NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED
EXCEPT IN ACCORDANCE WITH SUCH REGISTRATION REQUIREMENTS OR AN
AVAILABLE EXEMPTION THEREFROM AND EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THIS WARRANT.
SECOND AMENDED AND RESTATED WARRANT
To Purchase Common Stock of
OPTEK TECHNOLOGY, INC.
This SECOND AMENDED AND RESTATED WARRANT (the "Warrant"),
entered
into as of the 31st day of October, 1997, between Optek
Technology, Inc., a Delaware
corporation (the "Company") and First Source Financial LLP, an
Illinois limited liability
partnership ("First Source");
WITNESSETH THAT:
WHEREAS, First Source is currently the holder of an Amended
and Restated Warrant
to Purchase Common Stock of the Company dated as of December 12,
1995 which was an
amendment and restatement of a warrant dated as of January 20,
1994 (the "Original Warrant");
WHEREAS, the Company issued the Original Warrant to First
Source, as successor-in-
interest to Household Commercial Financial Services, Inc.
pursuant to that certain Amended and
Restated Secured Credit Agreement dated as of January 20, 1994
among the Company and First
Source, as successor-in-interest to Household Commercial
Financial Services, Inc. in
consideration of the loans by Household Commercial Financial
Services, Inc.;
WHEREAS, the Original Warrant was an amendment and
restatement of, and was issued
in replacement of, a warrant dated as of November 27, 1991,
which, in turn, was an amendment
and restatement of, and was issued in replacement of, the warrant
dated as of January 31, 1991,
which in turn replaced rights granted under a Conversion
Agreement dated July 1, 1988, all of
which were issued to Household Commercial Financial Services,
Inc.; and
WHEREAS the parties desire to amend and restate the Amended
and Restated Warrant
as set forth herein;
NOW, THEREFORE, in consideration of the foregoing
provisions, the mutual
covenants and agreements set forth below, and for other good and
valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
Company and First Source hereby
amend and restate the Amended and Restated Warrant in its
entirety as follows:
PAGE
THIS IS TO CERTIFY that First Source, as
successor-in-interest to Household
Commercial Financial Services, Inc., or registered assigns, is
entitled upon the due exercise
hereof at any time during the Exercise Period (as hereinafter
defined) to purchase, in whole or
in part, from Optek Technology, Inc., a Delaware corporation (the
"Company'), the number of
shares of Common Stock, $0.01 par value, of the Company as
provided in Section 2.1 (subject
to adjustment) at the price for each share of such Common Stock
so purchased as provided in
Section 2.1 (subject to adjustment) and to exercise the other
rights, powers and privileges
hereinafter provided, all on the terms and conditions and
pursuant to the provisions hereinafter
set forth.
Dated as of October 31, 1997.
PAGE
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . .
. . . . 1
ARTICLE II EXERCISE OF WARRANT . . . . . . . . . . . . . . . . .
. . . . 5
2.1 Right to Exercise, Number of Shares and Exercise
Price. . . . 5
2.2 Notice of Exercise; Issuance of Common Stock. . . . .
. . . . 5
2.3 Fractional Shares . . . . . . . . . . . . . . . . . .
. . . . 5
2.4 Continued Validity. . . . . . . . . . . . . . . . . .
. . . . 6
ARTICLE III REGISTRATION, TRANSFER AND EXCHANGE . . . . . . .
. . . . 6
ARTICLE IV ANTIDILUTION PROVISIONS AND RIGHTS UPON
EXTRAORDINARY TRANSACTIONS. . . . . . . . . . . . . .
. . . . 7
4.1 Adjustment of Number of Shares Purchasable and
Exercise Price 7
(a) Adjustment to Number of Shares Issuable Pursuant
to this
Warrant . . . . . . . . . . . . . . . . . . . . .
. . . . 7
(b) Minimum Adjustment. . . . . . . . . . . . . . . .
. . . . 7
4.2 Diluting Events and Related Matters . . . . . . . . .
. . . . 8
(a) Issuance of Stock . . . . . . . . . . . . . . . .
. . . . 8
(b) Issuance of Warrants, Options or Other Rights . .
. . . . 8
(c) Issuance of Convertible Securities. . . . . . . .
. . . . 9
(d) Reorganization, Reclassification,
Recapitalization, Merger or
Sale of Company . . . . . . . . . . . . . . . . .
. . . . 10
(e) Readjustments . . . . . . . . . . . . . . . . . .
. . . . 10
(f) Determination of Consideration for Rights or
Options. . . 11
(g) Determination of Consideration upon Payment of
Cash, Property
or Merger . . . . . . . . . . . . . . . . . . . .
. . . . 11
(h) Date of Determination . . . . . . . . . . . . . .
