EXHIBIT 10.40
THIS WARRANT AND THE RIGHTS REPRESENTED HEREBY SHALL NOT BE TRANSFERABLE AT ANY
TIME UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, SHALL BE IN EFFECT WITH RESPECT TO THIS WARRANT OR THE SHARES ISSUABLE
HEREUNDER AT SUCH TIME, OR (ii) THE TRANSFER IS MADE IN COMPLIANCE WITH THE
PROVISIONS OF SECTION 5.
NUMBER: 50,000 SHARES
WARRANT
TO PURCHASE SHARES
OF
TIPPERARY CORPORATION
This certifies that, for value received, Xxxxx X. Xxxxxxxx, an individual
residing in Denver, Colorado ("Xxxxxxxx"), or his registered assigns, is
entitled to purchase from TIPPERARY CORPORATION, a Texas corporation (the
"Company"), fifty thousand (50,000) Shares, at the price of Four Dollars and
63/100 ($4.63) per Share (as defined in Section 3) at any time, or in part from
time to time in accordance with the following vesting schedule ("Vesting
Schedule"):
Date: Total Shares Subject to Exercise
From and after January 25, 1997 16,667
From and after January 25, 1998 16,667
From and after January 25, 1999 16,666
This Warrant shall expire, if not exercised prior thereto, two (2) years after
the resignation or removal of Xxxxxxxx as an employee of the Company. If
Xxxxxxxx should resign or be removed as an officer from the Company, then this
Warrant shall be vested only to the extent vested on such date of resignation or
removal according to the Vesting Schedule. The provisions as to adjustment of
the initial exercise price set forth above and the number of Shares to be issued
upon the occurrence of certain events (the Provisions as to Adjustment) are more
fully set forth in Annex I hereto. (Hereinafter, the initial exercise price set
forth above in this paragraph for the purchase of Shares upon the exercise of
this Warrant, as adjusted pursuant to the Provisions as to Adjustment, is
referred to as the "Exercise Price"). This Warrant is subject to the following
provision, terms and conditions:
1. EXERCISE OF WARRANT.
(a) The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part,(but not as to a fractional Share), by the surrender
of this Warrant at the Company's principal office located in Denver, Colorado
(or such other office or agency of the Company as the Company may designate by
notice in writing to the holder hereof at the address of such holder appearing
on the books of the Company at any time within the period above
named) and delivery of a completed subscription form in the form attached to
this Warrant as EXHIBIT A, and upon payment to the Company of the Exercise Price
for such Shares.
(b) Payment of the Exercise Price shall be made by a combination of any
one or more of the following: (i) by application, to the extent permitted by
applicable law, of (A) Shares or other securities of the Company owned by the
holder hereof, (B) Warrant Shares (as hereinafter defined) issuable upon the
exercise of this Warrant, (C) options, warrants or similar rights to acquire
Shares or other securities of the Company owned by the holder hereof, or (D)
other securities owned by the holder hereof which are convertible into Shares or
other securities of the Company, the value of any of which for such purpose
shall be the fair market value thereof determined in good faith by the Company
and the holder hereof at the time of such exercise; or (ii) in cash or by
certified check or bank draft in New York Clearing House funds.
(c) The Company agrees that any Shares so purchased by the exercise of
this Warrant shall be deemed to be issued to the holder hereof as the record
owner of such Shares as of the close of business on the date on which this
Warrant shall have been surrendered, the completed subscription form delivered,
and payment made for such Shares as aforesaid.
(d) Stock certificates evidencing Shares so purchased shall be delivered
to the holder hereof as promptly as practicable, after the rights represented by
this Warrant shall have been so exercised. If this Warrant shall have been
exercised only in part, and unless this Warrant has expired, a new Warrant
representing the number of Shares with respect to which this Warrant shall not
then have been exercised shall also be delivered to the holder hereof within
such time. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any stock certificate evidencing Shares upon exercise of
this Warrant except in accordance with the provisions, and subject to the
limitations, of Section 5. The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of stock
certificates and any new Warrants.
2. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
(a) All Shares which may be issued upon the exercise of the rights
represented by this Warrant (all such Shares, whether previously issued or
subject to issuance upon the exercise of this Warrant, are from time to time
referred to herein as "Warrant Shares") will, upon issuance, be duly authorized
and issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
(b) During the period within which the rights represented by this Warrant
may be exercised, and only insofar as the Vesting Schedule herein permits the
exercise of this Warrant, the Company will at all times have authorized and
reserved free of preemptive or other rights for
Page 2 - Warrant to Purchase Shares
the exclusive purpose of issuance upon exercise of the purchase rights evidenced
by this Warrant, a sufficient number of Shares to provide for the exercise of
rights represented by this Warrant.
