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EXHIBIT 4.2
PACIFIC UNITED GROUP, INC.
and
PRESIDENTIAL MANAGEMENT COMPANY
____________________
GENERAL PARTNER'S WARRANT AND
REGISTRATION RIGHTS AGREEMENT
Dated as of ____________ __, 1996
____________________
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GENERAL PARTNER'S WARRANT AND
REGISTRATION RIGHTS AGREEMENT
THIS GENERAL PARTNER'S WARRANT AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement"), dated as of ___________ __, 1996, is made and entered into by and
between PACIFIC UNITED GROUP, INC., a Delaware corporation (the "Company"), and
PRESIDENTIAL MANAGEMENT COMPANY, a California limited partnership ("the General
Partner").
The Company agrees to issue and sell to the General Partner and the
General Partner agrees to purchase from the Company, in exchange for the
forgiveness of indebtedness in the amount of $350,000 owed by Presidential
Mortgage Company, the predecessor-in-interest of the Company ("the
Partnership"), to the General Partner (who has served as the general partner of
the Partnership), warrants, as hereinafter described (together with any
warrants subsequently issued hereunder, the "Warrants"), to purchase up to
_____________ shares, as may be adjusted from time to time as set forth herein,
of the Company's common stock, par value $.01 per share ("Common Stock"). The
shares of Common Stock purchasable upon exercise of the Warrants, as may be
adjusted from time to time as set forth herein, are hereinafter referred to as
the "Warrant Stock."
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants, the Warrant Stock and the respective
rights and obligations hereunder and thereunder, the Company and the General
Partner, for value received, hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS.
1.1 Registration. All Warrants shall be numbered and
shall be registered on the books of the Company when issued.
1.2 Transfer. The Warrants shall be transferable only on
the books of the Company maintained at its principal office, wherever its
principal office may then be located, upon delivery thereof duly endorsed by a
Warrant holder (a "Warrantholder") or by its duly authorized attorney or
representative and with the signatures properly guaranteed, accompanied by
proper evidence of succession, assignment or authority to transfer. Upon any
registration of transfer, the Company shall execute and deliver a new
certificate evidencing each such Warrant to each person entitled thereto.
1.3 Limitations on Transfer of the Warrants. Warrants
shall not be sold, transferred, assigned or hypothecated, except that Warrants
may be transferred: (i) to and between the partners of the General Partner,
provided that any such transferee agrees to be bound by the terms and
provisions of this Agreement; (ii) to the grantor of any trust which is a
partner of the General Partner; (iii) to a trust in which a partner of the
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General Partner is the primary beneficiary; or (iv) by will, pursuant to the
laws of descent or distribution or by operation of law. The Warrants may be
divided or combined, upon request to the Company by a Warrantholder, into a
certificate or certificates representing the right to purchase the same
aggregate number of Warrant Stock. Unless the context indicates otherwise, the
term "Warrantholder" shall include the General Partner and any transferee or
transferees of the Warrants pursuant to this subsection 1.3 and as otherwise
permitted by this Agreement, and the term "Warrants" shall include any and all
Warrants outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to this Agreement.
1.4 Form of Warrants. The text of the Warrants and of
the form of election to purchase Warrant Stock shall be substantially as set
forth in Exhibit A attached hereto. The aggregate number of shares of Common
Stock issuable upon exercise of the Warrants is subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall
be executed on behalf of the Company by its Chief Executive Officer or its
President and attested to by its Chief Financial Officer or its Secretary. A
Warrant bearing the signature of an individual who was at any time the proper
officer of the Company shall bind the Company, notwithstanding that such
individual shall have ceased to hold such office prior to the delivery of such
Warrant or did not hold such office on the date of this Agreement or at any
time thereafter.
The Warrants shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
SECTION 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate
may be exchanged for another certificate or certificates entitling the
Warrantholder to purchase a like aggregate number of shares of Warrant Stock as
the certificate or certificates surrendered then entitled such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate or certificates as so requested.
SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Subject to the terms of this Agreement, the
Warrantholder shall have the right, at any time during the period commencing at
9:00 a.m., Pacific Time, on the Initial Exercise Date (as defined below) and
ending at 5:00 p.m., Pacific Time, on the two-year anniversary of the Initial
Exercise Date (the "Termination Date"), to purchase from the Company up to the
number of fully paid and nonassessable shares of Warrant Stock to
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which the Warrantholder may at the time be entitled to purchase pursuant to
this Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly completed and executed, and upon payment to
the Company of the Warrant Price (as defined in and determined in accordance
with the provisions of this Section 3 and Sections 7 and 8 hereof) for the
number of shares of Warrant Stock in respect of which such Warrants are then
exercised. This Warrant may be exercised from time to time in whole or in
part. The "Initial Exercise Date" of the Warrants shall be determined as the
earlier of (i) the date Pacific Thrift and Loan Company ("Pacific Thrift"), a
wholly owned subsidiary of the Company, has fully utilized as an offset against
taxable income at least $6,800,000 of a net operating loss carryforward (the
"NOL") existing as of December 31, 1994; (ii) the date that the NOL becomes
subject to limitation as a result of an "ownership change" as determined by
Section 382 of the Internal Revenue Code of 1986, as amended, which is not
caused by the exercise of Warrants; (iii) the acquisition by any person other
than a Warrantholder of more than ten percent (10%) of the total outstanding
voting stock of the Company; or (iv) June 30, 1997. The Company shall cause to
be mailed to each Warrantholder by first class mail, postage prepaid, notice of
the Initial Exercise Date within two business days after such date occurs.
(b) Payment of the Warrant Price shall be made in
cash, by certified or official bank check in Los Angeles Clearing House funds
(next day funds), or any combination thereof.
(c) In addition to the method of payment set
forth in Section 3(b) above and in lieu of any cash payment required
thereunder, unless otherwise prohibited by law, the Warrantholders shall have
the right at any time and from time to time to exercise the Warrants in full or
in part (i) by receiving from the Company the number of shares of Warrant Stock
equal to the number of shares of Warrant Stock otherwise issuable upon such
exercise less the number of shares of Warrant Stock having an aggregate value
on the date of exercise equal to the Warrant Price multiplied by the number of
shares of Warrant Stock for which this Warrant is being exercised and/or (ii)
by delivering to the Company the number of shares of Common Stock having an
aggregate value on the date of exercise equal to the Warrant Price multiplied
by the number of shares of Warrant Stock for which this Warrant is being
exercised.
Upon surrender of the Warrants and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Warrantholder,
and in such name or names as the Warrantholder may designate (provided that any
designee is a permitted transferee as described in Section 1.3 hereof),
certificates for the number of full shares of Warrant Stock so purchased upon
such exercise of the Warrant, together with cash,
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as provided in Section 9 hereof, in respect of any fractional shares otherwise
issuable upon such surrender. Such certificate or certificates, to the extent
permitted by law, shall be deemed to have been issued and any person so
designated to be named therein shall be defined to have become a holder of
record of such securities as of the date of surrender of the Warrants and
payment of the Warrant Price, as aforesaid, notwithstanding that the
certificate or certificates representing such securities shall not actually
have been delivered or that the stock transfer books of the Company shall then
be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a Warrant is exercised in respect of less than all of the shares of
Warrant Stock specified therein at any time prior to the Termination Date, a
new Warrant evidencing the remaining shares of the Warrant Stock purchasable by
such Warrantholders hereunder shall be issued by the Company to such
Warrantholders.
