EXHIBIT 10.7
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
ORCHIDS PAPER PRODUCTS COMPANY
WARRANT FOR THE PURCHASE OF COMMON STOCK
This WARRANT (this "Warrant") of Orchids Paper Products Company, a
Delaware corporation (the "Company"), is being issued pursuant to that certain
Underwriting Agreement, dated as of [______], 2005, by and between the Company
and Taglich Brothers, Inc. (the "Underwriter") relating to a firm commitment
public offering (the "Offering") of 1,875,000 shares of common stock, par value
$0.001 per share (the "Common Stock"), of the Company underwritten by the
Underwriter.
FOR VALUE RECEIVED, the Company hereby grants to the Underwriter and its
permitted successors and assigns (collectively, the "Holder") the right to
purchase from the Company up to One Hundred Fifty Thousand (150,000) shares of
Common Stock (such shares underlying this Warrant, the "Warrant Shares"), at a
per share purchase price equal to $[_______] (the "Exercise Price"), subject to
the terms, conditions and adjustments set forth below in this Warrant.
1. VESTING OF WARRANT. This Warrant shall vest and become exercisable
on the one (1) year anniversary of the consummation of the Offering (the
"Vesting Date"). Except as otherwise provided for herein or as permitted by
applicable rules of the National Association of Securities Dealers, Inc., this
Warrant shall not be sold, transferred, assigned, pledged or hypothecated prior
to the Vesting Date.
2. EXPIRATION OF WARRANT. This Warrant shall expire on the five (5)
year anniversary of the effectiveness of the Offering (the "Expiration Date").
3. EXERCISE OF WARRANT. This Warrant shall be exercisable pursuant to
the terms of this Section 3.
3.1 Manner of Exercise.
(a) This Warrant may only be exercised by the Holder hereof
on or after the Vesting Date and on or prior to the Expiration Date, in
accordance with the terms and conditions hereof, in whole or in part (but
not as to fractional shares) with respect to any portion of this Warrant,
during the Company's normal business hours on
any day other than a Saturday or a Sunday or a day on which commercial
banking institutions in New York, New York are authorized or required by
law to be closed (a "Business Day"), by surrender of this Warrant to the
Company at its office maintained pursuant to Section 10.2(a) hereof,
accompanied by a written exercise notice in the form attached as Exhibit A
to this Warrant (or a reasonable facsimile thereof) duly executed by the
Holder, together with the payment of the aggregate Exercise Price for the
number of Warrant Shares purchased upon exercise of this Warrant. Upon
surrender of this Warrant, the Company shall cancel this Warrant document
and shall, in the event of partial exercise, replace it with a new Warrant
document in accordance with Section 3.3(b).
(b) Except as provided for below, each exercise of this
Warrant must be accompanied by payment in full of the aggregate Exercise
Price in cash by wire transfer in immediately available funds for the
number of Warrant Shares being purchased by the Holder upon such exercise.
The aggregate Exercise Price for the number of Warrant Shares being
purchased may, however, also be paid in full or in part at the election of
the Holder: (i) in the form of Common Stock owned by the Holder (based on
the Fair Market Value (as defined below) of such Common Stock on the date
of exercise), (ii) in the form of Warrant Shares withheld by the Company
from the Warrant Shares otherwise to be received upon exercise of this
Warrant having an aggregate Fair Market Value on the date of exercise
equal to the aggregate Exercise Price of the Warrant Shares being
purchased by the Holder, or (iii) by a combination of the foregoing,
provided that the combined value of all cash and the Fair Market Value of
any shares surrendered to the Company is at least equal to the aggregate
Exercise Price for the number of Warrant Shares being purchased by the
Holder.
(c) For purposes of this Warrant, the term "Fair Market
Value" means, with respect to a particular date, the average closing price
of the Common Stock for the immediately preceding ten (10) trading days on
the principal securities exchange or market on which shares of Common
Stock are listed or quoted, if the shares of Common Stock are so listed or
quoted or, if not so listed or quoted, as determined by the Company in
good faith and in a reasonable manner, based on the information available
to it.