. . . . 11
4.3 Rights of the Holder upon Rights Offering, Mergers,
Reorganizations
and Certain Other Transactions. . . . . . . . . . . .
. . . . 11
(a) Participation in Rights Offerings . . . . . . . .
. . . . 11
(b) Participation in Stock Dispositions . . . . . . .
. . . . 12
(c) Dividends . . . . . . . . . . . . . . . . . . . .
. . . . 12
(d) Other Distribution. . . . . . . . . . . . . . . .
. . . . 13
(e) Dividends in Securities; Splits and Combinations.
. . . . 13
(f) Record Date . . . . . . . . . . . . . . . . . . .
. . . . 13
(g) Shares Outstanding. . . . . . . . . . . . . . . .
. . . . 14
4.4 Certificates, Notices and Consents. . . . . . . . . .
. . . . 14
4.5 No Adjustment After Exercise. . . . . . . . . . . . .
. . . . 15
PAGE
ARTICLE V COVENANTS OF THE COMPANY. . . . . . . . . . . . . . .
. . . . 15
5.1 No Impairment . . . . . . . . . . . . . . . . . . . .
. . . . 15
5.2 Affirmative Covenants . . . . . . . . . . . . . . . .
. . . . 15
5.2.1 Delivery of Financial and Business Information . . . .
. . . . . . . . . . . . .15
5.2.2 Disputed Financial Statements . . . . . . . . . . . .
. . . . 17
5.2.3 Budget. . . . . . . . . . . . . . . . . . . . . .
. . . . 17
5.2.4 Auditors' Reports . . . . . . . . . . . . . . . .
. . . . 17
5.2.5 Lender Information. . . . . . . . . . . . . . . .
. . . . 17
5.2.6 Litigation. . . . . . . . . . . . . . . . . . . .
. . . . 17
5.2.7 Default . . . . . . . . . . . . . . . . . . . . .
. . . . 18
5.2.8 Material Adverse Developments . . . . . . . . . .
. . . . 18
5.2.9 Other Information . . . . . . . . . . . . . . . .
. . . . 18
5.2.10 Auditors. . . . . . . . . . . . . . . . . . . . .
. . . . 18
5.2.11 Inspection and Meeting Rights; Budget Review. . .
. . . . 18
5.2.12 Accounting. . . . . . . . . . . . . . . . . . . .
. . . . 18
5.2.13 Insurance . . . . . . . . . . . . . . . . . . . .
. . . . 18
5.2.14 Payment of Taxes. . . . . . . . . . . . . . . . .
. . . . 18
5.2.15 Compliance With Laws. . . . . . . . . . . . . . .
. . . . 19
5.2.16 Preservation of Corporate Existence and Property;
Operations 19
5.2.17 Holder as Observer. . . . . . . . . . . . . . . .
. . . . 19
5.2.18 Confidential Information. . . . . . . . . . . . .
. . . . 19
ARTICLE VI RESERVATION OF STOCK ISSUABLE ON EXERCISE OF
WARRANT; PREEMPTIVE RIGHTS. . . . . . . . . . . . . .
. . . . 20
ARTICLE VII LISTING ON SECURITIES EXCHANGE. . . . . . . . . .
. . . . 20
ARTICLE VIII RESTRICTIONS ON TRANSFER. . . . . . . . . . . . .
. . . . 20
8.1 Notice of Proposed Transfer; Transfers Without
Registration . 20
8.2 Registration and Qualification. . . . . . . . . . . .
. . . . 21
(a) Piggyback Registration. . . . . . . . . . . . . .
. . . . 21
(b) Demand Registration . . . . . . . . . . . . . . .
. . . . 23
8.3 Registration and Qualification Procedures . . . . . .
. . . . 24
8.4 Allocation of Expenses. . . . . . . . . . . . . . . .
. . . . 25
8.5 Indemnification . . . . . . . . . . . . . . . . . . .
. . . . 26
8.6 Legend on Certificates. . . . . . . . . . . . . . . .
. . . . 28
8.7 Supplying Information . . . . . . . . . . . . . . . .
. . . . 28
8.8 Damages . . . . . . . . . . . . . . . . . . . . . . .
. . . . 28
8.9 Holdback Agreements . . . . . . . . . . . . . . . . .
. . . . 29
8.10 Rule 144 Reporting. . . . . . . . . . . . . . . . . .
. . . . 29
8.11 Consent for Additional Registration Rights. . . . . .
. . . . 30
PAGE
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . .
. . . . 30
9.1 Nonwaiver and Expenses. . . . . . . . . . . . . . . .
. . . . 30
9.2 Holder Not a Stockholder. . . . . . . . . . . . . . .
. . . . 30
9.3 Notice Generally. . . . . . . . . . . . . . . . . . .
. . . . 30
9.4 Payment of Certain Expenses . . . . . . . . . . . . .
. . . . 30
9.5 Successors and Assigns. . . . . . . . . . . . . . . .
. . . . 31
9.6 Amendment . . . . . . . . . . . . . . . . . . . . . .
. . . . 31
9.7 Headings. . . . . . . . . . . . . . . . . . . . . . .
. . . . 31
9.8 GOVERNING LAW . . . . . . . . . . . . . . . . . . . .
. . . . 31
9.9 Subsidiaries. . . . . . . . . . . . . . . . . . . . .
. . . . 31
9.10 No Section 338 Election or Step-Up in Asset Value on
Books of the
Company . . . . . . . . . . . . . . . . . . . . . . .
. . . . 31
9.11 Replacement . . . . . . . . . . . . . . . . . . . . .
. . . . 31
9.12 Termination Agreement . . . . . . . . . . . . . . . .
. . . . 31
NOTICE OF EXERCISE FORM
ASSIGNMENT FORM
PAGE
ARTICLE I
DEFINITIONS
The terms defined in this ARTICLE I, whenever used in this
Warrant, shall have the
respective meanings hereinafter specified. Whenever used in this
Warrant, any noun or pronoun
shall be deemed to include both the singular and plural and to
cover all genders.
"Adjusted Operating Profits" means an amount equal to the
Net Income of the Company and
its Subsidiaries for the period specified before deduction of any
amount which, in conformity
with generally accepted accounting principles, would be set forth
opposite the caption "income
tax expense" (including deferred income taxes) (or any like
caption) on a consolidated income
statement of the Company, and excluding any amounts which, in
conformity with generally
accepted accounting principles, would be set forth opposite the
captions, "extraordinary pre-tax
gain" and "extraordinary pre-tax loss" (or any like captions) on
such consolidated income
statement, plus the amount which, in accordance with generally
accepted accounting principles,
would be set forth opposite the caption "interest expense" (or
any like caption) on such
consolidated income statement, plus an amount which, in
conformity with generally accepted
accounting principles, is equal to any amortization or
depreciation for such fiscal period, to the
extent the same are deducted from net revenues, in conformity
with generally accepted
accounting principles, in determining Net Income for such fiscal
period.
"Affiliate" of any person means any other person which,
directly or indirectly, controls
or is controlled by or is under common control with, such person.
A person shall be deemed
to be "controlled by" any other person if such other person
possesses, directly or-indirectly,
power
(a) to vote 10% or more of the securities having ordinary
voting power, or if not
having ordinary voting power, having at the time voting
power, for the election of
directors of such person; or
(b) to direct or cause the direction of the management and
policies of such person
whether by contract or otherwise.
"Assignment" means the form of Assignment appearing at the
end of this Warrant.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's authorized Common Stock,
$0.01 par value, and
any class of capital stock of the Company now or hereafter
authorized having the right to share
in distributions either of earnings or assets of the Company
without limit as to amount or
percentage.
"Common Stock on a Fully Diluted Basis" means, at any date
as at which the number
of shares thereof is to be determined, all issued shares of
Common Stock, except shares then
owned or held by or for the account of the Company, and shall
include all shares issuable in
respect of outstanding scrip or any certificates representing
fractional interests in shares of
Common Stock (which issued and outstanding shares shall be
approximately 4,259,534 shares
on the date this Warrant is issued), and all shares issuable
pursuant to the Company's incentive
stock option plan, long-term stock investment plan, director's
formula award plan or directors
formula compensation plan, all as in effect on the date hereof,
or pursuant to an employee or
director stock option plan, restricted stock bonus or ownership
plan, stock appreciation plan or
similar equity appreciation plan which the Company may implement
after receiving written
approval of a majority of the Holders in their sole discretion
(which approval must include First
Source if First Source is a Holder) (whether or not options or
awards with respect to such shares
have been granted) or issuable upon exercise of any warrant
(including this Warrant and
warrants previously issued to Directors of the Company), rights
to subscribe for or options
(whether or not vested) to purchase Common Stock or Convertible
Securities or upon the
conversion of any Convertible Securities. On the date hereof,
the number of shares of Common
Stock on a Fully Diluted Basis shall be 8,214,496 shares,
including 3,150,000 shares of
Common Stock initially issuable pursuant to this Warrant.