SECTION 4. VALIDITY; PAYMENT OF TAXES. All securities delivered upon
exercise of a Warrant shall be duly and validly issued and non-assessable. The
Company shall pay all documentary stamp taxes, if any, attributable to the
initial issuance of the Warrants and the shares of Warrant Stock issuable upon
the exercise of the Warrants; provided, however, the Company shall not be
required to pay any tax which may be payable in respect of any secondary
transfer of the Warrants or the Warrant Stock.
SECTION 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction of such Warrant.
SECTION 6. RESERVATION OF SHARES. The Company represents and
warrants to the Warrantholder that there has been reserved, and the Company
shall at all times keep reserved so long as the Warrants remain outstanding,
out of its authorized Common Stock, such number of shares of Common Stock as
shall be subject to purchase under the Warrants. Every transfer agent for the
Common Stock and other securities of the Company issuable upon the exercise of
the Warrants shall be irrevocably authorized and directed at all times to
reserve such number of authorized shares and other securities as shall be
requisite for such purpose. The Company shall keep a copy of this Agreement on
file with every transfer agent for the Common Stock and other securities of the
Company issuable upon the exercise of the Warrants. The Company shall supply
every such transfer agent with duly executed stock and other certificates, as
appropriate, for such purpose and
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shall provide or otherwise make available any cash which may be payable in lieu
of the issuance of fractional shares, as provided in Section 9 hereof.
SECTION 7. WARRANT PRICE. The price per share at which shares of
Warrant Stock shall be purchasable upon the exercise of the Warrants shall be
$12.50, subject to adjustment pursuant to Section 8 hereof (as so adjusted from
time to time, the "Warrant Price").
SECTION 8. ADJUSTMENTS OF NUMBER OF SHARES OF WARRANT STOCK AND
WARRANT PRICE. The number and kind of securities purchasable upon the exercise
of the Warrants and the Warrant Price shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
8.1 Adjustments. The number of shares of Warrant Stock
purchasable upon the exercise of each Warrant and the Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend
or make a distribution on its Common Stock in shares of its capital stock or
other securities, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding Common Stock into a
smaller number of shares or (iv) issue, by reclassification of its Common
Stock, shares of its capital stock or other securities of the Company
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), shares of Common
Stock, the number of shares of Warrant Stock purchasable upon exercise of a
Warrant immediately prior thereto shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of shares of Warrant Stock,
shares of its capital stock and other securities of the Company which such
holder would have owned or would have been entitled to receive immediately
after the happening of any of the events described above, had the Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made pursuant to this subsection 8.1(a)
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights,
options (other than options issued under, and pursuant to, the Company's 1995
Stock Option Plan (the "1995 Option Plan"), warrants or convertible securities
to holders of its Common Stock, without any charge to such holders, containing
the right to subscribe for or purchase Common Stock, the number of shares of
Warrant Stock thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of shares of Warrant Stock theretofore
purchasable upon exercise of a Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding immediately prior to
the
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issuance of such rights, options, warrants or convertible securities plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities. Such adjustment shall be made whenever
such rights, options, warrants or convertible securities are issued, and shall
become effective immediately and retroactive to the record date for the
determination of shareholders entitled to receive such rights, options,
warrants or convertible securities.
(c) In case the Company shall distribute to
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions out of current earnings made in the ordinary
course of business consistent with past practices), then in each case the
number of shares of Warrant Stock thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of shares of Warrant
Stock theretofore purchasable upon exercise of such Warrant by a fraction, of
which the numerator shall be the then Current Market Price (as defined in
Section 9 hereof) on the date of such distribution, and of which the
denominator shall be such Current Market Price on such date minus the then fair
value (determined as provided in subsection 8(f) below) of the portion of the
assets or evidences of indebtedness so distributed applicable to one share of
Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(d) No adjustment in the number of shares of
Warrant Stock purchasable pursuant to subsections 8.1(b) or (c) hereof shall be
required unless such adjustment would require an increase or decrease of at
least one percent in the number of shares of Warrant Stock then purchasable
upon the exercise of the Warrants or, if the Warrants are not then exercisable,
the number of shares of Warrant Stock purchasable upon the exercise of the
Warrants on the first date thereafter that the Warrants would become
exercisable; provided, however, that any adjustments which by reason of this
subsection 8.1(d) are not required to be made immediately shall be carried
forward and taken into account in any subsequent adjustment.
(e) Whenever the number of shares of Warrant
Stock purchasable upon the exercise of a Warrant is adjusted as herein
provided, the Warrant Price payable upon exercise of the Warrant shall be
adjusted by multiplying such Warrant Price immediately prior to such adjustment
by a fraction, of which the numerator shall be the number of shares of Warrant
Stock purchasable upon the exercise of such Warrant immediately prior to such
adjustment, and of which the denominator shall be the
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number of shares of Warrant Stock purchasable immediately thereafter.
(f) To the extent not covered by subsections
8.1(b) or (c) hereof, in case the Company shall sell or issue Common Stock
(other than Common Stock issued pursuant to the Company's 1995 Employee Stock
Purchase Plan (the "1995 Purchase Plan")) or rights, options (other than
options issued under and pursuant to the 1995 Option Plan), warrants or
convertible securities containing the right to subscribe for, purchase or
exchange into shares of Common Stock at a price per share (determined, in the
case of such rights, options, warrants or convertible securities, by dividing
(i) the total amount received or receivable by the Company in consideration of
the sale or issuance of such rights, options, warrants or convertible
securities, plus the total consideration payable to the Company upon exercise,
conversion or exchange thereof, by (ii) the total number of shares covered by
such rights, options, warrants or convertible securities) lower than the then
Current Market Price or the Warrant Price in effect immediately prior to such
sale or issuance, then the Warrant Price shall be reduced to a price
(calculated to the nearest cent) determined by dividing (I) an amount equal to
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such sale or issuance multiplied by the then existing Warrant Price,
plus (B) the consideration received or receivable by the Company upon such sale
or issuance, by (II) the total number of shares of Common Stock outstanding
immediately after such sale or issuance. The number of shares of Warrant Stock
purchasable upon the exercise of a Warrant shall thereafter be that number
determined by multiplying the number of shares of Warrant Stock purchasable
upon exercise immediately prior to such adjustment by a fraction, of which the
numerator shall be the Warrant Price in effect immediately prior to such
adjustment and the denominator shall be the Warrant Price as so adjusted. For
the purposes of such adjustments, the Common Stock which the holders of any
such rights, options, warrants or convertible securities shall be entitled to
subscribe for, purchase or exchange into shall be deemed issued and outstanding
as of the date of such sale or issuance and the consideration received by the
Company therefor shall be deemed to be the consideration received by the
Company for such rights, options, warrants or convertible securities, plus the
consideration or premiums stated in such rights, options, warrants or
convertible securities to be payable for the Common Stock covered thereby. In
case the Company shall sell or issue Common Stock or rights, options, warrants
or convertible securities containing the right to subscribe for, purchase or
exchange into Common Stock for a consideration consisting, in whole or in part,
of property other than cash or its equivalent, then, in determining the "price
per share" of Common Stock and the "consideration received by the Company" for
purposes of the first sentence of this subsection 8.1(f), the Board of
Directors shall determine the fair value of said property, and such
determination, if based upon the Board of Directors, good faith
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business judgment, shall be binding upon the Warrantholders. In determining
the "price per share" of Common Stock, any underwriting discounts or
commissions paid to brokers, dealers or other selling agents shall not be
deducted from the price received by the Company for sales of securities
registered under the Securities Act of 1933, as amended (the "Act") or issued
in a private placement. There shall be no adjustment of the Warrant Price
pursuant to this subsection 8.1(f) if the amount of such adjustment would be
less than $.05 per share of Common Stock; provided, however, that any
adjustment which by reason of this provision is not required to be made
immediately shall be carried forward and taken into account in any subsequent
adjustment.
