WARRANT
TO PURCHASE 160,000 SHARES OF COMMON STOCK
OF
ELECTRONIC PROCESSING, INC.
THIS CERTIFIES THAT, for good and valuable consideration, X. X. Xxxxxxxx &
Company (the "Underwriter"), or its registered assigns, is entitled to subscribe
for and purchase from Electronic Processing, Inc., a Missouri corporation (the
"Company"), at any time after __________, 1998, to and including ____________,
2002, One Hundred Sixty Thousand (160,000) fully paid and nonassessable shares
of the Common Stock of the Company at the price of ______________ per share (the
"Warrant Exercise Price"), subject to the antidilution provisions of this
Warrant. Reference is made to this Warrant in the Underwriting Agreement dated
___________ 1997, by and between the Company and the Underwriter. The shares
which may be acquired upon exercise of this Warrant are referred to herein as
the "Warrant Shares." As used herein, the term "Holder" means the Underwriter,
any party who acquires all or a part of this Warrant as a registered transferee
of the Underwriter, or any record holder or holders of the Warrant Shares issued
upon exercise, whether in whole or in part, of the Warrant. As used herein, the
term "Common Stock" means and includes the Company's presently authorized common
stock and shall also include any capital stock of any class of the Company
hereafter authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the Holders thereof to participate in dividends or in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company.
This Warrant is subject to the following provisions, terms and conditions:
1. EXERCISE; TRANSFERABILITY.
(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 of Common Stock),
by written notice of exercise (in the form attached hereto) delivered to the
Company at the principal office of the Company prior to the expiration of this
Warrant and accompanied or preceded by the surrender of this Warrant along with
a check in payment of the Warrant Exercise Price for such shares.
(b) This Warrant may not be sold, assigned, hypothecated, or otherwise
transferred until exercisable. Thereafter, this Warrant may not be sold,
assigned, hypothecated or otherwise transferred other than by will or pursuant
to the operation of law, except to a person who is an officer of the
Underwriter. Further, this Warrant may not be sold, transferred, assigned,
hypothecated or divided into two or more Warrants of smaller denominations, nor
may any Warrant shares issued pursuant to exercise of this Warrant be
transferred, except as provided in Section 7 hereof.
2. EXCHANGE AND REPLACEMENT. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by
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the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant; provided,
however, that if the Underwriter shall be such Holder, an agreement of indemnity
by such Holder shall be sufficient for all purposes of this Section 2. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. ISSUANCE OF THE WARRANT SHARES.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the
next section, certificates for the Warrant Shares so purchased shall be
delivered to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the right to
purchase the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be delivered to the Holder
within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
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5. ANTIDILUTION ADJUSTMENTS. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company payable in
Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into a greater
number of shares; or
(iii) combine outstanding shares of Common Stock, by reclassification or
otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to
the nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section 5.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to Section
5(a) above, the Holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Warrant Exercise Price the
number of shares, calculated to the nearest full share, obtained by multiplying
the number of shares specified in such Warrant (as adjusted as a result of all
adjustments in the Warrant Exercise Price in effect prior to such adjustment) by
the Warrant Exercise Price in effect prior to such adjustment and dividing the
product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a party,
or in case of any sale or conveyance to another corporation of the property of
the Company as an entirety
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or substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Company), there shall
be no adjustment under Subsection (a) of this Section above but the Holder of
each Warrant then outstanding shall have the right thereafter to convert such
Warrant into the kind and amount of shares of stock and other securities and
property which he would have owned or have been entitled to receive immediately
after such consolidation, merger, statutory exchange, sale, or conveyance had
such Warrant been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale, or conveyance and in any such
case, if necessary, appropriate adjustment shall be made in the application of
the provisions set forth in this Section with respect to the rights and
interests thereafter of any Holders of the Warrant, to the end that the
provisions set forth in this Section shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
and other securities and property thereafter deliverable on the exercise of the
Warrant. The provisions of this Subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
6. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. NOTICE OF TRANSFER OF WARRANT OR RESALE OF THE WARRANT SHARES.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Xxxxxx's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel to the Company and
satisfactory to the Company to prevent further transfers which would be in
violation of Section 5 of the Securities Act of 1933, as amended (the "1933
Act") and applicable state securities laws; and provided further that the
prospective transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company for the transfer or disposition
of the Warrant or Warrant Shares.