3.2 When Exercise Effective. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the Business Day on which this Warrant shall have been duly surrendered to the
Company as provided in Sections 3.1 and 12 hereof, and, at such time, the Holder
in whose name any certificate or certificates for Warrant Shares shall be
issuable upon exercise as provided in Section 3.3 hereof shall be deemed to have
become the holder or holders of record thereof of the number of Warrant Shares
purchased upon exercise of this Warrant.
3.3 Delivery of Common Stock Certificates and New Warrant. As soon
as reasonably practicable after each exercise of this Warrant, in whole or in
part, and in any event within five (5) Business Days thereafter, the Company, at
its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the Holder hereof or, subject
to Sections 9 and 10 hereof, as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct:
2
(a) a certificate or certificates (with appropriate
restrictive legends, as applicable) for the number of duly authorized,
validly issued, fully paid and nonassessable Warrant Shares to which the
Holder shall be entitled upon exercise; and
(b) in case exercise is in part only, a new Warrant document
of like tenor, dated the date hereof, for the remaining number of Warrant
Shares issuable upon exercise of this Warrant after giving effect to the
partial exercise of this Warrant (including the delivery of any Warrant
Shares as payment of the Exercise Price for such partial exercise of this
Warrant).
4. CERTAIN ADJUSTMENTS. For so long as this Warrant is outstanding:
4.1 Mergers or Consolidations. If at any time after the date
hereof there shall be a capital reorganization (other than a combination or
subdivision of Common Stock otherwise provided for herein) resulting in a
reclassification to or change in the terms of securities issuable upon exercise
of this Warrant (a "Reorganization"), or a merger or consolidation of the
Company with another corporation, association, partnership, organization,
business, individual, government or political subdivision thereof or a
governmental agency (a "Persons" or the "Persons") (other than a merger with
another Person in which the Company is a continuing corporation and which does
not result in any reclassification or change in the terms of securities issuable
upon exercise of this Warrant or a merger effected exclusively for the purpose
of changing the domicile of the Company) (a "Merger"), then, as a part of such
Reorganization or Merger, lawful provision and adjustment shall be made so that
the Holder shall thereafter be entitled to receive, upon exercise of this
Warrant, the number of shares of stock or any other equity or debt securities or
property receivable upon such Reorganization or Merger by a holder of the number
of shares of Common Stock which might have been purchased upon exercise of this
Warrant immediately prior to such Reorganization or Merger. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the Holder after the
Reorganization or Merger to the end that the provisions of this Warrant
(including adjustment of the Exercise Price then in effect and the number of
Warrant Shares) shall be applicable after that event, as near as reasonably may
be, in relation to any shares of stock, securities, property or other assets
thereafter deliverable upon exercise of this Warrant. The provisions of this
Section 4.1 shall similarly apply to successive Reorganizations and/or Mergers.
4.2 Splits and Subdivisions; Dividends. In the event the Company
should at any time or from time to time effectuate a split or subdivision of the
outstanding shares of Common Stock or pay a dividend in or make a distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock (hereinafter referred to as the
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of the applicable record date (or the date of such
distribution, split or subdivision if no record date is fixed), the per share
Exercise Price shall be appropriately decreased and the number of Warrant Shares
shall
3
be appropriately increased in proportion to such increase (or potential
increase) of outstanding shares; provided, however, that no adjustment shall be
made in the event the split, subdivision, dividend or distribution is not
effectuated.
4.3 Combination of Shares. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share Exercise Price shall be
appropriately increased and the number of shares of Warrant Shares shall be
appropriately decreased in proportion to such decrease in outstanding shares.