(g) For the purpose of this Section 8, the term
"Common Stock" shall mean (i) the class of stock designated as the Common Stock
of the Company at the date of this Agreement or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value,
or from no par value to par value. In the event that at any time, as a result
of an adjustment made pursuant to this Section 8, a Warrantholder shall become
entitled to purchase any securities of the Company other than Common Stock, (i)
if the Warrantholder's right to purchase is on any other basis than that
available to all holders of the Company's Common Stock, the Company shall
obtain an opinion of a reputable investment banking firm valuing such other
securities and (ii) thereafter the number of such other securities so
purchasable upon exercise of a Warrant and the Warrant Price of such securities
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 the Common
Stock contained in this Section 8.
(h) Upon the expiration of any rights, options,
warrants or conversion privileges, if such shall not have been exercised, the
number of shares of Warrant Stock purchasable upon exercise of a Warrant and
the Warrant Price, to the extent a Warrant has not then been exercised, shall,
upon such expiration, be readjusted and shall thereafter be such number and
such price as they would have been had they been originally adjusted (or had
the original adjustment not been required, as the case may be) on the basis of
(A) the fact that the only shares of Common Stock issued in respect of such
rights, options, warrants or conversion privileges were the shares of Common
Stock, if any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion privileges, and (B) the fact that such shares
of Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion privileges whether or not exercised;
provided, however, that no such readjustment shall have the effect of
decreasing the numbers of shares of Warrant Stock purchasable upon exercise of
a Warrant or increasing the Warrant
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Price by an amount in excess of the amount of the adjustment made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion
privileges.
(i) Whenever the number of shares of Warrant
Stock purchasable upon the exercise of a Warrant or the Warrant Price is
adjusted pursuant to this Section 8, the Company shall cause to be promptly
mailed to each Warrantholder by first class mail, postage prepaid, notice of
such adjustment or adjustments and a certificate of the chief financial officer
of the Company setting forth the number of shares of Common Stock, capital
stock and other securities purchasable upon the exercise of such
Warrantholder's Warrant and the applicable Warrant Price after such adjustment,
a brief statement of the facts requiring such adjustment and the computation by
which such adjustment was made.
8.2 No Adjustment for Dividends, 1995 Plans. Except as
specifically provided in subsection 8.1, no adjustment in respect of any cash
dividends or distributions on the Company's Common Stock out of current
earnings made in the ordinary course of business shall be made during the term
of the Warrants or upon the exercise of the Warrants. No adjustment in respect
of options issued under, and pursuant to, the 1995 Option Plan shall be made
during the term of the Warrants or upon the exercise of the Warrants. No
adjustment in respect of Common Stock issued under, and pursuant to, the 1995
Purchase Plan shall be made during the term of the Warrants or upon the
exercise of the Warrants.
8.3 Preservation of Purchase Rights upon
Reclassification, Consolidation, etc. In case of any consolidation of the
Company with or merger of the Company into another corporation or other entity
or in case of any sale, lease, conveyance or other transfer to another
corporation, person or other entity of the property, assets or business of the
Company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, person or other entity, as the case may
be, shall execute with the Warrantholder, and the agreements governing such
consolidation, merger, sale, lease, conveyance or other transfer shall require
such execution of, an agreement that the Warrantholder shall have the right
thereafter upon payment of the Warrant Price in effect immediately prior to
such event, upon exercise of the Warrants, to receive the kind and amount of
shares and other securities and property which it would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale,
lease, conveyance or other transfer had the Warrants (and each underlying
security) been exercised immediately prior to such action. The Company shall
promptly mail to each Warrantholder by first class mail, postage prepaid,
notice of the execution of any such agreement. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in
which the Company is the surviving corporation, the right to purchase shares of
Warrant Stock under the Warrants shall terminate on the date of such
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merger and thereupon the Warrants shall become null and void, but only if the
controlling corporation shall agree to substitute for the Warrants its warrants
which entitle the holders thereof to purchase upon exercise the kind and amount
of shares and other securities and property which such holders would have owned
or been entitled to receive had the Warrants been exercised immediately prior
to such merger. Any such agreements referred to in this subsection 8.3 shall
provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 8 hereof, and shall
provide for terms and provisions at least as favorable to the Warrantholder as
those contained in this Agreement. The provisions of this subsection 8.3 shall
similarly apply to successive consolidations, mergers, sales, leases,
conveyances or other transfers.
8.4 Par Value of Shares of Common Stock. Before taking
any action which would cause an adjustment effectively reducing the portion of
the Warrant Price allocable to each share of Warrant Stock below the then par
value per share, if any, of the Warrant Stock issuable upon exercise of the
Warrants, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Stock upon exercise of the Warrants.
8.5 Independent Public Accountants. The Company shall
retain BDO Xxxxxxx, LLP, or any other nationally recognized accounting firm
qualified to practice in front of the Securities and Exchange Commission (the
"Commission") to make any computation required under this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 8.
8.6 Statement on Warrant Certificates. Irrespective of
any adjustments in the number of securities issuable upon exercise of Warrants,
Warrant certificates theretofore or thereafter issued may continue to express
the same number of securities as are stated in the similar Warrant certificates
initially issuable pursuant to this Agreement, provided that such expression
shall in no way affect the number of shares of Warrant Stock actually
purchasable upon the exercise of such Warrants.
SECTION 9. FRACTIONAL SHARES; CURRENT MARKET PRICE. The Company
shall not be required to issue fractional shares of Common Stock on the
exercise of a Warrant. If any fraction of a share of Common Stock would,
except for the provisions of this Section 9, be issuable upon the exercise of a
Warrant (or specified portion thereof), the Company shall in lieu thereof pay
an amount in cash equal to the then Current Market Price multiplied by such
fraction. For purposes of this Agreement, the term "Current Market Price"
shall mean (i) if the Common Stock is traded on the Nasdaq National Market
("NNM") or on a national securities exchange, as will be the case upon the
issuance of the
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Warrant, the per share closing price of the Common Stock in the NNM or on the
principal stock exchange on which it is listed, as the case may be, on the date
of exercise of the Warrant or, with respect to any adjustment pursuant to
Section 8.1 hereof, on the date immediately preceding the announcement of the
event causing such adjustment or (ii) if the Common Stock is traded in the
over-the-counter market and no longer traded in the NNM or on any national
securities exchange, the average of the per share closing bid prices of the
Common Stock on the thirty (30) consecutive trading days immediately preceding
the date in question, as reported by The Nasdaq Small Cap Market (or an
equivalent generally accepted reporting service if quotations are not reported
on The Nasdaq Small Cap Market). The closing price referred to in clause (i)
above shall be the last reported sale price or, in the case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NNM or on the principal stock exchange on which
the Common Stock is then listed. For purposes of clause (ii) above, if trading
in the Common Stock is not reported by The Nasdaq Small Cap Market, the bid
price referred to in said clause shall be the lowest bid price as reported in
the Nasdaq Electronic Bulletin Board or, if not reported thereon, as reported
in the "pink sheets" published by National Quotation Bureau, Incorporated, and,
if such Common Stock is not so reported, shall be the price of a share of
Common Stock determined by the Company's Board of Directors in good faith.