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(b) If in the opinion of either of the counsel referred to in this Section
7, the proposed transfer or disposition of this Warrant or such Warrant Shares
described in the written notice given pursuant to this Section 7 may not be
effected without registration or qualification of this Warrant or such Warrant
Shares the Company shall promptly give written notice thereof to the Holder, and
the Holder will limit its activities in respect to such as, in the opinion of
both such counsel, are permitted by law.
8. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the closing sale price reported by Nasdaq National Market or any national
securities exchange or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in Nasdaq
SmallCap Market-SM-, or if not listed on a national securities exchange or
quoted in Nasdaq SmallCap Market-SM-, the average of the last reported closing
bid and asked prices as reported by Metro Data Company, Inc. from quotations by
market makers in such Common Stock on the Minneapolis-St. Xxxx local
over-the-counter market.
9. REGISTRATION RIGHTS.
(a) If at any time after ___________, 1998 and prior to the end of the
two-year period following complete exercise of this Warrant or ____________,
2004, whichever occurs earlier, the Company proposes to register under the 1933
Act (except by a Form S-4 or Form S-8 Registration Statement or any successor
forms thereto) or qualify for a public distribution under Section 3(b) of the
1933 Act, any of its securities, it will give written notice to all Holders of
this Warrant, any Warrants issued pursuant to Section 2 and/or Section 3(a)
hereof, and any Warrant Shares of its intention to do so and, on the written
request of any such Holder given within twenty (20) days after receipt of any
such notice (which request shall specify the interest in this Warrant or the
Warrant Shares intended to be sold or disposed of by such Holder and describe
the nature of any proposed sale or other disposition thereof), the Company will
use its best efforts to cause all such Warrant Shares, the Holders of which
shall have requested the registration or qualification thereof, to be included
in such registration statement proposed to be filed by the Company; provided,
however, that if a greater number of Warrant Shares is offered for participation
in the proposed offering than in the reasonable opinion of the managing
underwriter of the proposed offering can be accommodated without adversely
affecting the proposed offering, then the amount of Warrant Shares proposed to
be offered by such Holders for registration, as well as the number of securities
of any other selling shareholders participating in the registration, shall be
proportionately reduced to a number deemed satisfactory by the managing
underwriter.
(b) Further, on a one-time basis at any time after the date on which
registration on Form S-3 (or sucessor form) becomes available to the Company or
____________ 1998, whichever occurs earlier, upon request by the Holder or
Holders of a majority in interest of this Warrant,
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of any Warrants issued pursuant to Section 2 and/or Section 3(a) hereof, and of
any Warrant Shares, the Company will promptly take all necessary steps to
register or qualify, on Form S-3 under the 1933 Act and the securities laws of
such states as the Holders may reasonably request, such number of Warrant Shares
issued and to be issued upon conversion of the Warrants requested by such
Holders in their request to the Company. The Company shall keep effective and
maintain any registration, qualification, notification, or approval specified in
this Paragraph (b) for such period as may be reasonably necessary for such
Holder or Holders of such Warrant Shares to dispose thereof and from time to
time shall amend or supplement the prospectus used in connection therewith to
the extent necessary in order to comply with applicable law.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following fees,
costs, and expenses: all registration, filing and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
and any other expenses relating to the sale of securities by the selling Holders
not expressly included above shall be borne by the selling Holders pro rata.