4.4 Adjustments for Other Distributions. In the event the Company
shall declare a distribution payable in securities of other Persons, evidences
of indebtedness issued by the Company or other Persons, assets (excluding cash
dividends or distributions to the holders of Common Stock paid out of current or
retained earnings and declared by the Company's board of directors) or options
or rights not referred to in Sections 4.1, 4.2 or 4.3, then, in each such case
for the purpose of this Section 4.4, upon exercise of this Warrant, the Holder
shall be entitled to a proportionate share of any such distribution as though
the Holder was the actual record holder of the number of Warrant Shares as of
the record date fixed for the determination of the holders of Common Stock of
the Company entitled to receive such distribution.
5. NO IMPAIRMENT. The Company will not, by amendment of its articles of
incorporation or by-laws or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all of the terms and in the taking of all actions necessary or
appropriate in order to protect the rights of the Holder against impairment.
6. CHIEF FINANCIAL OFFICER'S REPORT AS TO ADJUSTMENTS. With respect to
each adjustment pursuant to Section 4 of this Warrant, the Company, at its
expense, will promptly compute the adjustment or re-adjustment in accordance
with the terms of this Warrant and cause its Chief Financial Officer to certify
the computation (other than any computation of the fair value of property of the
Company) and prepare a report setting forth, in reasonable detail, the event
requiring the adjustment or re-adjustment and the amount of such adjustment or
re-adjustment, the method of calculation thereof and the facts upon which the
adjustment or re-adjustment is based, and the Exercise Price and the number of
Warrant Shares or other securities purchasable hereunder after giving effect to
such adjustment or re-adjustment, which report shall be mailed by first class
mail, postage prepaid to the Holder. The Company will also keep copies of all
reports at its office maintained pursuant to Section 10.2(a) hereof and will
cause them to be available for inspection at the office during normal business
hours upon reasonable notice by the Holder or any prospective purchaser of the
Warrant designated by the Holder thereof.
7. RESERVATION OF SHARES. The Company shall, solely for the purpose of
effecting the exercise of this Warrant, at all times during the term of this
Warrant, reserve and keep available out of its authorized shares of Common
Stock, free from all taxes, liens and charges with respect to the issue thereof
and not subject to preemptive rights or other similar rights of shareholders of
the Company, such number of its shares of Common Stock as shall from time to
4
time be sufficient to effect in full the exercise of this Warrant. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect in full the exercise of this Warrant, in addition to such
other remedies as shall be available to Holder, the Company will promptly take
such corporate action as may, in the opinion of its counsel, be necessary to
increase the number of authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes, including without
limitation, using its best efforts to obtain the requisite shareholder approval
necessary to increase the number of authorized shares of Common Stock. The
Company hereby represents and warrants that all shares of Common Stock issuable
upon exercise of this Warrant shall be duly authorized and, when issued and paid
for upon exercise, shall be validly issued, fully paid and nonassessable.
8. REGISTRATION AND LISTING.
8.1 Definition of Registrable Securities; Majority. As used
herein, the term "Registrable Securities" means any shares of Common Stock
issuable upon the exercise of this Warrant, until the date (if any) on which
such shares shall have been transferred or exchanged and new certificates for
them not bearing a legend restricting further transfer shall have been delivered
by the Company and subsequent disposition of them shall not require registration
or qualification of them under the Securities Act or any similar state law then
in force. For purposes of this Warrant, the term "Majority", in reference to the
holders of Registrable Securities, shall mean in excess of fifty percent (50%)
of the then outstanding Warrant Shares (assuming the exercise of the entire
Warrant).
8.2 Required Registration.
(a) At any time on or after the Vesting Date and on or
before the Expiration Date, but in no event on not more than one (1)
occasion, upon the written request of the holders of the Registrable
Securities representing a Majority of such securities, the Company will
use its best efforts to effect the registration of the respective shares
of the holders of Registrable Securities under the Securities Act to the
extent requisite to permit the disposition thereof as expeditiously as
reasonably possible, but in no event later than 150 days from the date of
such request.