SECTION 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER.
Except as expressly provided herein, nothing contained in this Agreement or in
the Warrants shall be construed as conferring upon the Warrantholder or its
transferees any rights as a shareholder of the Company, including the right to
vote, receive dividends or subscription rights, consent or receive notices as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior
to the expiration of the Warrants and prior to their exercise, any one or more
of the following events shall occur:
(a) any action which would require an adjustment
pursuant to Section 8 hereof;
(b) an issuance by the Company of rights,
options, warrants or convertible securities to all or substantially all holders
of its Common Stock, without any charge to such holders, containing the right
to subscribe for or purchase Common Stock; or
(c) a dissolution, liquidation or winding up of
the Company (other than in connection with a consolidation, merger or sale of
its property, assets and business as an entirety or substantially as an
entirety) shall be proposed; then the Company shall give notice in writing of
such event to the Warrantholders, as provided in Section 13 hereof, at least 20
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days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to any
relevant dividend, distribution or other rights or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be.
SECTION 11. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS;
OBLIGATIONS IN REGISTRATION.
(a) The Warrants are not transferable other than
as provided for in Section 1.3. Each holder of Warrant Stock agrees that prior
to making any disposition of the Warrant Stock, it shall give written notice to
the Company describing briefly the manner in which any such proposed
disposition is to be made; and, assuming no Registration Statement (as defined
below) is in effect covering such disposition, no such disposition shall be
made unless the holder of Warrant Stock has notified, or concurrently with such
disposition notifies, the Company that in the opinion of counsel reasonably
satisfactory to the Company a Registration Statement, application or other
notification, filing or post-effective amendment or supplement thereto
(hereinafter collectively a "Registration Statement") under the Act or the
state securities or "blue sky" laws of any applicable jurisdiction is not
required with respect to such disposition and no such Registration Statement
has been filed by the Company with, and declared effective, if necessary, by,
the Commission or state securities commission or agency. The Warrantholder
agrees that it shall use its reasonable best efforts to obtain from any
permitted transferee who acquires any Warrants or Warrant Stock in a private
transaction with the Warrantholder an agreement by such transferee that it
agrees to be bound by any transfer restrictions set forth in this subsection
11(a) then applicable to such transferees.
(b) The Company has prepared and filed a
Registration Statement, and amendments thereto, with the Commission for the
registration of (i) certain shares of Common Stock issued to the General
Partner, and certain additional shares of Common Stock issued to partners of
the General Partner (collectively "General Partner Affiliate Stock"), (ii) the
Warrants and (iii) the Warrant Stock under the Act (collectively, the General
Partner Affiliate Stock and the Warrant Stock are sometimes referred to herein
as the "Stock"). Such Registration Statement was declared effective by the
Commission on _____________, 199__. The Company shall be obligated to the
General Partner, the partners of the General Partner and the registered holders
of the Warrant Stock to continually maintain, at the Company's own expense, the
currency and effectiveness of such Registration Statement of the Company,
including the filing of any and all applications and other notifications,
filings and post-effective amendments and supplements (collectively, the
"Initial Registration Statement"), as may be necessary, so as to
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permit the resale of the Stock and such applications or other filings, as
required under applicable state securities or blue sky laws sufficient to
permit the public offering of the Stock, until the earlier of the time that all
shares of the Stock have been sold pursuant to the Initial Registration
Statement or the fifth anniversary date of the Initial Exercise Date (the
"Registration End Date"). In the event of the failure of the Company to
maintain the effectiveness of the Registration Statement, any original record
owner of General Partner Affiliate Stock or Warrant Stock issued or issuable
under outstanding Warrants shall have the right to bring an action for specific
performance of the Company's obligation under this Section 11(b), which shall
include the filing of a new Registration Statement if necessary to register the
Stock for resale.
(c) If at any time after the date hereof the
Initial Registration Statement is no longer in effect other than because all
shares of the Stock have been sold pursuant to the Initial Registration
Statement or because the Registration End Date has already occurred, the
Company shall be obligated as follows, which shall not limit the right of any
original record holder of General Partner Affiliate Stock or any holder of
Warrants or Warrant Stock to bring an action for specific performance under
Section 11(b) hereof:
(i) Whenever during the period beginning
on the date hereof and ending on the Registration End Date, the Company
proposes to file with the Commission a registration statement (other than as to
securities issued pursuant to an employee benefit plan or as to a transaction
subject to Rule 145 promulgated under the Act), it shall, at least thirty (30)
days prior to each such filing, give written notice of such proposed filing to
each holder of the Warrants and the Stock at their respective addresses as they
appear on the records of the Company, and shall offer to include and shall
include in such filing any proposed disposition of the Stock upon receipt by
the Company, not more than twenty (20) days following the receipt of such
notice, of a request therefor setting forth the facts with respect to such
proposed disposition and all other information with respect to such person
reasonably necessary to be included in such Registration Statement. In the
event that such Registration Statement relates to an underwritten offering on a
"firm commitment" basis and the managing underwriter for said offering advises
the Company in writing that the inclusion of the Stock in the offering would be
materially and substantially detrimental to the completion of the offering, the
Stock shall nevertheless be included in the Registration Statement, provided
that each holder of the Stock desiring to have such securities included in the
Registration Statement agrees in writing for a period of ninety (90) days
following such offering not to sell or otherwise dispose of the Stock pursuant
to such Registration Statement, which Registration Statement the Company shall
keep effective for a period of at least nine (9) months following the
expiration of such ninety (90) day period.
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(ii) In addition to any Registration
Statement pursuant to subparagraph (i) above, during the period beginning on
the date hereof and ending on the Registration End Date, the Company will, as
promptly as practicable (but in any event within sixty (60) days), after
written request (the "Request") by persons holding at least fifty percent (50%)
of the shares of General Partner Affiliate Stock and Warrant Stock which have
been (or may be) issued upon exercise of the Warrants, prepare and file at the
Company's expense a Registration Statement with the Commission and such
applications or other filings as required under applicable state securities or
blue sky laws sufficient to permit the public offering of the Stock, and shall
use its reasonable best efforts at its own expense through its officers,
directors, auditors and counsel, in all matters necessary or advisable, to
cause such Registration Statement to become effective as promptly as
practicable and to maintain such effectiveness until the earlier of the time
that all such Stock has been sold or the expiration of ninety (90) days from
the effective date of the Registration Statement; provided, however, that the
Company shall only be obligated to file one such Registration Statement under
this Section 11(c)(ii). Notwithstanding the foregoing, once and only once
during the period would the Company have an obligation to register the Stock
pursuant to this Section 11(c)(ii), and the Company shall not be obligated to
effect a registration pursuant to this Section 11(c)(ii) during the three (3)
month period starting with the date thirty (30) days prior to the Company's
estimated date of filing of an underwritten public offering of securities
solely for the account of the Company; provided that the Company is actively
employing in good faith all reasonable efforts to cause such Registration
Statement to become effective and that the Company's estimate of the date of
filing such Registration Statement is made in good faith; provided further,
that the Company shall furnish to each holder of Stock a certificate signed by
the managing underwriter stating that it would be seriously detrimental to the
Company or its shareholders for the Registration Statement to be filed in the
near future.
