warrantholders
may exercise such Warrant in whole or in part in a "cashless" or "net-issue"
exercise. In such event, the Warrantholder will deliver the Warrants to the
Company with a notice stating the number of shares to be delivered to the
Warrantholders and the number of shares with respect to which the Warrant are
being surrendered in payment of the aggregate Warrant Price for the shares to be
delivered to the Warrantholder and for the shares as to which the Warrants are
being surrendered for exercise. For purposes of this provision, all shares as
to which the Warrant is surrendered will be valued at the Current Market Price
(as defined in section 9 below). The notice accompanying the Warrants shall
also set forth the number of shares, if any, remaining subject to the Warrants.
Section 4. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of the Warrants or the
Shares; provided, however, the Company shall not be required to pay any tax
which may be payable in respect of any secondary transfer of the Warrants or the
Shares.
Section 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing Warrants shall be mutilated, lost, stolen or destroyed,
the Company shall, at the request of the Warrantholder, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated certificate
or certificates, or in lieu of and substitution for the certificate or
certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrants. Applicants for such substitute Warrant
certificate or certificates shall also comply with such other reasonable
regulations and shall pay such other reasonable charges as the Company may
prescribe.
Section 6. RESERVATION OF SHARES. There has been reserved, and the
Company shall at all times keep reserved so long as the Warrants remain
outstanding, out of its authorized Common Stock, such number of shares of Common
Stock as shall be subject to purchase under the Warrants. Every transfer agent
for the Common Stock and other securities of the Company issuable upon the
exercise of the Warrants will be irrevocably authorized and directed at all
times to reserve such number of authorized shares and other securities as shall
be required for such purpose. The Company will keep a copy of this
3.
Agreement on file with every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Warrants. The
Company will supply every such transfer agent with duly executed stock and other
certificates, as appropriate, for such purpose and will provide or otherwise
make available any cash which may be payable as provided in section 9 hereof.
Section 7. WARRANT PRICE. The price per Share at which Shares shall be
purchasable upon the exercise of the Warrants (the "Warrant Price") shall be
$_______ subject to adjustment pursuant to section 8 hereof.
Section 8. ADJUSTMENT OF NUMBER OF SHARES. The number and kind of
securities purchasable upon the exercise of the Warrants and the Warrant Price
shall be subject to adjustment from time to time upon the happening of certain
events, as follows:
8.1 ADJUSTMENTS. In case the Company shall (i) pay a dividend in
Common Stock or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock, (iv) effect any increase or decrease
in the number of outstanding shares of Common Stock without receipt of
consideration by the Company, or (v) issue by reclassification of its Common
Stock other securities of the Company, the Warrant Price and the number of
Shares purchasable upon exercise of the Warrants immediately prior thereto shall
be proportionally adjusted so that the Warrantholders shall be entitled to
receive the kind and number of Shares or other securities of the Company which
they would have owned or would have been entitled to receive immediately after
the happening of any of the events described above, had the Warrants been
exercised at the Warrant Price immediately prior to the happening of such event
or any record date with respect thereto. Any adjustment made pursuant to this
subsection 8.1 shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
Except for purposes of this subsection 8.1, the term "Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, 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.
8.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection
8.1, no adjustment in respect of any dividends or distributions out of earnings
shall be made during the term of the Warrants or upon exercise of the Warrants.
8.3 CERTIFICATE OF ADJUSTMENTS. Whenever the number of Shares
purchasable upon the exercise of the Warrants is adjusted as herein provided,
the Company shall cause to be promptly mailed to the Warrantholders by first
class mail, postage prepaid, notice of such adjustment, certified by the chief
financial officer of the Company, setting forth the number of Shares purchasable
upon the exercise of the Warrants after such adjustment, a brief statement of
the facts requiring such adjustment and the computation by which such adjustment
was made.