(b) Registration of Registrable Securities under this
Section 8.2 shall be on such appropriate registration form: (i) as shall
be selected by the Company, and (ii) as shall permit the disposition of
such Registrable Securities in accordance with this Section 8.2. The
Company agrees to include in any such registration statement all
information which the requesting holders of Registrable Securities shall
reasonably request, which is required to be contained therein. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities pursuant to this Section 8.2.
(c) A registration requested pursuant to this Section 8.2
shall not be deemed to have been effected: (i) unless a registration
statement with respect thereto has become effective or (ii) if, after it
has become effective, such registration is interfered with by any stop
order, injunction or other order or requirement of the Securities and
5
Exchange Commission (the "SEC") or other governmental agency or court of
competent jurisdiction for any reason, other than by reason of some act or
omission by a holder of Registrable Securities.
8.3 Incidental Registration Rights.
(a) If the Company, at any time on or after the Vesting Date
and on or before the five (5) year anniversary of the effectiveness of the
Offering, proposes to register any of its securities under the Securities
Act (other than in connection with a registration on Form S-4 or S-8 or
any successor forms) whether for its own account or for the account of any
holder or holders of its shares other than Registrable Securities (any
shares of such holder or holders (but not those of the Company and not
Registrable Securities) with respect to any registration are referred to
herein as, "Other Shares"), the Company shall each such time give prompt
(but not less than thirty (30) days prior to the anticipated effectiveness
thereof) written notice to the holders of Registrable Securities of its
intention to do so; provided, however, that in no event shall the Company
have the obligation to send any such notice, and the holders of
Registrable Securities will not have any registration rights under this
Section 8.3, if registration rights have been exercised two (2) times
pursuant to this Section 8.3 (except if the Company elected not to proceed
with any such registrations, withdrew such registrations or otherwise
failed to effect the offerings covered by such registrations). Upon the
written request of any such holder of Registrable Securities made within
twenty (20) days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such
holder), except as set forth in Section 8.3(b), the Company will use its
best efforts to effect the registration under the Securities Act of all of
the Registrable Securities which the Company has been so requested to
register by such holder, to the extent requisite to permit the disposition
of the Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the
securities which the Company proposes to register; provided, however, that
if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason in its sole discretion either to not register, to
delay or to withdraw registration of such securities, the Company may, at
its election, give written notice of such determination to such holder
and, thereupon, (i) in the case of a determination not to register, shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith), without prejudice,
however, to the rights of the holders of Registrable Securities entitled
to request that such registration be effected as a registration under
Section 8.2, (ii) in the case of a determination to delay registration,
shall be permitted to delay registering any Registrable Securities for the
same period as the delay in registering such other securities (including
the Other Shares), without prejudice, however, to the rights of the
holders of Registrable Securities entitled to request that such
registration be effected as a registration under Section 8.2 and (iii) in
the case of a determination to withdraw registration, shall be permitted
to withdraw registration, without prejudice, however, to the rights of the
holders of Registrable Securities entitled to request that such
registration be effected as a registration under
6
Section 8.2. No registration effected under this Section 8.3 shall relieve
the Company of its obligation to effect any registration upon request
under Section 8.2, nor shall any such registration hereunder be deemed to
have been effected pursuant to Section 8.2. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities pursuant to this Section 8.3.
(b) If the Company at any time proposes to register any of
its securities under the Securities Act as contemplated by this Section
8.3 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by a holder of Registrable
Securities, use its commercially reasonable efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such
underwritten offering shall inform the Company by letter of its belief
that inclusion in such distribution of all or a specified number of such
securities proposed to be distributed by such underwriters would interfere
with the successful marketing of the securities being distributed by such
underwriters (such letter to state the basis of such belief and the
approximate number of such Registrable Securities, such Other Shares and
shares held by the Company proposed so to be registered which may be
distributed without such effect), then the Company may, upon written
notice to such holder, the other holders of Registrable Securities, and
holders of such Other Shares, reduce pro rata in accordance with the
number of shares of Common Stock desired to be included in such
registration (if and to the extent stated by such managing underwriter to
be necessary to eliminate such effect) the number of such Registrable
Securities and Other Shares the registration of which shall have been
requested by each holder thereof so that the resulting aggregate number of
such Registrable Securities and Other Shares so included in such
registration, together with the number of securities to be included in
such registration for the account of the Company, shall be equal to the
number of shares stated in such managing underwriter's letter.