(d) All fees, disbursements and out-of-pocket
expenses (other than brokerage fees and commissions and legal fees of counsel
to the holders of the Stock) in connection with the filing of any Registration
Statement or maintaining the currency and effectiveness of the Initial
Registration Statement (or obtaining any opinion of counsel or any no-action
position of the Commission with respect to sales under Rule 144 or other
exemption from registration) and in complying with applicable federal
securities and state securities and blue sky laws shall be borne by the
Company. The Company at its expense shall supply any holder of Stock with
copies of such Registration Statement and the prospectus included therein and
other related documents and any opinions and no-action letters in such
quantities as may be reasonably requested by such holder.
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(e) The Company shall not be required by this
Section 11 to file or maintain the effectiveness of a Registration Statement
if, in the opinion of counsel reasonably satisfactory to the holders of a
majority of the Stock, the proposed public offering or other transfer as to
which such Registration Statement is requested is exempt from applicable
federal securities and state securities and blue sky laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities," as defined in Rule 144 under the Act.
(f) The provisions of this Section 11 and of
Section 12 hereof shall apply to the extent provided herein if the Company
chooses to file an Offering Statement under Regulation A promulgated under the
Act.
(g) The Company agrees that until all of the
Stock has been sold, either (i) under a Registration Statement, (ii) pursuant
to Rule 144 under the Act or (iii) pursuant to an exemption from the
registration requirements of the Act, it shall keep current in filing all
materials required to be filed with the Commission in order to permit the
holders of such securities to sell the same under Rule 144.
(h) In the event any holder of the Stock timely
elects to participate in an offering by including Warrant Stock in a
Registration Statement pursuant to subsections 11(b) or 11(c) above, the
Company shall use its reasonable best efforts to effect such registration to
permit the sale of the Stock in accordance with the intended method or methods
of disposition thereof, and pursuant thereto, the Company shall, as
expeditiously as possible:
(i) Prepare and file with the Commission
a Registration Statement or Registration Statements on a form available for the
sale of the Stock, and to cause any such Registration Statement filed under the
Act pursuant to subsection 11(c) above to become effective at the earliest
possible date after the filing thereof and remain effective as provided herein
and to comply with all applicable rules and regulations of the Commission (the
"Rules and Regulations") in connection therewith; provided, however, that
before filing a Registration Statement or prospectus or any amendments or
supplements thereto, including documents which would be incorporated or deemed
to be incorporated by reference in the Registration Statement after the initial
filing of any Registration Statement, the Company will furnish to the holders
of the Stock, their respective counsel, and the underwriters, if any, to be
engaged in connection with the offering and sale by the Company (for purposes
of this Section 11(i), the "Public Underwriter"), copies of all such documents
proposed to be filed, which documents will be subject to their review, and the
Company will not file any Registration Statement, amendment thereto, any
prospectus or any supplement thereto (including such documents incorporated or
deemed to be
-15-
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incorporated by reference) to which holders of a majority of outstanding shares
of the Stock or the Public Underwriter, if any, shall reasonably object;
(ii) Prepare and promptly file with the
Commission such amendments and post-effective amendments to a Registration
Statement as may be necessary to keep such Registration Statement continuously
effective for a period of twelve (12) months; cause the related prospectus to
be supplemented, by any required prospectus supplement, and as so supplemented,
to be filed pursuant to Rule 424 under the Act; and comply with the provisions
of the Act with respect to the disposition of all Stock covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition as set forth in such Registration Statement or
supplement to such prospectus. The Company shall not be deemed to have used
its reasonable best efforts to keep a Registration Statement effective during
the applicable period if it intentionally or voluntarily takes any action that
would result in any holder of Stock not being able to sell such Stock;
(iii) As soon as the Company is advised or
obtains knowledge thereof, advise each holder of Stock and confirm the same in
writing (A) when the Registration Statement, as amended, becomes effective and
when any post-effective amendment to the Registration Statement becomes
effective, (B) of the issuance by the Commission or any State or other
regulatory body of any stop order or other order, or of the initiation or the
threat or contemplation of any proceeding, the outcome of which may result in
the suspension of the effectiveness of the Registration Statement or the
issuance of any order preventing or suspending the use of any preliminary
prospectus or the prospectus, or any amendment or supplement thereto, or the
institution of any proceedings for that purpose, (C) of the issuance by the
Commission or any State or other regulatory body of any proceedings for the
suspension of the qualification of any of the Stock for offering or sale in any
jurisdiction or of the initiation or the threat or contemplation of any
proceeding for that purpose, (D) of the receipt of any comments from the
Commission and (E) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the prospectus related
thereto or for additional information. If the Commission or any State or other
regulatory body shall enter a stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of any preliminary prospectus or the prospectus, or any amendment or supplement
thereto, or suspend such qualification at any time, the Company shall make
every effort to obtain promptly the lifting of such order or suspension;
(iv) If requested by holders of a
majority of the Stock or the Public Underwriter, if any, (1) immediately
incorporate in a prospectus supplement or post-effective
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amendment such information as such holders and the Public Underwriter, if any,
agree should be included therein relating to such sale and distribution of the
Stock, including, without limitation, information with respect to the number of
shares of Stock being sold to such Public Underwriter, the purchase price being
paid therefor by such Public Underwriter and with respect to any other terms of
the underwritten offering of the Stock to be sold in such offering; (2) make
all required filings of such prospectus supplement or post-effective amendment
as soon as notified of the matters to be so incorporated in such prospectus
supplement or post-effective amendment; and (3) supplement or amend any
Registration Statement;
(v) Furnish to each holder of Stock and
their respective counsel, without charge and at such place as such holder may
designate, copies of each preliminary prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto, the prospectus,
and all amendments and supplements thereto, including any prospectus prepared
after the effective date of the Registration Statement and any term sheet, in
each case as soon as available and in such quantities as each such holder may
reasonably request;
(vi) During the time when a prospectus is
required to be delivered under the Act, comply with all requirements imposed
upon it by the Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Stock in accordance with the
provisions hereof and the prospectus, or any amendments or supplements thereto;
(vii) If, at any time when a prospectus
relating to the Stock and Warrant Stock is required to be delivered under the
Act, any event shall have occurred as a result of which, in the opinion of the
Company or counsel for the Company or a majority of the holders of Stock, the
prospectus, as then amended or supplemented, would include an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, or if it is necessary at
any time to amend or supplement the prospectus to comply with the Act, notify
the Public Underwriter, if any, and prepare and file, at the Company's expense,
with the Commission an appropriate amendment or supplement to the Registration
Statement or an amendment or supplement to the prospectus which will correct
such statement or omission, or effect such compliance, each such amendment or
supplement to be reasonably satisfactory to a majority of the holders of Stock
and their counsel; and furnish to each holder of Stock copies of such amendment
or supplement as soon as available and in such quantities as such holders may
request;