"Common Stock Valuation Price" in effect as of any date
shall mean a per share value equal
to the result obtained by dividing
(a) an amount equal to (i) the product of the
Company's Adjusted Operating Profits
for the four most recent Quarterly Fiscal Periods of the Company
(at the end of the Quarterly
Fiscal Period of the Company immediately preceding such date) and
seven (7) less (ii) the
amount of Funded Indebtedness (at the end of the Quarterly Fiscal
Period of the Company
immediately preceding such date), plus (iii) the proceeds that
would be received by the Company
upon exercise of all warrants, rights to subscribe for or options
to purchase Common Stock or
Convertible Securities or upon conversion of any Convertible
Securities, plus (iv) the fair market
value of proceeds received by the Company (other than proceeds in
the form of services of
employees of the Company and cash proceeds, which are reflected
in the amount of Funded
Indebtedness in clause (ii) above) upon any issuances or sales by
it of Common Stock,
Convertible Securities or warrants, rights to subscribe for or
options to purchase Common Stock
or Convertible Securities, multiplied by a fraction the numerator
of which (which shall never
be less than zero) is four minus the number of full Quarterly
Fiscal Periods since such issuance
or sale and the denominator of which is four, by
(b) the number of shares of Common Stock on a Fully
Diluted Basis on such date,
all as determined by a firm of independent public accountants of
recognized standing selected
by the Company and reasonably acceptable to the Holder.
"Company" means Optek Technology, Inc., a Delaware
corporation.
"Convertible Securities" means evidences of indebtedness,
shares of stock or other
securities which are convertible into or exchangeable for, with
or without payment of additional
consideration in cash or property, shares of Common Stock, either
immediately or upon the
arrival of a specified date or the happening of a specified
event.
"Default Rate" means at any time 4.50% plus the rate per
annum then most recently
announced by The First National Bank of Chicago, a national
banking association ("FNBC"),
as its corporate base rate at Chicago, Illinois (or if such rate
is not being quoted by FNBC, the
rate which is the successor to such rate, and if FNBC is not
quoting any such rate, the rate
conceptually equivalent to such rate which the domestic
commercial bank having the highest
combined capital and surplus of any bank having its principal
office in Chicago, Illinois is
quoting).
"Diluting Event" means any transaction or event which is
identified as a Diluting Event
in Section 4.2(a) - (d).
"Exercise Period" means the period commencing on the date
hereof and terminating at
5:00 p.m., Chicago time, on October 31, 1998.
"Exercise Price" means the price per share of Common Stock
as set forth in Section 2.1
as such price may be adjusted from time to time pursuant to
Article IV.
"First Source" means First Source Financial LLP, an Illinois
registered limited liability
partnership.
"Funded Indebtedness" means all indebtedness of the Company
and its Subsidiaries, on
a consolidated basis, if appropriate, solely for money borrowed
and owing, less the aggregate
amount of all cash and cash equivalents of the Company and its
Subsidiaries but not including
the amount of any indebtedness of the Company represented by
Convertible Securities.
"Holder" means the person in whose name this Warrant is
registered on the books of the
Company maintained for such purpose.
"Independent Counsel" means counsel to the Company, unless
counsel to the Holder
disagrees in writing with the opinion or advice of such counsel
with respect to the issue in
question within 15 days after receipt of such opinion or advice,
in which case the Company and
Holder shall select another counsel, not the regular counsel of
the Company or the Holder and
experienced in Securities Act matters, who shall render an
opinion with respect to the issue in
question. The opinion or advice of such other counsel so given
shall be conclusive and binding
on the Company and the Holder. The legal fees and expenses of
such other counsel incurred
in connection with the rendering of such opinion shall be borne
equally by the Holder and the
Company.
"Market Value" per share of Common Stock on any date shall
mean average of the daily
market prices for the 10 consecutive trading days preceding such
date. The market price for
each such trading day shall be the last sales price on such day
on such stock exchange on which
such stock is listed or admitted to trading, or, if no sale takes
place on such day on any such
exchange, the average of the closing bid and asked prices on such
day and officially quoted on
any such exchange, or, if the Common Stock is not then listed or
admitted to trading on any
stock exchange, the market price for each such business day shall
be the last sale price on such
day if reported by the National Association of Securities Dealers
Automated Quotation System
("NASDAQ") or, if not so reported, the average of the reported
closing bid and asked price
quotations for such day, as reported by NASDAQ. Notwithstanding
the foregoing, if Market
Value cannot be determined as set forth above because the Common
Stock is not then listed or
admitted to trading on a stock exchange, nor reported by NASDAQ,
then "Market Value" as
used in this Warrant shall have the same meaning as "Common Stock
Valuation Price."
"Net Income" for any fiscal period of the Company shall mean
consolidated net income
or loss of the Company and its Subsidiaries, if any, as it would
appear on the consolidated
statement of income of the Company for such fiscal period
prepared in accordance with
generally accepted accounting principles and as it may be
adjusted pursuant to Section 5.2.
"Notice of Exercise" means the form of Notice of Exercise
appearing at the end of this
Warrant.
"Organic Change" shall have the meaning provided in Section
4.3(b).