8.4 Registration Procedures. Whenever the holders of Registrable
Securities have properly requested that any Registrable Securities be registered
pursuant to the terms of this Warrant, the Company shall use its best efforts to
effect the registration of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective;
(b) notify such holders of the effectiveness of each
registration statement filed hereunder and prepare and file with the SEC
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to (i) keep
such registration statement effective and the prospectus included therein
usable for a period commencing on the date that such registration
statement is initially declared effective by the SEC and ending on the
earlier of (A) the date that all of the Registrable Securities covered by
such registration
7
statement have been sold pursuant to the registration statement, or (B)
the date the holders thereof receive an opinion of counsel to the Company
that all of the Registrable Securities may be freely traded without
registration under the Securities Act, under Rule 144(k) promulgated under
the Securities Act or otherwise; provided that the Company shall in no
event be required to keep any such registration in effect for a period in
excess of nine months from the date on which such holders are first free
to sell such Registrable Securities, and (ii) comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in accordance
with the intended methods of disposition by the sellers thereof set forth
in such registration statement;
(c) furnish to such holders such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such holders;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as such holders reasonably request and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such holders to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such holders; provided, however, that
the Company shall not be required to: (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph; (ii) subject itself to taxation in any such
jurisdiction; or (iii) consent to general service of process in any such
jurisdiction;
(e) notify such holders, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits any material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not materially
misleading, and, at the reasonable request of such holders, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in light of the circumstances in which they are made, not
materially misleading;
(f) Notwithstanding anything to the contrary in this
Warrant, the Company, upon notice to the Holders of Registrable
Securities, may suspend the use of the prospectus included in any
registration statement in the event that and for a period of time (a
"Blackout Period") not to exceed an aggregate of 60 days in any 180 day
period if (1) the Board of Directors of the Company determines that the
disclosure of an event, occurrence or other item at such time could
reasonably be expected to have a material adverse effect on the business,
operations or prospects of the Company or (2) the disclosure otherwise
relates to a material business transaction which has not been
8
publicly disclosed and the Board of Directors determines, in good faith,
that any such disclosure would jeopardize the success of such transaction
or that disclosure of the transaction is prohibited pursuant to the terms
thereto; provided that, upon the termination of such Blackout Period, the
Company promptly shall notify the Holders of Registrable Securities that
such Blackout Period has been terminated. Each Holder of Registrable
Securities agrees that upon receipt of the notice referred to in this
Section 8.4(f) (a "Suspension Notice"), such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
applicable registration statement until (i) such Holder has received
copies of a supplemented or amended prospectus, or (ii) such Holder is
advised in writing by the Company that the use of the prospectus may be
resumed, and has received copies of any additional or supplemental filings
that are incorporated by reference in the prospectus, except for those
available on the SEC's XXXXX website (in each case, the "Recommencement
Date"). Each Holder receiving a Suspension Notice hereby agrees that it
will either (i) destroy any prospectuses, other than permanent file
copies, then in such Holder's possession which have been replaced by the
Company with more recently dated prospectuses or (ii) deliver to the
Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the prospectus covering such
Registrable Securities that was current at the time of receipt of the
Suspension Notice. The time period regarding the effectiveness of such
registration statement set forth in Section 8.4(b) hereof shall be
extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the
Recommencement Date;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(h) make available for inspection by any underwriter
participating in any disposition pursuant to such registration statement,
and any attorney, accountant or other agent retained by any such
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, managers, employees and independent accountants to supply all
information reasonably requested by any such underwriter, attorney,
accountant or agent in connection with such registration statement;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
of the Company, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and, at the option of the Company,
Rule 158 thereunder;
(j) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending
the qualification of any Registrable Securities included in such
registration statement for sale in any jurisdiction, the Company shall use
its best efforts promptly to obtain the withdrawal of such order;
9
(k) use its best efforts to cause any Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the sellers thereof to consummate the disposition of such
Registrable Securities; and
(l) if the offering is underwritten, use its best efforts to
furnish on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such registration, an opinion dated such
date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters covering such issues as are
reasonably required by such underwriters.