8.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the
Warrantholders an agreement that the Warrantholders shall have the right
thereafter upon payment of the Warrant Price in effect immediately prior to such
action to purchase, upon exercise of the Warrants, the kind and amount of shares
and other securities and property which they would have owned or have been
entitled to receive after the happening of such consolidation,
4.
merger, sale or conveyance had the Warrants been exercised immediately prior top
such action. In the event of a merger described in Section 368(a)(2)(E) of the
Internal Revenue Code of 1986 in which the Company is the surviving corporation,
the right to purchase Shares under the Warrants shall terminate on the date of
such merger and thereupon the Warrants shall become null and void, but only if
the controlling corporation shall agree to substitute for the Warrants its
warrant which entitles the holder hereof to purchase upon its exercise the kind
and amount of shares and other securities and property which it would have owned
or been entitled to receive had the Warrants been exercised immediately prior to
such merger. Any such agreements referred to in this subsection 8.4 shall
provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in section 8 hereof. The provisions
of this subsection 8.4 shall similarly apply to successive consolidations,
merger, sales or conveyances.
8.5 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action
which would cause an adjustment effectively reducing the portion of the Warrant
Price allocable to each Share below the then par value per share of the Common
Stock issuable upon exercise of the Warrants, the Company will take any
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
Common Stock upon exercise of the Warrants.
8.6 INDEPENDENT PUBLIC ACCOUNTANT. The Company may retain a firm
of independent public accountants of recognized national standing (which may be
any such firm regularly employed by the Company) to make any computation
required under this section 8, and a certificate signed by such firm shall be
PRIMA FACIE evidence of the correctness of any computation made under this
section 8.
8.7 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any
adjustments in the number of securities issuable upon exercise of Warrants,
Warrant certificates theretofore or thereafter issued may continue to express
the same number of securities as are stated in the similar Warrant certificates
initially issuable pursuant to this Agreement. However, the Company may, at any
time in its sole discretion, make any change in the form of Warrant certificate
that it may deem appropriate and that does not affect the substance thereof; and
any Warrant certificate thereafter issued, whether upon registration or transfer
of, or in exchange or substitution for, an outstanding Warrant certificate, may
be in the form so changed.
Section 9. FRACTIONAL INTERESTS; CURRENT MARKET PRICE. The Company shall
not be required to issue fractional Shares on the exercise of the Warrants. If
any fraction of a Share would, except for the provisions of this section 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to then Current Market Price
multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Stock is traded in the
over-the-counter market and not in the Nasdaq National Market nor on any
national securities exchange, the average of the per share closing bid prices of
the Common Stock on the 30 consecutive trading days immediately preceding the
date in question, as reported by Nasdaq or an equivalent generally accepted
reporting service, or (ii) if the Common Stock is traded in the Nasdaq National
Market or on a national securities exchange, the average for the 30 consecutive
trading days immediately preceding the date in question of the daily per share
closing prices of the Common Stock in the Nasdaq National Market or on the
principal stock exchange on which it is listed, as the case may be. For
purposes of clause (i) above, if trading in the Common Stock is not reported by
Nasdaq, the bid price referred to in said clause shall be the lowest bid price
as reported in the "pink sheets" published by National Quotation Bureau,
Incorporated. The closing price referred to in clause (ii) above shall be the
last reported sale price or, in case no such reported sale takes place on such
day, the average of the reported closing bid and asked prices, in either case in
the Nasdaq National Market or on the national securities exchange on which the
Common Stock is then listed.
5.
Section 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDERS. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon a Warrantholder or its transferees any rights as a stockholder of the
Company, including the right to vote, receive dividends, consent or receive
notices as a stockholder in respect to any meeting of stockholders for the
election of directors of the Company or any other matter. If, however, at any
time prior to the expiration of the Warrants and prior to their exercise, any
one or more of the following events shall occur:
(a) any action which would require an adjustment pursuant to
subsection 8.1;
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall be
proposed;
or
(c) any dividend, distribution, subscription rights or other
rights are to be given to stockholders;
then the Company shall give notice in writing of such event to the
Warrantholders, as provided in section 14 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive such notice
or any defect therein shall not affect the validity of any action taken with
respect thereto.
Section 11. RESTRICTION ON TRANSFER; REGISTRATION RIGHTS.
(a) Each Warrantholder agrees that prior to making any
disposition of the Warrants or the Shares, other than to persons or entities
identified in clauses (i) through (vi), inclusive, of subsection 1.3 hereof, the
Warrantholder shall give written notice to the Company describing briefly the
manner in which any such proposed disposition is to be made; and no such
disposition shall be made if the Company has notified the Warrantholder that in
the opinion of counsel reasonably satisfactory to the Warrantholder a
registration statement or other notification or post-effective amendment thereto
(hereinafter collectively a "Registration Statement") under the Act is required
with respect to such disposition and no such Registration Statement has been
filed by the Company, and declared effective, if necessary, by, the Securities
and Exchange Commission (the "Commission").