"Quarterly Fiscal Period" means a period comprised of
thirteen or fourteen weeks, as
applicable, representing a fiscal quarter of the Company, the
first of which in any fiscal year
shall begin on the first day of the Company's fiscal year and the
remainder of which in such
year shall begin on the day following the termination of the
preceding Quarterly Fiscal Period.
"Registration Agreement" shall have the meaning provided in
Section 8.2.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal
statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same
shall be in effect from time to time.
"Shares" shall have the meaning provided in Section 2.1.
"Subsidiary" means a corporation, partnership or other
entity of which a person and/or
such person's other Subsidiaries, individually or in the
aggregate, own, directly or indirectly,
such number of outstanding shares or other interests as have more
than 50% of the ordinary
voting power (or, at the time extraordinary powers are available
to holders of shares or other
interests, such number of outstanding shares or other interests
as have more than 50% of voting
power) for the election of directors or the members of any
similar governing body.
"Warrant" and "Warrants," including "this Warrant," mean (a)
the warrant dated as of
October 31, 1997 issued to First Source and (b) all warrants
issued upon the partial exercise,
transfer or division of or in substitution for such warrant.
"Warrant Valuation Price" in effect as of any date shall
mean a per share value equal to
the difference between the Market Value and the Exercise Price
then in effect.
PAGE
ARTICLE II
EXERCISE OF WARRANT
2.1 Right to Exercise, Number of Shares and Exercise Price.
Subject to and upon
compliance with the conditions of this ARTICLE II, the Holder
shall have the right, at its
option, at any time and from time to time during the Exercise
Period, to exercise this Warrant
in whole or in part. The aggregate number of shares of Common
Stock which may be
purchased from time to time during the Exercise Period by the
Holder upon exercise of this
Warrant shall be 3,150,000 subject to adjustment as provided in
ARTICLE IV hereof (the
"Shares"), and the initial Exercise Price shall be fifty cents
($0.50) (subject to adjustment as
provided in Section 4.3(e)). Notwithstanding the foregoing, the
aggregate exercise price for the
shares issuable under this Warrant shall not exceed One Million
Five Hundred Seventy Five
Thousand Dollars ($1,575,000.00).
2.2 Notice of Exercise; Issuance of Common Stock. (a) To
exercise this Warrant,
the Holder shall deliver to the Company at its principal office
at 0000 Xxxx Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxx 00000 Attention: President (i) a Notice of
Exercise duly executed by the
Holder and specifying the number of shares of Common Stock to be
purchased and (ii) this
Warrant.
(b) Payment of the Exercise Price shall be made at the
option of the Holder, (A) by
wire transfer to an account in a bank located in the United
States designated for such purpose
by the Company or (B) by certified or official bank check payable
to the order of the Company
and drawn on a member of the Chicago or New York Clearing House.
Upon receipt of the cash
payment, the Company shall, as promptly as practicable, and in
any event within five days
thereafter, cause to be issued and delivered to the Holder, or,
subject to ARTICLE VIII, the
transferee designated in the Notice of Exercise, a certificate or
certificates representing the
aggregate number of full shares of Common Stock issuable upon
such exercise registered in the
name of the Holder or the name of the transferee so designated.
(c) Unless otherwise requested by the Holder, this Warrant
shall be deemed to have
been exercised and such certificate or certificates shall be
deemed to have been issued, and the
Holder or transferee so designated in the Notice of Exercise
shall be deemed to have become
the holder of record of such shares for all purposes, as of the
close of business on the date the
Notice of Exercise, together with payment as herein provided, and
this Warrant, are received
by the Company.
(d) If this Warrant is exercised in part, the Company
shall, at the time of delivery of
the certificate or certificates for Common Stock, unless the
Exercise Period has then expired,
issue and deliver to the Holder or the transferee so designated
in the Notice of Exercise a new
Warrant evidencing the rights of the Holder or such transferee to
purchase the aggregate number
of shares of Common Stock for which this Warrant shall not have
been exercised, and this
Warrant shall be cancelled.
2.3 Fractional Shares. The Company shall not issue
fractional shares of Common
Stock or scrip representing fractional shares of Common Stock
upon exercise of this Warrant.
As to any fractional share of Common Stock which the Holder would
otherwise be entitled to
purchase upon such exercise, the Company shall purchase from the
Holder such unissued
fractional share at a price equal to an amount calculated by
multiplying such fractional share
(calculated to the nearest 1/100th of a share) by the Market
Value. Payment of such amount
shall be made in cash or by check payable to the order of the
Holder at the time of delivery of
any certificate or certificates arising upon such exercise.