8.5 Listing. The Company shall secure the listing of the Common
Stock underlying this Warrant upon each national securities exchange or
automated quotation system upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain such listing of
shares of Common Stock. The Company shall at all times comply in all material
respects with the Company's reporting, filing and other obligations under the
by-laws or rules of the American Stock Exchange (or such other national
securities exchange or market on which the Common Stock may then be listed, as
applicable).
8.6 Expenses. The Company shall pay all Registration Expenses
relating to the registration and listing obligations set forth in this Section
8. For purposes of this Warrant, the term "Registration Expenses" means: (a) all
registration, filing and NASD fees, (b) all reasonable fees and expenses of
complying with securities or blue sky laws, (c) all word processing, duplicating
and printing expenses, (d) the fees and disbursements of counsel for the Company
and of its independent public accountants, including the expenses of any special
audits or "cold comfort" letters required by or incident to such performance and
compliance, (e) premiums and other costs of policies of insurance (if any)
against liabilities arising out of the public offering of the Registrable
Securities being registered if the Company desires such insurance, if any, and
(f) reasonable fees and disbursements of one counsel for the selling holders of
Registrable Securities in an amount not to exceed $20,000; provided however,
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include (and such expenses shall be borne by
the Company): (i) salaries of Company personnel or general overhead expenses of
the Company, (ii) auditing fees, (iii) premiums or other expenses relating to
liability insurance required by underwriters of the Company, or (iv) other
expenses for the preparation of financial statements or other data, to the
extent that any of the foregoing either is normally prepared by the Company in
the ordinary course of its business or would have been incurred by the Company
had no public offering taken place. Registration Expenses shall not include any
underwriting discounts and commissions which may be incurred in the sale of any
Registrable Securities and transfer taxes of the selling holders of Registrable
Securities.
8.7 Indemnification.
(a) The Company shall indemnify the holder(s) of the
Registrable Securities to be sold pursuant to any registration statement
and each person, if any, who controls such holders within the meaning of
Section 15 of the Securities Act or Section
10
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against all loss, claim, damage, expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or otherwise, arising from such
registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriter as contained in the Underwriting Agreement;
provided, however, that in no event shall the Company be required to
indemnify any holder of Registrable Securities for any liability arising
as a result of such holder failing to deliver a current version of the
prospectus or delivering a prospectus during a Blackout Period.
(b) Each of the holder(s) of the Registrable Securities to
be sold pursuant to a registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its
officers and directors and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act, against all loss, claim, damage or expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject
under the Securities Act, the Exchange Act or otherwise, arising from
written information furnished by such Holder, or their successors or
assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company, except that the maximum amount which may be
recovered from each Holder pursuant to this paragraph or otherwise shall
be limited to the amount of net proceeds received by the holder from the
sale of the Registrable Securities.
8.8 Information Provided by Holders. Any holder of Registrable
Securities included in any registration shall furnish to the Company such
information as the Company may reasonably request in writing to enable the
Company to comply with the provisions hereof in connection with any registration
referred to in this Warrant. In the event that a holder of Registrable
Securities fails to provide such information on a timely basis, and in any event
within seven (7) Business Days of the Company's written request, then the
Company shall be entitled to exclude the Registrable Securities of such holder
from such registration and the Company shall nevertheless be deemed to have
satisfied its obligations hereunder with respect to such registration.