(b) The Company shall be obligated to the owners of the
Warrants and the Shares to file a Registration Statement as follows:
(i) Whenever during the six-year period beginning on
July __, 1998 and ending on July __, 2004, the Company proposes to file with the
Commission a Registration Statement (other than as to securities issued pursuant
to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act or which a Form S-4 Registration Statement could be
used), it shall, at least 30 days prior to each such filing, give written notice
of such proposed filing to the Warrantholders and each holder of Shares at their
respective addresses as they appear on the records of the Company, and shall
offer to include and shall include in such filing any proposed disposition of
the Shares upon receipt by the Company, not less than 10 days prior to the
proposed filing date, of a request therefor setting forth the facts with respect
to such proposed disposition and all other information with respect to such
person reasonably necessary to be included in such Registration Statement. In
the event that the managing underwriter for said offering advises the Company in
writing that the inclusion of such securities in the
6.
offering would be materially detrimental to the offering, the Company shall
include in the Registration Statement the number of such securities that, in the
opinion of such managing underwriter, can be sold.
(ii) In addition to any Registration Statement
pursuant to subparagraph (i) above, during the four-year period beginning on
July [__], 1999 and ending on July [__], 2003, the Company will, as promptly
as practicable (but in any event within 60 days), after written request (the
"Request") by any of Meridian Capital Group, Inc., Xxxxxxxx, Xxxxxx & Company
Incorporated, X.X. Xxxxx & Company Inc. or by any person or persons holding
(or having the right to acquire by virtue of holding the Warrants) at least
50% of the shares of Common Stock which have been (or may be) issued upon
exercise of the Warrants, prepare and file at its own expense a Registration
Statement with the Commission and appropriate "blue sky" authorities
sufficient to permit the public offering of the Shares and will use its best
efforts at its own expense through its officers, directors, auditors and
counsel, in all matters necessary or advisable, to cause such Registration
Statement to become effective as promptly as practicable and to maintain such
effectiveness so as to permit resale of the Shares covered by the Request
until the earlier of the time that all such Shares have been sold or the
expiration of 90 days from the effective date of the Registration Statement;
provided, however, that the Company shall only be obligated to file one such
Registration Statement under this section 11(b)(ii).
(c) All fees, disbursements and out-of-pocket expenses (other
than the Warrantholders' brokerage fees and commissions and legal fees of
counsel to the Warrantholders, if any) in connection with the filing of any
Registration Statement under section 11(b) (or obtaining the opinion of counsel
and any no-action position of the Commission with respect to sales under Rule
144) and in complying with applicable securities and blue sky, laws shall be
borne by the Company. The Company at its expense will supply any Warrantholder
and any holder of Shares with copies of such Registration Statement and the
prospectus included therein and other related documents and any opinions and
no-action letters in such quantities as may be reasonably requested by the
Warrantholders or holder of Shares.
(d) The Company shall not be required by this section 11 to
file such Registration Statement if, in the opinion of counsel for the
Warrantholders and holders of Shares and the Company (or, should they not agree,
in the opinion of another counsel experienced in securities law matters
acceptable to counsel for such holders and the Company), the proposed offering
or other transfer as to which such Registration Statement is requested is exempt
from applicable federal and state securities laws and would result in all
purchasers or transferees obtaining securities which are not "restricted
securities," as defined in Rule 144 under the Act.
(e) The provisions of this section 11 and section 12 hereof
shall apply to the extent as provided herein if the Company chooses to file an
Registration Statement under Regulation A promulgated under the Act.
(f) The Company agrees that until all Shares have been sold
under a Registration Statement or pursuant to Rule 144 under the Act, it will
keep current in filing all materials required to be filed with the Commission in
order to permit the holders of shares to sell the same under Rule 144.