2.4 Continued Validity. A holder of shares of Common Stock
issued upon the
exercise of this Warrant, in whole or in part, shall continue to
be entitled to all rights provided
to holders of Common Stock issuable on the exercise of this
Warrant, whether or not this
Warrant has been fully exercised, except where such holder
acquires the shares through a public
market. The Company will, at the time of the exercise of this
Warrant, in whole or in part,
upon the request of the holder of the shares of Common Stock
issued upon the exercise thereof,
acknowledge in writing, in form reasonably satisfactory to such
holder, its continuing obligation
to afford to such holder all rights to which such holder shall
continue to be entitled after such
exercise in accordance with the provisions of this Warrant;
provided, however, that if such
holder shall fail to make any such request, such failure shall
not affect the continuing obligation
of the Company to afford to such holder all such rights.
ARTICLE III
REGISTRA TION,
TRANSFER AND EXCHANGE
The Company shall keep at the Company's principal office
referred to in Section 2.2 or
at the offices of Xxxxxx & Xxxxxx, P.C. in Dallas, Texas or at
such other address as shall be
specified in a written notice to the Holder a register in which,
subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration, transfer and
exchange of this Warrant. The Company will not at any time,
except upon the dissolution,
liquidation or winding up of the Company, close such register so
as to result in preventing or
delaying the exercise or transfer of this Warrant.
Upon surrender for registration of transfer of this Warrant
at such office, the Company
shall execute and deliver, in the name of the designated
transferee or transferees, one or more
new Warrants representing the right to purchase a like aggregate
number of shares of Common
Stock. At the option of the Holder, this Warrant may be
exchanged for other Warrants
representing the right to purchase a like aggregate number of
shares of Common Stock upon
surrender of this Warrant at such office. Whenever this Warrant
is so surrendered for exchange,
the Company shall execute and deliver the Warrants which the
Holder making the exchange is
entitled to receive.
Every Warrant presented or surrendered for registration of
transfer or exchange shall be
accompanied by an Assignment duly executed by the holder thereof
or its attorney duly
authorized in writing.
All warrants issued upon any registration of transfer or
exchange of warrants shall be the
valid obligations of the Company, evidencing the same rights, and
entitled to the same benefits
as the warrants surrendered upon such registration of transfer or
exchange.
Upon receipt by the Company of evidence satisfactory to it
(in the exercise of reasonable
discretion) of the ownership of and the loss, theft, destruction
or mutilation of this Warrant and
(in case of loss, theft or destruction) the written agreement of
the Holder to indemnify the
Company (or, if the Holder is not First Source and if the Company
reasonably requests, a bond)
against any resulting loss or expense and in case of mutilation
upon surrender and cancellation
thereof, the Company will execute and deliver in lieu thereof a
new Warrant.
No service charge shall be made for any registration of
transfer or exchange of Warrants,
but the Company may require payment of a sum sufficient to cover
any tax or other
governmental charge that may be imposed in connection with any
registration of transfer as
provided in Section 9.4.
The Company and any agent of the Company may treat the
person in whose name this
Warrant is registered as the owner of this Warrant for all
purposes whatsoever, and neither the
Company nor any agent of the Company shall be affected by notice
to the contrary. This
Warrant, if properly assigned, may be exercised by a new holder
without first having a new
Warrant issued.
ARTICLE IV
ANTIDILUTION PROVISIONS AND RIGHTS UPON
EXTRAORDINARY TRANSACTIONS
4.1 Adjustment of Number of Shares Purchasable and Exercise
Price. Subject to the
provisions of this ARTICLE IV, the Exercise Price and the number
of shares of Common Stock
issuable upon exercise of this Warrant shall be subject to
adjustment from time to time as set
forth below.
(a) Adjustment to Number of Shares Issuable Pursuant to
this Warrant. If a Diluting
Event, as identified in Section 4.2, occurs (unless otherwise
specified in Section 4.2), the Holder
shall thereafter be entitled upon exercise of this Warrant under
Section 2.1 to receive, at the
same Exercise Price per share, the number of shares of Common
Stock calculated by multiplying
the number of shares of Common Stock issuable upon exercise of
this Warrant immediately prior
to such Diluting Event by a fraction (a) the numerator of which
shall be the Market Value
immediately prior to such Diluting Event, and (b) the denominator
of which is (x) the sum of
(i) the number of shares of Common Stock on a Fully Diluted Basis
immediately prior to such
Diluting Event (but not including shares of Common Stock issuable
upon exercise of this
Warrant) multiplied by the Market Value immediately prior to such
Diluting Event plus (ii) the
aggregate consideration, if any, deemed to be received by the
Company upon such Diluting
Event, divided by (y) the total number of shares of Common Stock
on a Fully Diluted Basis
immediately after such Diluting Event (but not including shares
of Common Stock issuable upon
exercise of this Warrant).