9. RESTRICTIONS ON TRANSFER.
9.1 Restrictive Legends. This Warrant and each Warrant issued upon
transfer or in substitution for this Warrant pursuant to Section 10 hereof, each
certificate for Common Stock issued upon the exercise of the Warrant and each
certificate issued upon the transfer of any such Common Stock shall be
transferable only upon satisfaction of the conditions specified in this Section
9. Each of the foregoing securities shall be stamped or otherwise imprinted with
a legend reflecting the restrictions on transfer set forth herein and any
restrictions required under the Securities Act or other applicable securities
laws.
11
9.2 Notice of Proposed Transfer. Prior to any transfer of any
securities which are not registered under an effective registration statement
under the Securities Act ("Restricted Securities"), which transfer may only
occur if there is an exemption from the registration provisions of the
Securities Act and all other applicable securities laws, the Holder will give
written notice to the Company of the Holder's intention to effect a transfer
(and shall describe the manner and circumstances of the proposed transfer). The
following provisions shall apply to any proposed transfer of Restricted
Securities:
(i) If in the opinion of counsel for the Holder reasonably
satisfactory to the Company the proposed transfer may be effected without
registration of the Restricted Securities under the Securities Act (which
opinion shall state in detail the basis of the legal conclusions reached
therein), the Holder shall thereupon be entitled to transfer the
Restricted Securities in accordance with the terms of the notice delivered
by the Holder to the Company. Each certificate representing the Restricted
Securities issued upon or in connection with any transfer shall bear the
restrictive legends required by Section 9.1 hereof.
(ii) If the opinion called for in (i) above is not delivered,
the Holder shall not be entitled to transfer the Restricted Securities
until either (x) receipt by the Company of a further notice from such
Holder pursuant to the foregoing provisions of this Section 9.2 and
fulfillment of the provisions of clause (i) above, or (y) such Restricted
Securities have been effectively registered under the Securities Act.
9.3 Certain Other Transfer Restrictions. Notwithstanding any other
provision of this Section 9, prior to the Vesting Date, this Warrant or the
Restricted Securities thereunder may only be transferred or assigned to the
persons permitted under NASD Rule 2710(g).
9.4 Termination of Restrictions. Except as set forth in Section 9.3
hereof, the restrictions imposed by this Section 9 upon the transferability of
Restricted Securities shall cease and terminate as to any particular Restricted
Securities: (a) which shall have been effectively registered under the
Securities Act, or (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company, such restrictions are no longer required in
order to insure compliance with the Securities Act or Section 10 hereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the Holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new securities
of like tenor not bearing the applicable legends required by Section 9.1 hereof.
12
10. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANT.
10.1 Ownership of Warrant. The Company may treat any Person in whose
name this Warrant is registered in the Warrant Register maintained pursuant to
Section 10.2(b) hereof as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer thereof as the owner of such Warrant for all purposes,
notwithstanding any notice to the contrary. Subject to Sections 9 and 10 hereof,
this Warrant, if properly assigned, may be exercised by a new holder without a
new Warrant first having been issued.
10.2 Office; Exchange of Warrant.
(a) The Company will maintain its principal office at the
location identified in the prospectus relating to the Offering or at such
other offices as set forth in the Company's most current filing (as of the
date notice is to be given) under the Exchange Act or as the Company
otherwise notifies the Holder.
(b) The Company shall cause to be kept at its office
maintained pursuant to Section 10.2(a) hereof a Warrant Register for the
registration and transfer of the Warrant. The name and address of the
holder of the Warrant, the transfers thereof and the name and address of
the transferee of the Warrant shall be registered in such Warrant
Register. The Person in whose name the Warrant shall be so registered
shall be deemed and treated as the owner and holder thereof for all
purposes of this Warrant, and the Company shall not be affected by any
notice or knowledge to the contrary.