(c) The Company will not, by amendment or restatement of the Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issuance or sale of securities or otherwise, avoid or take any action
which would have the effect of avoiding the performance of any of the terms to
be performed hereunder by the Company, but will at all times in good faith carry
out all of the provisions of this Warrant and take all such action as may be
necessary or appropriate to protect the rights of the holder hereof against
dilution or other impairment and, in particular, will not permit the par value
of any Share to be or become greater than the then effective Exercise Price.
3. DEFINITION OF SHARES. As used herein, the term "Shares" shall mean
and include shares of the Common Stock, par value $.02 per share, of the Company
as are constituted and exist on the date hereof, and shall also include any
other class of the capital stock of the Company hereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect to the
rights of the holders thereof to receive dividends and to participate in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, nor be subject at any time to
redemption by the Company; provided that the Shares receivable upon exercise of
this Warrant shall include only Shares of the type as are constituted and exist
on the date hereof or Shares resulting from any reclassification of the Shares
as provided for in paragraph (C) of the Provisions as to Adjustment.
4. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof as such to any rights whatsoever, including, without
limitation, voting rights, as a holder of Shares of the Company. No provisions
hereof, in the absence of affirmative action by the holder hereof to purchase
Shares, and no mere enumeration herein of the rights or privileges of such
holder, shall give rise to any liability of such holder as a holder of Shares of
the Company, regardless of who may assert such liability.
5. RESTRICTIONS ON TRANSFER.
(a) This Warrant shall not be exercisable by a transferee hereof and/or
transferable and the Warrant Shares shall not be transferable except upon the
conditions specified in this Section 5, which conditions are intended, among
other things, to ensure compliance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder (collectively the "Securities Act"), in
respect of the exercise and/or transfer of this Warrant and/or transfer of such
Warrant Shares.
Page 3 - Warrant to Purchase Shares
(b) This Warrant and the Warrant Shares shall not be transferable (except
for a transfer of this Warrant or the Warrant Shares in an offering registered
under the Securities Act, including, without limitation, a transfer in a
registered offering effected pursuant to Section 6, and any subsequent transfer)
unless, prior to any transfer, the holder hereof shall have received from its
transferee reasonable assurances that such person is aware that this Warrant and
the Warrant Shares have not been registered under the Securities Act and that
such person is acquiring this Warrant or the Warrant Shares for investment only
and not with the view to the disposition or public offering thereof (unless in
an offering registered under the Securities Act of 1933 or exempt therefrom),
and that such person is aware that the stock certificates evidencing the Warrant
Shares shall bear a legend restricting transfer and disposition thereof in
accordance with the Securities Act unless, in the opinion of counsel to the
Company, such legend may be omitted. In the event of any transfer of this
Warrant (other than a transfer in an offering registered under the Securities
Act, including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the holder hereof shall
provide an opinion of counsel, who shall be reasonably satisfactory to the
Company, that an exemption from the registration requirements of the Securities
Act is available.
(c) Any permitted subsequent holder of this Warrant shall be subject to
all the terms and conditions herein, and shall acknowledge, in writing, upon
receipt of this Warrant his or her acceptance of the terms and conditions
herein.
(d) To facilitate sales by a holder of this Warrant or Warrant Shares in
transactions qualifying under Rule 144 promulgated by the Commission under the
Securities Act, if available, the Company agrees to satisfy the current public
information requirements of said Rule 144, for as long as the Shares remain
registered under the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder (collectively the "Exchange Act"),
and to provide said holder upon request with such other information as such
holder may require for compliance with the provisions of said Rule 144.
6. REGISTRATION UNDER SECURITIES ACT.
(a) If the Company at any time proposes to register any issuance of its
securities under the Securities Act (other than a registration on Form S-8 in
connection with an employee stock purchase or option plan or on Form S-4 in
connection with mergers, acquisitions or exchange offerings), the Company will
at such time give prompt written notice to the holder hereof and to the holders
of all other Warrant Shares issuable from any outstanding Warrants (such holders
are hereinafter referred to as the "Prospective Sellers") of its intention to do
so. Upon the written request of a Prospective Seller, given within 30 days
after receipt of any such notice (which request shall state the intended method
of disposition of the Warrant Shares to be transferred by such Prospective
Seller), the Company shall use its best efforts to cause all Warrant Shares, the
holders of which (or of the Warrants to which the same are related), to the
extent vested in
Page 4 - Warrant to Purchase Shares
accordance with the Vesting Schedule, shall have so requested registration of
the transfer thereof, to be registered under the Securities Act, all to the
extent requisite to permit the sale or other disposition (in accordance with the
intended method thereof as aforesaid) by the Prospective Sellers of such Warrant
Shares. The rights granted pursuant to this Section 6(a) shall not be effective
with respect to the Prospective Seller in the case of an underwritten public
offering of securities of the Company by the Company unless each Prospective
Seller agrees to the terms and conditions, including underwriting discounts and
allowances, specified by the managing underwriter of such offering with respect
to such Warrant Shares. The Company shall have the right to reduce the number
of Warrant Shares of the Prospective Sellers to be included in a registration
statement pursuant to the exercise of the rights granted by this Section 6(a)
if, and to the extent, that the managing underwriter of such offering is of the
good faith opinion, supported by written reasons therefor, that the inclusion of
such Warrant Shares would materially adversely affect the marketing of the
securities of the Company to be offered; provided, that any such reduction of
the number of Warrant Shares the transfer of which is to be registered on behalf
of the Prospective Sellers shall be made on the basis of a pro rata reduction of
all Warrant Shares of all Prospective Sellers.