Section 12. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement
with respect to the Shares pursuant to section 11 hereof, the Company agrees to
indemnify and hold harmless the Warrantholders or any holder of such Shares and
each person, if any, who controls the Warrantholders or any holder of such
Shares within the meaning of the Act, against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to,
7.
all costs of defense and investigation and all attorneys' fees), to which the
Warrantholders or any holder of such Shares or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such Registration Statement, or any related preliminary
prospectus, final prospectus, or amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Warrantholders or the holder of such Shares specifically for use in the
preparation thereof. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) The Warrantholders and the holders of the Shares,
severally and not jointly, agree that they will indemnify and hold harmless the
Company, each other person referred to in subparts (1), (2) and (3) of Section
11(a) of the Act in respect of the Registration Statement and each person, if
any, who controls the Company within the meaning of the Act, against any losses,
claims, damages or liabilities (which shall, for all purposes of this Agreement,
include but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in such Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by the Warrantholders or such
holder of Shares specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the
Warrantholders or such holder of Shares may otherwise have.
(c) Promptly after receipt by an indemnified party under this
section 12 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this section 12, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to any indemnified
party otherwise than as to the particular item as to which indemnification is
then being sought solely pursuant to this section 12. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, reasonably assume the defense thereof,
subject to the provisions herein stated, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this section 12 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is a Warrantholder
8.
or a holder of Shares or a person who controls a Warrantholder or a holder of
Shares within the meaning of the Act, the fees and expenses of such counsel
shall be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action, including any impleaded parties,
include both a Warrantholder or a holder of Shares or such controlling person
and the indemnifying party and a Warrantholder or a holder of Shares or such
controlling person shall have been advised by such counsel that there may be one
or more legal defenses available to a Warrantholders or a holder of Shares or
controlling person which are not available to or in conflict with any legal
defenses which may be available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of a Warrantholder or a holder of Shares or such controlling person,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for the Warrantholders, the holders of
the Shares and controlling persons, which firm shall be designated in writing by
a majority in interest of such holders and controlling persons based upon the
value of the securities included in the Registration Statement). No settlement
of any action against an indemnified party shall be made without the consent of
the indemnified and the indemnifying parties, which shall not be unreasonably
withheld in light of all factors of importance to such parties.
Section 13. CONTRIBUTION. In order to provide for just and equitable
contribution under the Act in any case in which (i) a Warrantholder or any
holder of the Shares or controlling person makes a claim for indemnification
pursuant to section 12 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of section 12 hereof provide for indemnification in such
case or (ii) contribution under the Act may be required on the part of any of
the Warrantholders or any of the holders of the Shares or controlling person
thereof, then the Company and any of the Warrantholders or any such holder of
the Shares or controlling person shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by,
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or a
Warrantholder or holder of Shares or controlling person on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and such holders of
such securities and such controlling persons agree that it would not be just and
equitable if contribution pursuant to this section 13 were determined by pro
rata allocation or by any other method which does not take account of the
equitable considerations referred to in this section 13. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this section 13
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
Section 14. NOTICES. Any notice pursuant to this Agreement by the Company
or by the Warrantholders or a holder of Shares shall be in writing and shall be
deemed to have been duly given if delivered or mailed by certified mail, return
receipt requested:
9.
(a) If to a Warrantholder, or a holder of Shares, addressed
to the Warrantholder or holder of Shares c/o Meridian Capital Group, Inc., 0000
XxxXxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxx
Xxxxxxxxx.
(b) If to the Company addressed to it at 0000 X.X. 00xx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: President.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
Section 15. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Warrantholders, or the
holders of Shares shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 16. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not
merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of subsection 8.4 hereof are complied with.
Section 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in any schedule, exhibit, certificate or other instrument delivered by
or on behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf
of the parties to this Agreement, all representations, warranties and agreements
made by the parties to this Agreement or pursuant hereto shall survive.
Section 18. APPLICABLE LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of California and for all purposes
shall be construed in accordance with the laws of said State.
Section 19. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrantholders and the holders of Shares any legal or equitable right, remedy or
claim under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company, the Warrantholders and the holders of Shares.
10.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
JENKON INTERNATIONAL, INC.
By
-------------------------------
Xxxxx Xxxxxxx,
President and Chief Executive Officer
MERIDIAN CAPITAL GROUP, INC.
By
-------------------------------
Xxxx Xxxxxxxxx
XXXXXXXX, XXXXXX & COMPANY INCORPORATED
By
-------------------------------
Xxxxxxx Xxxxxxxxx
X.X. XXXXX & COMPANY INC.