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(viii) As soon as practicable, but in any
event not later than forty-five (45) days after the end of the twelve (12)
month period beginning after the effective date of the Registration Statement
occurs, make generally available to its security holders, in the manner
specified in Rule 158(b) promulgated under the Act, and to the Warrantholders,
an earnings statement which will comply with the provisions of Section 11(a) of
the Act and Rule 158(a) promulgated under the Act;
(ix) Deliver to each holder of Stock,
their respective counsel and the Public Underwriter, if any, without charge, as
many copies of the prospectus or prospectuses (including each preliminary
prospectus) and any amendment or supplement thereto as such persons may
reasonably request; the Company consents to the use of any such prospectus or
any amendment or supplement thereto by the holders of Stock and the Public
Underwriter, if any, in connection with the offering and sale of the Stock
covered by such prospectus or any amendment or supplement thereto;
(x) Prior to any public offering of
Stock, use its best efforts, at or prior to the time the Registration Statement
becomes effective, to qualify the Stock for offering and sale under the
securities or "blue sky" laws of such jurisdictions as holders of a majority of
Stock may reasonably designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution, and make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or to execute a general consent to service
of process in any such jurisdiction; in each jurisdiction where such
qualification shall be effected, use its best efforts to file and make such
statements or reports at such times as are or may be required by the laws of
such jurisdiction to continue such qualification;
(xi) Cooperate with the holders of the
Stock and the Public Underwriter, if any, to facilitate the timely preparation
and delivery of certificates representing the Stock to be sold, which
certificates shall not bear any restrictive legends; and enable such Stock to
be in such denominations and registered in such names as the Public
Underwriter, if any, may request at least two (2) business days prior to any
sale of the Stock;
(xii) Use its reasonable best efforts to
cause the Stock covered by the Registration Statement to be registered with or
approved by such other governmental bodies, agencies or authorities as may be
necessary to enable the holders of Stock or the Public Underwriter, if any, to
consummate the disposition of the Stock;
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(xiii) Make every reasonable effort to cause
all Stock covered by such Registration Statement to be (1) listed on each
securities exchange, if any, in which equity securities issued by the Company
are then listed or (2) authorized to be quoted on the NNM if the Company's
Common Stock is then authorized to be quoted on the NNM;
(xiv) Enter into such agreements
(including, without limitation, if applicable, an underwriting agreement, in
form, scope and substance as is customary in underwritten offerings) and take
all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Stock and, in such connection, whether or not
an underwriting agreement is entered into and whether or not the registration
is an underwritten registration, (1) make such representations and warranties
to the holders of the Stock with respect to the business of the Company and its
subsidiaries and the Public Underwriter, if any, the Registration Statement,
the prospectus, the prospectus supplement (if any) and documents, if any,
incorporated or deemed to be incorporated by reference in the Registration
Statement, in each case in such form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings and confirm the same
if and when requested; (2) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the majority of holders of the Stock),
addressed to the holders of the Stock with respect to the matters referred to
in the preceding clause in such form, scope and substance as are customarily
rendered to underwriters in underwritten offerings and such other matters as
may be reasonably requested by counsel to the majority of holders of the Stock
or the Public Underwriter, if any; (3) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement) addressed to the holders of the Stock
and the Public Underwriter, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with underwritten offerings; (4) if an underwriting
agreement is entered into, the same shall set forth in full the indemnification
and contribution provisions and procedures of Section 12 hereof (or such other
provisions and procedures as shall be acceptable to the holders of the Stock
and to the Public Underwriter of such underwritten offering) with respect to
all parties to be indemnified pursuant to said section; and (5) deliver such
documents and certificates as may be reasonably requested by the holders of the
Stock and the Public Underwriter, if any, to evidence the continued validity of
the representations and warranties made pursuant to clause (1) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement
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entered into by the Company; the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
(xv) Make available for inspection by a
representative of the holders of a majority of the Stock or any Public
Underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by such holders of the Stock
or such Public Underwriter, all financial and other records, pertinent
corporate documents and properties and assets of the Company and its
subsidiaries and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information reasonably requested by
such holders, Public Underwriter, attorney or accountant in connection with any
registration of the Stock; provided, however, that any records, information or
documents that are designated by the Company in writing at the time of delivery
of such records, information or documents as confidential shall be kept
confidential by such persons unless (1) disclosure of such records, information
or documents is required by court or administrative order or is necessary to
respond to inquiries of governmental or regulatory bodies, agencies or
authorities, (2) disclosure of such records, information or documents is, in
the opinion of counsel to any holder of the Stock or to any Public Underwriter,
required by law, regulations or legal process, (3) such records, information or
documents are otherwise publicly available or (4) such records, information or
documents become available to such person from a source other than the Company,
and such source is not bound by a confidentiality agreement;
(xvi) If the Company, in the exercise of
its reasonable judgment, objects to any change reasonably requested by holders
of a majority of the Stock or the Public Underwriter, if any, to any
Registration Statement or prospectus or any amendments or supplements thereto
(including documents incorporated or deemed to be incorporated therein by
reference), the Company shall not be obligated to make any such change and any
holder of the Stock may withdraw the Stock from such registration, in which
event the Company shall pay all registration expenses (including, without
limitations, attorneys' fees and expenses) incurred by the holders of the Stock
in connection with such Registration Statement or prospectus or any amendment
thereto or supplement thereof; provided, that if the Company provides the
holders of such Stock, as applicable, with a written opinion of independent
counsel (which counsel may be the Company's regular outside counsel), upon
which such holders may rely, that the change so requested is not required in
order that the Registration Statement comply with all applicable securities
laws (including any rules and regulations promulgated thereunder), such holders
may withdraw Stock from such registration but the Company shall not be
obligated to pay any registration expenses incurred by such holders; and
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(xvii) Pay all costs and expenses incident
to the performance of or compliance with the Company's obligations under
subsections 11(b) or 11(c) above and under this subsection 11(i) (collectively,
"Registration Expenses") whether or not any Registration Statement is filed or
becomes effective, including, without limitation, the fees and disbursements of
the Company's auditors, legal counsel, special legal counsel, legal counsel
responsible for qualifying the Stock under blue sky laws, all filing fees and
printing expenses, all expenses in connection with the transfer and delivery of
the Stock, and all expenses in connection with the qualification of the Stock
under applicable blue sky laws; provided, however, that the Company shall not
bear the Public Underwriter's discount or commission with respect to, or any
transfer taxes imposed on, the Stock or the fees and expenses of counsel to any
holder of such stock; provided, further, however, that the holders of the Stock
shall not be responsible in any way for any fees or expenses of the Company's
counsel, except, in each case, as provided in Subsection 11(h)(xvi) above.