(d) The Company hereby indemnifies each of the Holders of this Warrant and
of any Warrant Shares, and the officers and directors, if any, who control such
Holders, within the meaning of Section 15 of the 1933 Act, against all losses,
claims, damages, and liabilities caused by (1) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (and as amended or supplemented if the Company shall have furnished
any amendments thereof or supplements thereto), any Preliminary Prospectus or
any state securities law filings; (2) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading except insofar as such losses, claims,
damages, or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Holder expressly for
use therein; and each such Holder by its acceptance hereof severally agrees that
it will indemnify and hold harmless the Company, each of its officers who signs
such Registration Statement, and each person, if any, who controls the Company,
within the meaning of Section 15 of the 1933 Act, with respect to losses,
claims, damages, or liabilities which are caused by any untrue statement or
alleged untrue statement, omission or alleged omission contained in information
furnished in writing to the Company by such Holder expressly for use therein.
10. ADDITIONAL RIGHT TO CONVERT WARRANT.
(a) The Holder of this Warrant shall have the right to require the Company
to convert this Warrant (the "Conversion Right") at any time after it is
exercisable, but prior to its expiration into shares of Company Common Stock
as provided for in this Section 10. Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of any
Warrant Exercise Price) that number of shares of Company Common Stock
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equal to the quotient obtained by dividing (x) the value of the Warrant at the
time the Conversion Right is exercised (determined by subtracting the aggregate
Warrant Exercise Price for the Warrant Shares in effect immediately prior to the
exercise of the Conversion Right from the aggregate Fair Market Value for the
Warrant Shares immediately prior to the exercise of the Conversion Right) by (y)
the Fair Market Value of one share of Company Common Stock immediately prior to
the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time or
from time to time after it is exercisable, prior to its expiration, on any
business day by delivering a written notice in the form attached hereto (the
"Conversion Notice") to the Company at the offices of the Company exercising the
Conversion Right and specifying (i) the total number of shares of Stock the
Holder will purchase pursuant to such conversion and (ii) a place and date not
less than one or more than 20 business days from the date of the Conversion
Notice for the closing of such purchase.
(c) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the Warrant and (ii) the Company will deliver to the Holder a
certificate or certificates for the number of shares of Company Common stock
issuable upon such conversion, together with cash, in lieu of any fraction of a
share, and (iii) the Company will deliver to the Holder a new warrant
representing the number of shares, if any, with respect to which the warrant
shall not have been exercised.
(d) Fair Market Value of a share of Common Stock as of a particular date
(the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the Nasdaq National Market, then the average closing or last sale
prices, respectively, reported for the ten (10) business days immediately
preceding the Determination Date,
(ii) If the Company's Common Stock is not traded on an exchange or on
the Nasdaq National Market but is traded on the Nasdaq SmallCap Market-SM-
or other over-the-counter market, then the average closing bid and asked
prices reported for the ten (10) business days immediately preceding the
Determination Date, and
(iii) If the Company's Common Stock is not traded on an exchange
or on the Nasdaq National Market, Nasdaq SmallCap Market-SM- or other
over-the-counter market, then the price established in good faith by the
Board of Directors.
IN WITNESS WHEREOF, Electronic Processing, Inc. has caused this Warrant to
be signed by its duly authorized officer and this Warrant to be dated
_____________, 1997.
Electronic Processing, Inc.
By
----------------------------
Its
---------------------------
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TO: ELECTRONIC PROCESSING, INC.
NOTICE OF EXERCISE OF WARRANT -- To Be Executed by the Registered Holder in
Order to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
______________________________
(Print Name)
Please insert social security
or other identifying number
of registered Holder of
certificate (______________) Address:
______________________________
______________________________
Date: ________________ ______________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
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ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto _____________________________ the right to purchase the securities of
Electronic Processing, Inc.
to which the within Warrant relates and appoints _____________, attorney, to
transfer said right on the books of Electronic Processing, Inc. with full power
of substitution in the premises.
Dated:________________ _____________________________
(Signature)
Address:
______________________________
______________________________
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CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 10)
TO: ELECTRONIC PROCESSING, INC.
The undersigned hereby irrevocably elects a cashless exercise of the right
of purchase represented by the within Warrant Certificate for, and to purchase
thereunder, ______________ shares of Common Stock, as provided for in Section 10
therein.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name__________________________________
(Please print name)
Address________________________________
______________________________________
Social Security No.___________________
Signature______________________________
NOTE: The above signature should correspond exactly with the name on the
first page of this Warrant Certificate or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
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