(b) If and whenever the Company is required by the provisions of this
Section 6 to use its best efforts to effect the registration of any transfer of
Warrant Shares under the Securities Act, the Company will, as expeditiously as
possible,
(i) prepare and file with the Commission a registration statement
with respect to such transfer and use its best efforts to cause
such registration statement to become and remain effective, but
not for any period longer than nine months;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective, and to comply with the
provisions of the Securities Act with respect to the transfer of
all securities covered by such registration statement, including,
without limitation, taking all necessary actions whenever the
Prospective Sellers of the Warrant Shares covered by such
registration statement shall desire to dispose of the same;
(iii) furnish to each Prospective Seller such number of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in
order to facilitate the disposition of the Warrant Shares owned
by such Prospective Seller and covered by such registration
statement;
Page 5 - Warrant to Purchase Shares
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each
Prospective Seller shall request, and use its best efforts to do
any and all other acts and things which may be reasonably
necessary to enable such Prospective Seller to consummate the
disposition in such jurisdiction of the Warrant Shares owned by
such Prospective Seller and covered by such registration
statement; provided that, notwithstanding the foregoing, the
Company shall not be required to register in any jurisdiction as
a broker or dealer of securities or to grant its consent to
service of process in any such jurisdiction solely on account of
such intended disposition by such Prospective Seller;
(v) furnish to the Prospective Sellers whose intended dispositions
are registered a signed copy of an opinion of counsel for the
Company, in form and substance acceptable to such Prospective
Sellers, to the effect that: (A) a registration statement
covering such dispositions of Warrant Shares has been filed with
the Commission under the Securities Act and has been made
effective by order of the Commission, (B) such registration
statement and the prospectus contained therein and any amendments
or supplements thereto comply as to form in all material respects
with the requirements of the Securities Act, and nothing has come
to such counsel's attention which would cause him to believe that
the registration statement or such prospectus, amendment or
supplement, at the time such registration statement or amendment
became effective or such supplement was filed with the
Commission, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of such
prospectus, amendment or supplement, in the light of the
circumstances under which they were made) not misleading
(provided that such counsel need not render any opinion with
respect to the financial statements and other financial,
engineering and statistical data included therein), and (C) to
the best of such counsel's knowledge, no stop order has been
issued by the Commission suspending the effectiveness of such
registration statement and no proceedings for the issuance of
such a stop order are threatened or contemplated;
(vi) furnish to the Prospective Sellers whose intended dispositions
are required a blue sky survey in the form and of the substance
customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and
describing the application provisions of the securities or blue
sky laws of each state or jurisdiction in which the Company
Page 6 - Warrant to Purchase Shares
shall be required, pursuant to Section 6(c)(iv), to register or
qualify such intended dispositions of such Warrant Shares, or, in
the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such
survey to, and to allow reliance thereon by, such Prospective
Sellers;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission under the Securities Act
and the Exchange Act, insofar as they relate to such registration
and such registration statement; and
(viii) use its best efforts to list such Warrant Shares on any
securities exchange on which any securities of the Company are
then listed or to admit such Warrant Shares for trading in any
national market system in which any securities of the Company are
then admitted for trading, if the listing or admission of such
securities is then permitted under the rules of such exchange or
system.
(c) With respect to the registration by the Company of transfers of
Warrant Shares under the Securities Act pursuant to Section 6(a), the Company
shall pay all expenses incurred by it in complying with this Section 6
(including, without limitation, all registration and filing fees, printing
expenses, blue sky fees and expenses, costs and expenses of audits, and
reasonable fees and disbursements of counsel for the Company and special counsel
designated by Prospective Sellers owning a majority of the Warrant Shares
covered by such registration, but specifically excluding any underwriting
discounts and allowances that are allocable to the Warrant Shares being sold by,
and which shall be paid by, the Prospective Sellers; provided, however, that if
any registration statement filed with the Commission by the Company under
Section 6(a) shall not be declared effective by the Commission, such attempted
registration shall not constitute a registration under this Section 6(c).