(b) Minimum Adjustment. In the event any adjustment
pursuant to this Section 4.l
shall result in an adjustment of less than 100 shares of Common
Stock, no such adjustment shall
be made, but any such lesser adjustment shall be carried forward
and shall be made at the time
and together with the next subsequent adjustment which, together
with any adjustments so
carried forward, shall amount to 100 or more shares of Common
Stock; provided, however, that
upon any adjustment resulting from (i) the declaration of a
dividend upon, or the making of any
distribution in respect of, any stock of the Company payable in
Common Stock or Convertible
Securities or (ii) the reclassification, by subdivision,
combination or otherwise, of the Common
Stock into a greater or smaller number of shares, the foregoing
figure of 100 shares (or such
figure as last adjusted) shall be proportionately adjusted; and
provided further, that upon exercise
of this Warrant, the Company shall make all necessary adjustments
not theretofore made to the
number of Shares up to and including the date upon which this
Warrant is exercised.
4.2 Diluting Events and Related Matters. Except as
otherwise expressly provided,
upon the occurrence of a Diluting Event, as identified in
subsections (a)-(d) below, the number
of shares subject to this Warrant shall be adjusted as set forth
in Section 4.1:
(a) Issuance of Stock. If the Company shall issue or sell
any shares of Common Stock
(including any treasury shares but excluding (i) any shares
issued pursuant to warrants or options
outstanding on the date hereof (at prices not less than the
prices at which such warrants and
options are exercisable on the date hereof), (ii) any shares
issued pursuant to the Company's
existing incentive stock option plan, directors formula award
plan, directors formula
compensation plan or long term stock investment plan, in each
case as in effect and in an amount
permitted on the date hereof, whether or not options or awards
with respect to such shares have
been granted and (iii) any shares issuable pursuant to an
employee or director stock option plan,
restricted stock bonus or ownership plan, stock appreciation plan
or similar equity appreciation
plan which the Company may implement after receiving the written
approval of a majority of
the Holders in their sole discretion (which approval must include
First Source if First Source is
a Holder) whether or not options or awards with respect to such
shares have been granted) for
consideration per share less than the Market Value in effect
immediately prior to the time of
such issue or sale, then a Diluting Event shall have occurred and
the number of Shares subject
to this Warrant shall be adjusted as set forth in Section 4.1.
(b) Issuance of Warrants, Options or Other Rights.
(i) Characterization of Transaction for
Antidilution Adjustment. In
case the Company shall in any manner grant (whether
directly or by assumption
in a merger or otherwise) any rights to subscribe for
or to purchase, or any
options for the purchase of Common Stock or for the
purchase of Convertible
Securities (but excluding options or awards granted
pursuant to the Company's
existing incentive stock option plan, directors'
formula award plan, directors
formula compensation plan or long term stock investment
plan, in each case as
in effect and in an amount permitted on the date
hereof, or granted pursuant to
an employee or director stock option plan, restricted
stock bonus or ownership
plan, stock appreciation plan or similar equity
appreciation plan which the
Company may implement after receiving the written
approval of a majority of the
Holders in their sole discretion (which approval must
include First Source if First
Source is a Holder) in amounts permitted pursuant to
the approval described
above), whether or not such rights or options or the
right to convert or exchange
any such Convertible Securities are immediately
exercisable, and the price per
share for which shares of Common Stock are issuable
upon the exercise of such
rights or options or upon conversion or exchange of
such Convertible Securities
shall be less than the Market Value existing
immediately prior to the time of such
granting of such rights or options, then a Diluting
Event shall have occurred and
the maximum number of shares of Common Stock issuable
upon the exercise of
such rights or options or upon conversion or exchange
of the maximum amount
of such Convertible Securities issuable upon the
exercise of such rights or options
shall (as of the date for adjustment required by
subsection (h) below) be deemed
to be outstanding and to have been issued for such
price per share. Except as
otherwise specified in Section 4.2 (e), no further
adjustments described in Section
4.1 shall be made upon the actual issuance of such
Common Stock or of such
rights or options or upon the actual issuance of such
Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Determination of Price. The price per share
for which shares of
Common Stock are issuable upon the exercise of such
rights or options or upon
conversion or exchange of such Convertible Securities
shall be determined by
dividing (1) the total amount, if any, received or
receivable by the Company as
consideration for the granting of such rights or
options, plus the minimum
aggregate amount of additional consideration payable to
the Company upon the
exercise of such rights or options, plus, in the case
of such Convertible
Securities, the minimum aggregate amount of additional
consideration if any,
payable upon the conversion or exchange thereof plus
the net amount received or
receivable upon the issuance of such Convertible
Securities (in each case without
double counting), by (2) the total maximum number of
shares of Common Stock
issuable upon the exercise of such rights or options or
upon the conversion or
exchange of all such Convertible Securities issuable
upon the exercise of such
rights or options.
(c) Issuance of Convertible Securities.