SECTION 12. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold
harmless the Warrantholders and any Holder of Stock (for purposes of this
Section 12, "Holder" shall include the officers, directors, partners,
employees, agents and counsel of a Warrantholder or holder of Stock), and each
person, if any, who controls a Holder ("controlling person") within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, from and against
any and all losses, claims, damages, expenses (including, without limitation,
reasonable attorneys' fees and expenses) or liabilities and all actions, suits,
proceedings, injuries, arbitrations, investigations, litigation or governmental
or other proceedings (in this Section 12, collectively, "actions") in respect
thereof, whatsoever (including, without limitation, any and all expenses
whatsoever reasonably incurred in investigating preparing or defending against
any action, commenced or threatened, or any claim whatsoever), as such are
incurred, to which a Holder or such controlling person may become subject under
the Act, the Exchange Act or any other statute or at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact contained (i) in any preliminary prospectus, the Initial
Registration Statement, any Registration Statement or any prospectus (as from
time to time amended and supplemented), any post-effective amendment or
amendments or any new Registration Statement and prospectus in which the Stock
is included or (ii) in any application or other document or written
communication (in this Section 12, collectively, "application") executed by the
Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Stock under the securities or blue sky
laws thereof or filed with the Commission, any state securities commission or
agency, the National Association of Securities Dealers, Inc. (the "NASD")
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or the NNM or any other securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of any
prospectus, in light of the circumstances in which they were made), unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to a Holder by or on behalf
of such Holder expressly for use in any preliminary prospectus, Registration
Statement or any prospectus, or any amendment thereof or supplement thereto, or
in any application, as the case may be. In addition to its other obligations
under this subsection 12(a), the Company agrees that, as an interim measure
during the pendency of any action arising out of or based upon any untrue
statement or omission, or alleged untrue statement or alleged omission as
described in this subsection 12(a), it shall reimburse the Holders (and, to the
extent applicable, each controlling person) on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such action notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligations to reimburse the Holders (and, to the extent applicable, each
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement is so held to have been
improper as to the Company, the Holders (and, to the extent applicable, each
controlling person) shall promptly return it to the Company, together with
interest compounded daily, based on the "reference rate" announced from time to
time by Bank of America NTSA (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the applicable Holder within
thirty (30) days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
The indemnity agreement in this subsection 12(a)
shall be in addition to any liability which the Company may have at common law
or otherwise.
(b) Each Holder severally agrees to indemnify and
hold harmless the Company (for purposes of this Section 12, "Company" shall
include the officers, directors, partners, employees, agents and counsel of the
Company) and each other person, if any, who controls the Company ("controlling
person") within the meaning of the Act, to the same extent as the foregoing
indemnity from the Company to the Holders, but only with respect to statements
or omissions, if any, made in any preliminary prospectus, the Initial
Registration Statement, any Registration Statement or any prospectus or any
amendment thereof or supplement thereto or in any application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to such Holder by or on behalf of such Holder expressly
for use in any preliminary prospectus, the Initial Registration Statement, any
Registration
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Statement or any prospectus or any amendment thereof or supplement thereto or
in any application, provided that such written information or omissions only
pertain to disclosures in any preliminary prospectus, the Initial Registration
Statement, any Registration Statement or any prospectus directly relating to
the transactions in connection with the offering contemplated hereby. In
addition to its other obligations under this subsection 12(b), each Holder
severally agrees that, as an interim measure during the pendency of any action
arising out of or based upon any untrue statement or omission, or alleged
untrue statement or alleged omission as described in this subsection 12(b), it
shall reimburse the Company (and, to the extent applicable, each controlling
person) on a monthly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any action with respect to such
Holder notwithstanding the absence of a judicial determination as to the
propriety and enforceability of such Holder's obligations to reimburse the
Company (and, to the extent applicable, each controlling person) for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement is so held to have been improper as to such Holder,
the Company (and, to the extent applicable, each controlling person) shall
promptly return it to such Holder, together with interest compounded daily,
based on the Prime Rate. Any such interim reimbursement payments which are not
made to the company within thirty (30) days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request.
Notwithstanding the provisions of this subsection 12(b), in connection with a
registration that includes Stock pursuant to subsection 11(c)(i) hereof, no
such Holder shall be required to indemnify or hold harmless the Company or any
controlling person for any amounts in excess of the net proceeds (before
deducting expenses) applicable to the Stock sold by such Holder pursuant to a
Registration Statement. Notwithstanding the provisions of this subsection
12(b), in connection with a registration that includes that Holder's Stock
pursuant to subsections 11(b) or 11(c)(ii), no such Holder shall be required to
indemnify and hold harmless the Company or any controlling person for any
amounts in excess of that portion of all expenses as to which indemnification
is properly claimed under this Agreement equal to such Holder's relevant
proportion of all net proceeds (before deduction of expenses) applicable to all
securities sold pursuant to the Initial Registration Statement or any
Registration Statement, as applicable.
(c) Promptly after receipt by an indemnified
party under this Section 12 of notice of the commencement of any action, such
indemnified party shall notify each party against whom indemnification is to be
sought in writing of the commencement thereof (but the failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 12 except to the extent that it has been materially
prejudiced by such failure). In case any
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such action is brought against any indemnified party, and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties shall be entitled to participate therein, and to the extent it
or they may elect by written notice delivered to the indemnified party or
parties promptly after receiving the aforesaid notice from such indemnified
party or parties, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, an
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party or parties in connection with
the defense of such action at the expense of the indemnifying party or parties,
(ii) the indemnifying party or parties shall not have employed counsel
reasonably satisfactory to such indemnified party to have charge of the defense
of such action within a reasonable time after notice of commencement of the
action or (iii) such indemnified party shall have reasonably concluded that
there may be one or more defenses available to it which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any
of which events such fees and expenses of one additional counsel (in addition
to appropriate local counsel) shall be borne by the indemnifying parties. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to appropriate local counsel) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 12 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent may not be unreasonably withheld.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes a claim for
indemnification pursuant to this Section 12, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of this Section 12 provide
for indemnification in such case or (ii) contribution under the Act may be
required on the part of any indemnified party, then each indemnifying party
shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified, on the
other hand, in connection
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with the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by such Holder,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to in the
first sentence of this subsection 12(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection 12(d), in a registration that includes a Holder's
Stock pursuant to subsection 11(c)(i) hereof, no Holder shall be required to
contribute any amount in excess of the net proceeds (before deducting expenses)
applicable to the shares of Stock sold by such Holder pursuant to such
Registration Statement and prospectus. Notwithstanding the provisions of this
subsection 12(d), in a registration that includes a Holder's Stock pursuant to
subsections 11(b) or 11(c)(ii), no such Holder shall be required to contribute
any amount in excess of that portion of all expenses as to which contribution
is properly claimed under this Agreement equal to such Holder's relevant
portion of all net proceeds (before deducting expenses) applicable to all
securities sold pursuant to the Initial Registration Statement or any
Registration Statement, as applicable. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act and the cases
and promulgations thereunder) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action against such party in respect to which a claim for contribution may be
made against another party or parties under this subsection 12(d), notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subsection 12(d) except to the extent it has been
materially prejudiced by such failure. The contribution agreement set forth
above shall be in addition to any liabilities which any indemnifying party may
have at common law or otherwise.