(d) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6 that each Prospective Seller, the
transfer of whose Warrant Shares is registered or to be registered under each
such registration, shall furnish to the Company such written information
regarding the securities held by such Prospective Seller as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
(e) (i) In the event of any registration of any transfer of Warrant
Shares under the Securities Act pursuant to this Section 6, the Company will
indemnify and hold harmless each Prospective Seller of such securities, each of
its officers, directors and partners, and each other person, if any, who
controls such Prospective Seller within the meaning of the Securities Act, and
Page 7 - Warrant to Purchase Shares
each underwriter, if any, who participates in the offering of such securities,
against any losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which each Prospective Seller, officer, director
or partner, controlling person or underwriter may become subject under the
Securities 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, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any 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, or any violation by the Company of the
Securities Act, and will reimburse such Prospective Seller and each of its
officers, directors and partners, and each such controlling person or
underwriter, for any legal or any other expenses reasonably incurred by such
Prospective Seller or its officers, directors and partners or controlling
persons or by each such underwriter, in connection with investigating or
defending any such loss, claim, damage, liability or action; 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 or prospectus or such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Prospective Seller specifically for use in the preparation thereof. In the
event of any registration by the Company or any transfer of securities under the
Securities Act pursuant to this Section 6, each Prospective Seller of Warrant
Shares covered by such registration will indemnify and hold harmless the
Company, each other person, if any, who controls the Company within the meaning
of the Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect to the written information relating to such Prospective
Seller furnished to the Company by such Prospective Seller aforesaid.
(ii) Each indemnified party shall, as promptly as practicable upon
receipt of notice of the commencement of any action against such indemnified
party or its officers, directors or partners, or any controlling person of such
indemnified party, in respect of which indemnity may be sought from an
indemnifying party on account of the indemnity agreement contained in Section
6(e)(i), notify the indemnifying party in writing of the commencement thereof.
The omission of such indemnified party to so notify the indemnifying party of
any such action shall not relieve the indemnifying party from any liability
which it may have on account of the indemnity agreement contained in Section
6(e)(i) to the extent that the failure to receive such notice within a
reasonable period of time shall not have caused harm, loss or damage to the
indemnifying party, provided that, conversely, if such failure to receive notice
shall have caused any harm, loss or damage to the indemnifying party, such
failure shall constitute a defense to any liability which such indemnifying
party may have on account of such agreement to the extent of
Page 8 - Warrant to Purchase Shares
the harm, loss or damage so caused. In case any such action shall be brought
against any indemnified party, its officers, directors and partners, or any such
controlling person, and such indemnified party shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in (and, to the extent that the indemnifying party shall wish, to
direct) the defense thereof at the indemnifying party's own expense, in which
event the defense shall be conducted by recognized counsel chosen by the
indemnifying party and approved by the indemnified party (whose approval shall
not unreasonably be withheld) and the indemnified party may participate in such
defense at its own expense (unless it is advised by counsel that actual or
potential differing interests or defenses exist or may exist, in which case such
expenses shall be paid by the indemnifying party, provided that the indemnifying
party shall not be required to pay the expenses for more than one counsel for
all such indemnified parties).
7. TRANSFER; OWNERSHIP. Subject to Section 5, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company referred to in Section 1 by the holder hereof in person or by a
duly authorized attorney, upon surrender of this Warrant, with an assignment,
acceptable to the Company, duly completed, at which time a new Warrant shall be
made and delivered by the Company, of the same tenor as this Warrant but
registered in the name of the transferee. The holder of this Warrant, by taking
or holding the same, consents and agrees that this Warrant, when endorsed in
blank, shall be deemed negotiable, and that the holder hereof, when this Warrant
shall have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant and to
transfer this Warrant on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered holder hereof as the owner hereof for all purposes. Any transfer
of this Warrant shall be made in compliance with the Securities Act and any
applicable statute, securities or blue sky laws.
8. EXCHANGE AND REPLACEMENT. Subject to Section 7, this Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 1, for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
Shares which may be purchased hereunder, each of such new Warrants to represent
the right to purchase such number of Shares as shall be designated by said
holder hereof at the time of such surrender. Upon receipt by the Company at the
office or agency referred to in Section 1 of evidence reasonably satisfactory to
it of the loss, theft or destruction of this Warrant and of indemnity or
security reasonably satisfactory to it (provided that the written indemnity of
the holder hereof shall be deemed reasonably satisfactory to the Company for
such purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any transfer, exchange or
replacement. The Company will pay all expenses and charges payable in
connection with the preparation, execution and delivery of Warrants pursuant to
Section 7 and this Section 8.