By
-------------------------------
Xxxxxx Xxxxx
11.
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH SECTION 11
OF THE AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Warrant Certificate No. ___
REPRESENTATIVES' WARRANTS TO PURCHASE _________ SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.,
CALIFORNIA TIME, ON _________, 2003
JENKON INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received,_____________________________, the
registered holder hereof or assigns (the "Warrantholder"), is entitled to
purchase from JENKON INTERNATIONAL, INC. (the "Company"), at any time during the
period commencing at 9:00 A.M., California Time, on ____________, 1999, and
before 5:00 P.M., California time, on _________, 2003, at the purchase price per
Share of $____ (the "Warrant Price"), the number of shares of Common Stock of
the Company set forth above (the "Shares"). The number of Shares issuable upon
exercise of each Warrant evidenced hereby shall be subject to adjustment from
time to time as set forth in the Representatives' Warrant Agreement referred to
below.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided thereon) and simultaneous
payment of the Warrant Price at the principal office of the Company. Payment of
such price shall be made at the option of the Warrantholder, in cash or by check
or by "cashless" or "net-issue" exercise as permitted in the Representatives'
Warrant Agreement.
The Warrants evidenced hereby represent the right to purchase an
aggregate of up to ________ Shares and are issued under and in accordance
with a Representatives' Warrant Agreement, dated as of July ___, 1998 (the
"Representatives' Warrant Agreement"), among the Company, Meridian Capital
Group, Inc., Xxxxxxxx, Xxxxxx & Company Incorporated and X.X. Xxxxx &
Company Inc., and are subject to the terms and provisions contained in the
Representatives' Warrant Agreement, to all of which the Warrantholder by
acceptance hereof consents.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder a new Warrant Certificate in respect of
the Shares of Common Stock as to which the Warrants evidenced hereby shall not
have been exercised. These Warrants may be exchanged at the office of the
Company by surrender of this Warrant Certificate properly endorsed for one or
more new Warrants of the same aggregate number of Shares of Common Stock as here
evidenced by the Warrant or Warrants exchanged. No fractional Share of Common
Stock will be issued upon the exercise of rights to purchase hereunder, but the
Company shall pay the cash value of any fraction upon the exercise of one or
more Warrants as provided in the Representatives' Warrant Agreement. These
Warrants are transferable at the office of the Company in the manner and subject
to the limitations set forth in the Representatives' Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a stockholder of the Company.
JENKON INTERNATIONAL, INC.
Dated:__________________, 1998 By
--------------------------------------
ATTEST: [Seal]
-------------------------------
Secretary
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
JENKON INTERNATIONAL, INC.
PURCHASE FORM
JENKON INTERNATIONAL, INC.
---------------------------------
---------------------------------
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
__________ shares of Common Stock (the "Shares") provided for therein, and
requests that certificates for the Shares be issued in the name of:
--------------------------------------
(Please Print or Type Name, Address and Social Security Number)
--------------------------------------
--------------------------------------
--------------------------------------
and, if said number of shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the Shares purchasable under
the within Warrant Certificate be registered in the name of the undersigned
Warrantholders or their Assignees as below indicated and delivered to the
address stated below.
Dated:
---------------
Name of Warrantholders or Assignee:
---------------------------------------
(Please Print)
Address:
----------------------------------------
----------------------------------------
Signature:
----------------------------------------
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever, unless these
Warrants have been assigned.
Signature Guaranteed:
----------------------------
(Signature must be guaranteed by a financial institution that is a member of the
Stock Transfer Association approved medallion program such as STAMP, SEMP or
MSP.)
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(Name and Address of Assignee Must Be Printed or Typewritten)
--------------------------------------
--------------------------------------
--------------------------------------
the within Warrants, hereby irrevocably constituting and appointing
_____________________ Attorney to transfer said Warrants on the books of the
Company, with full power of substitution in the premises.
Dated:
--------------- ----------------------------------------
Signature of Registered Holder
Note: The signature on this assignment must correspond with the name as it
appears upon the face of the within Warrant Certificate in every
particular, without alteration or enlargement or any change whatever.
Signature Guaranteed:
----------------------------
(Signature must be guaranteed by a financial institution that is a member of the
Stock Transfer Association approved medallion program such as STAMP, SEMP or
MSP.)