SECTION 13. NOTICES. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and shall
be deemed to have been duly given if mailed, delivered by hand or transmitted
by any standard form of telecommunication. Notices to the Warrantholders or a
holder of General Partner Affiliate Stock or Warrant Stock shall be directed to
each of them at their addresses as they appear on the
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books of the Company. Notices to the Company shall be directed to the Company
at 00000 Xxxxxxx Xxxxxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxx
X. Xxxxxxx, with a copy to Jeffer, Mangels, Xxxxxx & Marmaro LLP, 0000 Xxxxxx
xx xxx Xxxxx, Xxx Xxxxxx, Xxxxxxxxxx 00000 Attention: Xxxxxxxxx XxXxxx Xxxxxx,
Esq.
SECTION 14. PARTIES. This Agreement shall inure solely to the
benefit of and shall be binding upon, the General Partner, the Company, the
Warrantholders and the holders of General Partner Affiliate Stock Warrant Stock
and the controlling persons, officers, directors and others referred to in
Section 12 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
SECTION 15. MERGER OR CONSOLIDATION OF THE COMPANY. The Company
shall not merge or consolidate with or into any other corporation or sell all
or substantially all of its property to another corporation, unless the
provisions of Section 8.3 hereof are complied with.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
statements contained in the Proxy Statement/Prospectus, any schedule, exhibit,
certificate or other instrument delivered by or on behalf of the parties
hereto, or in connection with the transactions contemplated by this Agreement,
shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties
to this Agreement or pursuant hereto shall survive the termination of this
Agreement and the issuance, sale and delivery of the Warrant and the Warrant
Stock.
SECTION 17. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without giving effect to conflict of laws principles thereof.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which taken together shall be deemed to be one and the same instrument.
SECTION 19. ENTIRE AGREEMENT, AMENDMENTS. This Agreement constitutes
the entire agreement of the parties hereto concerning the subject matter hereof
and supersede all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended, modified or altered except in a writing signed by a majority of all
Warrantholders and holders of Warrant Stock and the Company.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
PACIFIC UNITED GROUP, INC.
By: ____________________________
Name:
Title:
PRESIDENTIAL MANAGEMENT COMPANY
By: ____________________________
Name:
Title:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN
COMPLIANCE WITH SECTION 1.3 OF THE GENERAL PARTNER'S WARRANT AGREEMENT PURSUANT
TO WHICH THEY WERE ISSUED.
WARRANT CERTIFICATE NO. __
WARRANT TO PURCHASE _______________
SHARES OF COMMON STOCK
PACIFIC UNITED GROUP, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received, PRESIDENTIAL MANAGEMENT
COMPANY, the registered holder hereof or assigns (the "Warrantholder"), is
entitled to purchase from PACIFIC UNITED GROUP, INC. (the "Company"), at any
time during the period commencing at 9:00 am., Pacific time, on the Initial
Exercise Date (as defined below), and before 5:00 p.m., Pacific time, on the
two-year anniversary date of the Initial Exercise Date (the "Expiration Date"),
at the purchase price per share of Common Stock of $12.50 (the "Warrant
Price"), _____________ shares of Common Stock of the Company (the "Warrant
Stock "). The "Initial Exercise Date" of the Warrants shall be determined as
the earlier of (i) the date Pacific Thrift and Loan Company ("Pacific Thrift"),
a wholly owned subsidiary of the Company, has fully utilized as an offset
against taxable income at least $6,800,000 of a net operating loss carryforward
(the "NOL") existing on the date hereof; (ii) the date that the NOL becomes
subject to limitation as a result of an "ownership change" as determined by
Section 382 of the Internal Revenue Code of 1986, as amended, which is not
caused by the exercise of Warrants; (iii) the acquisition by any person other
than a Warrantholder of more than ten percent (10%) of the total outstanding
voting stock of the Company; or (iv) June 30, 1997. The number of shares of
Common Stock of the Company purchasable upon exercise of each Warrant evidenced
hereby shall be subject to adjustment from time to time as set forth in the
General Partner's Warrant Agreement, dated as of ___________ __, 1996, by and
between the Company and the General Partner (the "General Partner's Warrant
Agreement").
The Warrants evidenced hereby represent the right to purchase an
aggregate of up to _______________ shares of Warrant Stock (subject to
adjustment as provided in the General Partner's Warrant Agreement) and are
issued under and subject to the terms and provisions contained in the General
Partner's Warrant Agreement, to all of which the Warrantholder by acceptance
hereof consents.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature
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guarantee as provided hereon) and simultaneous payment of the Warrant Price at
the principal office of the Company. Payment of such price shall be made at
the option of the Warrantholder in any manner allowed in the General Partner's
Warrant Agreement.
Upon any partial exercise of the Warrants evidenced hereby, there
shall be signed and issued to the Warrantholder a new Warrant Certificate in
respect of the shares of Warrant Stock as to which the Warrants evidenced
hereby shall not have been exercised. These Warrants may be exchanged at the
office of the Company by surrender of this Warrant Certificate properly
endorsed for one or more new Warrants of the same aggregate number of shares of
Warrant Stock as evidenced by the Warrant or Warrants exchanged. No fractional
securities shall be issued upon the exercise of rights to purchase hereunder,
but the Company shall pay the cash value of any fraction upon the exercise of
one or more Warrants. These Warrants are transferable at the office of the
Company in the manner and subject to the limitations set forth in the Warrant
Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of
the rights of a shareholder of the Company.
PACIFIC UNITED GROUP, INC.
By: ____________________________
Name:
Title:
Dated: _____________ __, 1996
ATTEST: [Seal]
_____________________________
Name:
Title:
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PACIFIC UNITED GROUP, INC.
PURCHASE FORM
PACIFIC UNITED GROUP, INC. (the "Company")
[21031 Xxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000]
Attention:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, _________ shares of common stock of the Company (the "Warrant
Stock") provided for therein, and requests that certificates for the Warrant
Stock be issued in the name of:
-----------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
-----------------------------------------------------------------
-----------------------------------------------------------------
and, if said number of shares of Warrant Stock shall not be all the Warrant
Stock purchasable hereunder, that a new Warrant Certificate for the balance of
the Warrant Stock purchasable under the within Warrant Certificate be
registered in the name of the undersigned Warrantholder or his assignee as
below indicated and delivered to the address stated below.
Dated:_________________
Name of Warrantholder
or Assignee: _________________________
(Please Print)
Address: _________________________
_________________________
Signature: _________________________
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed:_____________________________
(Signature must be guaranteed by a bank, trust company or savings and loan
association, having an office or correspondent in the United States or by a
member firm of a registered securities exchange or the National Association of
Securities Dealers, Inc.)
32
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers the right to purchase ______________ shares of Warrant Stock
represented by the within Warrant Certificate unto, and requests that a
certificate for such Warrant be issued in the name of:
-----------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
-----------------------------------------------------------------
-----------------------------------------------------------------
hereby irrevocably constituting and appointing _______________ as attorney to
transfer said Warrants on the books of the Company, with full power of
substitution in the premises and, if said number of shares of Warrant Stock
shall not be all of the Warrant Stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the Warrant
Stock purchasable under the within Warrant Certificate be registered in the
name of the undersigned Warrantholder and delivered to such Warrantholder's
address as then set forth on the Company's books.
Dated:_______________ ______________________________
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:_____________________________
(Signature must be guaranteed by a bank, trust company or savings and loan
association having an office or correspondent in the United States or by a
member firm of a registered securities exchange or the National Association of
Securities Dealers, Inc.)