Page 9 - Warrant to Purchase Shares
9. NOTICES. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be delivered at, or sent by
certified or registered mail to, Xxxxx X. Xxxxxxxx, 0000 Xxxx Xxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxx 00000, or to such other address as shall have been furnished
to the Company in writing by the holder hereof. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
at, or sent by certified or registered mail to, 000 Xxxxxxxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxxxxx 00000, or to such other address as shall have been furnished in
writing to the holder hereof by the Company. Any notice so addressed and mailed
by registered or certified mail or otherwise delivered, shall be deemed to be
given when actually received by the addressee.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
11. MISCELLANEOUS. This Warrant will be binding upon any partnership or
corporation succeeding to the Company by consolidation or acquisition of all or
substantially all of the Company's assets, and upon any successor or assign of
the holder hereto. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against whom enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereon.
IN WITNESS WHEREOF, Tipperary Corporation has caused this Warrant to be
signed by its duly authorized officers, under its corporate seal, to be dated
April 1, 1996.
TIPPERARY CORPORATION
BY: /s/ Xxxxx X. Xxxxxxxx
ITS: Chief Financial Officer
(CORPORATE SEAL)
ATTEST: /s/ Xxxxxx X. Xxxxxx
ITS: Secretary
Page 10 - Warrant to Purchase Shares
Annex 1
TIPPERARY CORPORATION
PROVISIONS AS TO ADJUSTMENT OF
EXERCISE PRICE AND NUMBER OF SHARES
ISSUED UPON OCCURRENCE OF CERTAIN EVENTS
The Exercise Price and the number of Shares issuable upon the exercise of
the annexed Warrant to purchase shares of TIPPERARY CORPORATION, a Texas
corporation (herein and in this Warrant referred to as the "Company"), shall be
subject to adjustment from time to time as hereinafter provided; that in no
event shall the Exercise Price be increased to a price greater than Four
Dollars and 63/100 ($ 4.63) per Share, except as provided by paragraph (C).
Upon each adjustment of the Exercise Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of Shares obtained by multiplying the number of Shares
purchasable pursuant hereto immediately prior to such adjustment by a fraction,
the numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment. In making the adjustments to the Exercise Price and the number
of Shares issuable upon the exercise of this Warrant, the following provisions
shall be applicable:
(A) If and whenever the Company shall issue or sell any Shares for
consideration per Share that is less than the Exercise Price in effect
immediately prior to the time of such issue or sale at less than the Market
Price (as hereinafter defined) of such Shares on the date of such issue or sale,
then forthwith upon such issue or sale the Exercise Price in effect immediately
prior thereto shall be adjusted to an amount (calculated to the nearest cent)
determined by dividing (i) an amount equal to the sum of (a) the number of
Shares outstanding immediately prior to such issue or sale multiplied by the
Exercise Price in effect immediately prior to such issue or sale, and (b) the
consideration, if any, received by the Company upon such issue or sale by (ii)
the total number of Shares outstanding immediately after such issue or sale;
provided, however, that no adjustment shall be made hereunder by reason of:
(i) the grant of this Warrant or the issuance of Shares upon the exercise
of this Warrant or any other outstanding Warrant;
(ii) the grant by the Company of options to purchase shares in connection
with any purchase or option plan for the benefit of employees of the
Company, or any affiliates or subsidiaries thereof; or
(iii) the issuance (whether directly or by assumption in a merger or
otherwise) or sale (including any issuance or sale to holders of
Shares) of any securities convertible into or exchangeable for Shares
(such convertible or exchangeable securities are herein referred to as
"Convertible Securities"), or the grant of
rights to subscribe for or to purchase, or of options for the purchase
of (including any grant of such rights or options to holders of
Shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or
exchange such Convertible Securities or such rights or options are
immediately exercisable.
No adjustment of the Exercise Price shall be required to be made by the Company
and no notice hereunder must be given if the amount of any required adjustment
is less than 5% of the Exercise Price. In such case any such adjustment shall
be carried forward and shall be made (and notice thereof shall be given
hereunder) at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to not less
than 5% of the Exercise Price.