(c) Upon the surrender of this Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 10.2(a) hereof, the Company at its expense
will (subject to compliance with Section 9 hereof, if applicable) execute
and deliver to or upon the order of the Holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face thereof for the number of shares of Common Stock
called for on the face of the Warrant so surrendered (after giving effect
to any previous adjustment(s) to the number of Warrant Shares).
10.3 Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, upon delivery of indemnity reasonably satisfactory to the Company in
form and amount or, in the case of any mutilation, upon surrender of this
Warrant for cancellation at the office of the Company maintained pursuant to
Section 10.2(a) hereof, the Company, at its expense, will execute and deliver,
in lieu thereof, a new Warrant of like tenor and dated the date hereof.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. No Holder shall be entitled
to vote or receive dividends or be deemed the holder of any shares of Common
Stock or any other
13
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the shares of Common Stock purchasable upon the exercise hereof
shall have become deliverable, as provided herein. The Holder will not be
entitled to share in the assets of the Company in the event of a liquidation,
dissolution or the winding up of the Company.
12. NOTICES. Any notice or other communication in connection with this
Warrant shall be given in writing and directed to the parties hereto as follows:
(a) if to the Holder, c/o Taglich Brothers, Inc., 000 Xxxxxxxxx Xxx., 00xx
Xxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx X. Xxxxxxxxx, Fax No: (000) 000-0000; or
(b) if to the Company, to the attention of its Chief Executive Officer at its
office maintained pursuant to Section 10.2(a) hereof; provided, that the
exercise of the Warrant shall also be effected in the manner provided in Section
3 hereof. Notices shall be deemed properly delivered and received when delivered
to the notice party (i) if personally delivered, upon receipt or refusal to
accept delivery, (ii) if sent via facsimile, upon mechanical confirmation of
successful transmission thereof generated by the sending telecopy machine, (iii)
if sent by a commercial overnight courier for delivery on the next Business Day,
on the first Business Day after deposit with such courier service, or (iv) if
sent by registered or certified mail, five (5) Business Days after deposit
thereof in the U.S. mail.
13. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes
attributable to the issuance of shares of Common Stock underlying this Warrant
upon exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the transfer or registration of this Warrant or any certificate for shares of
Common Stock underlying this Warrant in a name other that of the Holder. The
Holder is responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving shares of Common Stock
underlying this Warrant upon exercise hereof.
14. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
[Signature Page Follows]
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
ORCHIDS PAPER PRODUCTS COMPANY
By:___________________________
Name:_________________________
Title:________________________
[Signature Page to Underwriter's Warrant]
15
EXHIBIT A
FORM OF EXERCISE NOTICE
[To be executed only upon exercise of Warrant]
To Orchids Paper Products Company
The undersigned registered holder of the within Warrant hereby irrevocably
exercises the Warrant pursuant to Section 3.1 of the Warrant with respect to
__________ Warrant Shares, at an exercise price per share of $____, and requests
that the certificates for such Warrant Shares be issued, subject to Sections 9
and 10, in the name of, and delivered to:
___________________________________
___________________________________
___________________________________
___________________________________
The undersigned is hereby making payment for the Warrant Shares in the
following manner:
____________________________________________________________________ [describe
desired payment method as provided for in 3.1 of the Warrant].
The undersigned hereby represents and warrants that it is, and has been
since its acquisition of the Warrant, the record and beneficial owner of the
Warrant.
Dated: _______________
________________________________________
Print or Type Name
________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
16
EXHIBIT B
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _____________________ [include
name and addresses] the rights represented by the Warrant to purchase __________
shares of Common Stock of ORCHIDS PAPER PRODUCTS COMPANY to which the Warrant
relates, and appoints _____________________ Attorney to make such transfer on
the books of ORCHIDS PAPER PRODUCTS COMPANY maintained for the purpose, with
full power of substitution in the premises.
Dated ________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
________________________________________
(Signature of Transferee)
________________________________________
(Xxxxxx Xxxxxxx)
________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
17