(B) For the purposes of paragraph (A), the following provisions (i)
through (vi), inclusive, shall also be applicable:
(i) If, at the time Shares are issued and sold upon the conversion or
exchange of Convertible Securities or upon the exercise of rights
or options previously granted by the Company, the price per Share
for which such Shares are issued (determined by dividing (a) the
total amount, if any, received by the Company as consideration for
such Convertible Securities or for the granting of such rights or
options, plus the aggregate amount of additional consideration
paid to the Company upon the conversion or exchange of such
Convertible Securities (which, if so provided in such Convertible
Securities, shall be deemed to be equal to the outstanding
principal amount of the indebtedness represented by such
Convertible Securities) or upon the exercise of such rights or
options, by (b) the total number of Shares issued upon the
conversion or exchange of such Convertible Securities or upon the
exercise of such rights or options) shall be less than the
Exercise Price in effect immediately prior to such issue, sale or
exercise, then the adjustments provided for by the first paragraph
of this Annex 1 and paragraph (A) shall be made. In making the
adjustment of the Exercise Price provided for by paragraph (A),
the amount described in clause (a) of this paragraph (B)(i) shall
be considered the consideration received by the Company upon the
issue or sale of the Shares for purposes of clause (i)(b) of
paragraph (A).
(ii) In case at any time any Shares or Convertible Securities or any
rights or options to purchase any Shares or Convertible Securities
shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Company
therefor without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or
Page 2 - Annex 1
allowed by the Company in connection therewith. In case any
Shares or Convertible Securities or any rights or options to
purchase any Shares or Convertible Securities shall be issued or
sold, in whole or in part, for consideration other than cash, the
amount of the consideration other than cash received by the
Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such
consideration as determined in good faith by the board of
directors of the Company, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions
paid or allowed by the Company in connection therewith; provided
that if the holder or holders of at least 66-2/3% of the Warrant
Shares purchasable under this Warrant shall request in writing,
the value of such consideration shall be determined by an
independent expert selected by such holders, the costs and
expenses of which shall be borne by the Company, and, if the value
of such consideration as so determined is less than the value
determined by the board of directors of the Company, the lesser
value shall be utilized in calculating the consideration per Share
received by the Company for purposes of making the adjustment
provided by paragraph (A). In the event of any merger or
consolidation of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any corporation, the Company shall be deemed to have
issued a number of Shares for stock or securities of such other
corporation computed on the basis of the actual exchange ratio on
which the transaction was predicated and for consideration that is
equal to the fair market value on the date of such transaction of
such stock or securities of the other corporation, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Shares issuable upon exercise of
this Warrant immediately prior to such merger, consolidation or
sale, for purposes of paragraph (A), shall be made after giving
effect to such adjustment of the Exercise Price.
(iii) The number of Shares outstanding at any given time shall not
include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the
account of the Company, and the disposition of any such Shares
shall be considered an issue or sale of Shares for purposes of
paragraph (A).
(iv) "Market Price" shall mean the lower of (a) the average closing
sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a
national market system for securities in which the Shares are
admitted to trading or (b) the average of the closing bid and
asked prices of Shares reported in the domestic over-the-counter
market, for the 20
Page 3 - Annex 1
trading days immediately prior to the day as of which the Market
Price is being determined. If the Shares are not listed on any
national securities exchange or admitted for trading in any
national market system or traded in the domestic over-the-counter
market, the Market Price shall be the higher of (y) the book value
of the Shares as determined by a firm of independent public
accountants of recognized standing selected by the board of
directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is
to be made or (z) the fair market value of the Shares determined
in good faith by the board of directors of the Company, provided
that if the holder or holders of at least 66-2/3% of the Warrant
Shares purchasable under the Warrant shall request in writing, the
fair market value of the Shares shall be determined by an
independent investment banking firm or other independent expert
selected by such holders and reasonably satisfactory to the
Company, which determination shall be as of a date which is within
15 days of the date as of which the determination is to be made.
(v) Anything herein to the contrary notwithstanding, in case the
Company shall issue any Shares in connection with the acquisition
by the Company of the stock or assets of any other corporation or
the merger of any other corporation into the Company under
circumstances where, on the date of the issuance of such Shares,
the consideration received for such Shares is less than the Market
Price of the Shares, but on the date the number of Shares was
determined, the consideration received for such Shares would not
have been less than the Market Price thereof, such Shares shall
not be deemed to have been issued for less than the Market Price.
(vi) Anything in clause (ii) of this paragraph (B) to the contrary
notwithstanding, in the case of an acquisition where all or part
of the purchase price is payable in Shares or Convertible
Securities but is stated as a dollar amount, where the Company
upon making the acquisition pays only part of a maximum dollar
purchase price which is payable in Shares or Convertible
Securities and where the balance of such purchase price is
deferred or is contingently payable under a formula related to
earnings over a period of time, (a) the consideration received for
any Shares or Convertible Securities delivered at the time of the
acquisition shall be deemed to be such part of the total
consideration as the portion of the dollar purchase price then
paid in Shares or Convertible Securities bears to the total
maximum dollar purchase price payable in Shares or Convertible
Securities and (b) in connection with each issuance of additional
Shares or Convertible Securities pursuant to the terms of the
agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the
portion of the dollar
Page 4 - Annex 1
purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in
Shares or Convertible Securities multiplied by a fraction, the
numerator of which shall be the number of Shares (or in the case
of Convertible Securities other than capital stock of the Company,
the aggregate principal amount of such Convertible Securities)
then issued and the denominator of which shall be the total number
of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of
such Convertible Securities) then and theretofore issued under
such acquisition agreement. In the event only a part of the
purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term
"total consideration" as used in this clause (vi) shall mean that
part of the aggregate consideration as is fairly allocable to the
purchase price paid in Shares or Convertible Securities in the
manner referred to in this clause (vi), as determined by the board
of directors of the Company.
(C) In the case at any time the Company shall subdivide its outstanding
Shares into a greater number of Shares, then from and after the record date for
such subdivision the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
increased, and, conversely, in case the outstanding Shares shall be combined
into a smaller number of Shares, then from and after the record date for such
combination the Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares purchasable upon the
exercise of this Warrant shall be correspondingly decreased.
(D) Unless the provisions of paragraph (E) apply, if any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of all
or substantially all of its assets to another corporation, shall be effected in
such a way that holders of Shares (or any other securities of the Company then
issuable upon the exercise of this Warrant) shall be entitled to receive stock,
securities or assets with respect to or exchange for Shares (or such other
securities) then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the Shares (or other securities) of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
Shares (or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for
Page 5 - Annex 1
adjustment of the Exercise Price and of the number of Shares (or other
securities) purchasable upon the exercise of this Warrant and for the
registration thereof as provided in Section 6 of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof (including
an immediate adjustment, by reason of such consolidation, merger or sale, of the
Exercise Price to the value of the Shares (or other securities) reflected by the
terms of such consolidation, merger or sale if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). In the event of a consolidation or merger of the Company with
or into another corporation as a result of which a greater or lesser number of
securities of the surviving corporation are issuable to holders of Shares in
respect of the number of Shares outstanding immediately prior to such
consolidation or merger, then the Exercise Price in effect immediately prior to
such consolidation or merger shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding Shares. The Company
shall not effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof the surviving or successor
corporation (if other than the Company) resulting from such consolidation or
merger of the corporation purchasing such assets shall assume, by written
instrument executed and mailed to the registered holder hereof at the last
address of such holder appearing on the books of the Company, the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and containing the express assumption of such surviving or successor
corporation of the due performance of every provision of this Warrant to be
performed by the Company and of all liabilities and obligations of the Company
hereunder.
(E) In the event of a change in control of the Company, as defined in this
paragraph (E), then the Board of Directors shall accelerate the exercise date of
the Warrant or make this Warrant fully vested and exercisable and, in its sole
discretion, may take any or all of the following actions: (a) grant a cash bonus
award to any holder of this Warrant in an amount necessary to pay the Exercise
Price of all or any portion of the Warrant then held by such person; (b) pay
cash to any holder of this Warrant in exchange for the cancellation of the
holder's Warrant in an amount equal to the difference between the Exercise Price
of such Warrant and the greater of the tender offer price for the underlying
Shares or the Market Price of the Shares on the date of the cancellation of the
Warrant; and (c) make any other adjustments or amendments to this Warrant. For
purposes of this paragraph (E), a "change in control" shall be deemed to have
occurred if (a) any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended ("1934 Act"),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the
then outstanding voting stock of the Company; or (b) at any time during any
period of three consecutive years after the date of this Warrant, individuals
who at the beginning of such period constitute the Board (and any new director
whose election by the Board or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election
Page 6 - Annex 1
was previously so approved) cease for any reason to constitute a majority
thereof; or (c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation.
(F) In case at any time the Company shall pay any dividend on or make any
other distribution with respect to Shares (or any other securities of the
Company then issuable upon the exercise of the Warrant) that is payable in
Shares, Convertible Securities, any other securities of the Company or other
stock, securities or assets, other than cash, then thereafter, and in lieu of
any adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the holder of this Warrant, upon any exercise of the
rights represented hereby, shall be entitled to receive the number of Shares (or
other securities) being purchased upon such exercise and, in addition to and
without further payment, the Shares, Convertible Securities, other securities of
any company or other stock, securities or assets which the holder of this
Warrant would have received by way of such distributions if continuously since
the date of the Warrant (or, if this Warrant shall have been issued pursuant to
Section 7 of this Warrant, the date of the predecessor Warrant to which this
Warrant relates) such holder had been the record holder of the number of Shares
(or other securities), then being purchased and had retained all such Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets distributable with respect to such Shares (or other
securities) and, furthermore, all cash, stock, securities or assets payable as
dividends or distributions with respect to the foregoing and originating
directly or indirectly therefrom. The Company shall reserve and retain in
escrow from any such dividend or distribution of Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets, and from
any such dividends or distributions with respect thereto and originating
directly or indirectly therefrom, such Shares, Convertible Securities, other
securities of the Company and other stock, securities, assets and cash as shall
be necessary to fulfill its obligations to the holder hereof pursuant to this
paragraph (F).
(G) If at any time conditions arise by reason of action taken by the
Company, which in the good faith opinion of the board of directors of the
Company, are not adequately covered by the provisions of this Annex 1, and which
might materially adversely affect the rights of the holder of this Warrant, the
Company shall appoint a firm of independent public accountants of recognized
standing (which may be the regular accountants or auditors of the Company),
which shall give their opinion as to the adjustments, if any, in the Exercise
Price and the number of Shares purchasable upon the exercise of this Warrant, or
other change in the rights of the holder hereof, on a basis consistent with the
other provisions of this Annex 1, necessary to preserve without diminution the
rights of the holder hereof. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described therein.
Page 7 - Annex 1
(H)(i) Within ten (10) days of any adjustment of the Exercise Price or
change in the number of Shares purchasable upon the exercise of
this Warrant made pursuant to paragraphs (A), (B), (C) , or (F) or
any change in the rights of the holder of this Warrant by reason
of the occurrence of events described in paragraphs (D), (E), or
(F), the Company shall give written notice by certified or
registered mail to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which
notice shall describe the event requiring such adjustments (with
respect to any adjustment made pursuant to paragraphs (C), (D),
(E) or (F), the Exercise Price resulting from such adjustment, the
increase or decrease, if any, in the number of Shares purchasable
upon the exercise of this Warrant, or the other change in the
rights of such holder, and set forth in reasonable detail the
method of calculation of such adjustments and the facts upon which
such calculations are based. Within two (2) days of receipt from
the holder of this Warrant upon the surrender hereof for exercise
pursuant to Section 1 of this Warrant, and within three (3) days
of receipt from the holder hereof a written request therefor
(which request shall not be made more than once each calendar
quarter), the Company shall give written notice by certified or
registered mail to such holder at his address as shown on the
books of the Company of the Exercise Price in effect as of the
date of receipt by the Company of this Warrant for exercise, or
the date of receipt of such written request, and the number of
Shares purchasable or the number or amount of other shares of
stock, securities or assets receivable as of such date, and set
forth in reasonable detail the method of calculation of such
numbers; provided that no further adjustments to the Exercise
Price or the number of Shares purchasable or number or amount of
shares, securities or assets receivable on exercise of this
Warrant shall be made after receipt of this Warrant by the Company
for exercise.
(ii) Upon each adjustment of the Exercise Price and each change in the
number of Shares purchasable upon the exercise of this Warrant,
and change in the rights of the holder of this Warrant by reason
of the occurrence of other events herein set forth, then and in
each case, upon written request of the holder of this Warrant
(which request shall be made not more often than once each
calendar year), the Company will at its expense promptly obtain an
opinion of independent public accountants reasonably satisfactory
to each holder stating the then effective Exercise Price and the
number of Shares then purchasable, or specifying the other shares
of stock, securities or assets and the amount thereof then
receivable, and setting forth in reasonable detail the method of
calculation of such numbers and the facts upon which such
calculations are based. The Company will promptly mail a copy of
such opinion to the registered holder hereof.
Page 8 - Annex 1
(I) In case at any time:
(i) The Company shall pay any dividend payable in capital stock on
its outstanding Shares or make any distribution (other than
regular cash dividends) to the holders of Shares;
(ii) The Company shall offer for subscription pro rata to the holders
of Shares any additional capital stock or other rights;
(iii) There shall be authorized any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation; or
(iv) There shall be authorized or commence a voluntary or involuntary
dissolution, liquidation or winding up of the Company.
then, in one or more of said cases, the Company shall give written notice by
certified or registered mail to Xxxxxxxx at the address of Xxxxxxxx as shown on
the books of the Company on the date on which (1) the books of the Company shall
close or a record shall be taken for such dividend, distribution, or
subscription rights, or (2) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall take
place or be voted upon by the shareholders of the Company, as the case may be.
Such notice shall also specify the date as of which the holders of record of
Shares shall participate in such dividend, distribution or subscription rights,
or shall be entitled to exchange their Shares for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be. Such written
notice shall be given at least thirty (30) days prior to the action in question
and no less than thirty (30) days prior to the record date or the date on which
the Company's books are closed in respect thereto.
Page 9 - Annex 1