(i) Characterization of Transaction for
Antidilution Adjustment. In
case the Company shall in any manner issue or sell
(whether directly or by
assumption in a merger or otherwise) any Convertible
Securities, (but excluding
options or awards granted pursuant to the Company's
existing incentive stock
option plan, directors' formula award plan, directors
formula compensation plan
or long term stock investment plan, in each case as in
effect and in an amount
permitted on the date hereof, or granted pursuant to an
employee or director stock
option plan, restricted stock bonus or ownership plan,
stock appreciation plan or
similar equity appreciation plan which the Company may
implement after
receiving the written approval of a majority of the
Holders in their sole discretion
(which approval must include First Source if First
Source is a Holder) in amounts
permitted pursuant to the approval described above),
whether or not the rights to
convert or exchange thereunder are immediately
exercisable, and the price per
share for which shares of Common Stock are issuable
upon such conversion or
exchange shall be less than the Market Value existing
immediately prior to the
time of such issuance or sale, then a Diluting Event
shall have occurred and the
maximum number of shares of Common Stock issuable upon
conversion or
exchange of all such Convertible Securities shall (as
of the date for adjustment
required by subsection (h) below) be deemed to be
outstanding and to have been
issued for such price per share. Except as otherwise
specified in Section 4.2(e),
(x) no further adjustments shall be made upon the
actual issue of such Common
Stock upon conversion or exchange of such Convertible
Securities and (y) if any
such issue or sale of such Convertible Securities is
made upon exercise of any
rights to subscribe for or to purchase or any option to
purchase any such
Convertible Securities for which adjustments have been
or are to be made
pursuant to other provisions of Sections 4.1 and 4.2,
no further adjustment shall
be made by reason of such issue or sale.
(ii) Determination of Price. The price per share
for which shares of
Common Stock are issuable upon such conversion or
exchange shall be
determined by dividing (1) the total amount received or
receivable by the
Company as consideration for the issue or sale of such
Convertible Securities,
plus the minimum aggregate amount of additional
consideration, if any, payable
to the Company upon the conversion or exchange thereof,
by (2) the total
maximum number of shares of Common Stock issuable upon
the conversion or
exchange of all such Convertible Securities.
(d) Reorganization, Reclassification, Recapitalization,
Merger or Sale of Company.
In case the Company or a successor thereto issues Common Stock,
options, other rights or
Convertible Securities in connection with any consolidation or
merger of the Company or any
of its Subsidiaries with or into another corporation or in
connection with the sale or other
disposition of all or substantially all of the business or assets
of the Company or any of its
Subsidiaries and the consideration per share realized by the
Company by reason of any such
transaction, determined as applicable in accordance with
subsection (g) of this Section 4.2, is
less than the Market Value in effect immediately prior to such
event, then a Diluting Event shall
have occurred and the number of Shares subject to this Warrant
shall be adjusted as set forth in
Section 4.1.
(e) Readjustments. In the event (i) the purchase price
provided for in any rights or
options referred to in subsection (b) above, or (ii) the
additional consideration, if any, payable
upon the conversion or exchange of Convertible Securities
referred to in subsection (b) or (c)
above or (iii) the rate at which any Convertible Securities
referred to in subsection (b) or (c)
above are convertible into or exchangeable for Common Stock shall
change (other than under
or by reason of provisions designed to protect against dilution),
the number of Shares in effect
at the time of such event shall forthwith be readjusted to the
number of Shares which would have
been in effect at such time had such rights, options or
Convertible Securities still outstanding
provided for such changed purchase price, additional
consideration or exercise rate, as the case
may be, at the time initially granted, issued or sold. On the
expiration of any such option or
right or the termination of any such right to convert or exchange
such Convertible Securities,
the number of Shares then in effect hereunder shall forthwith be
readjusted to the number of
Shares which would have been in effect at the time of such
expiration or termination had such
right, option or Convertible Security never been issued, and the
Common Stock issuable
thereunder shall no longer be deemed to be outstanding.
(f) Determination of Consideration for Rights or Options.
In case any rights or
options to purchase any shares of Common Stock or Convertible
Securities shall be issued in
connection with the issue or sale of other securities of the
Company, together comprising one
integral transaction, in which no specific consideration is
allocated to the rights or options, such
rights or options shall be deemed to have been issued without
consideration.
(g) Determination of Consideration upon Payment of Cash,
Property or Merger. In
case any shares of Common Stock or Convertible Securities or any
rights or options to purchase
any such Common Stock or Convertible Securities shall be issued
or sold for cash, the
consideration received therefor shall be deemed to be the net
amount received by the Company
therefor, after deduction of any accrued interest, dividends or
any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Company in connection
therewith. In case any shares of Common Stock or Convertible
Securities or any rights or
options to purchase any such Common Stock or Convertible
Securities shall be issued for a
consideration other than cash, the amount of the consideration
other than cash received by the
Company shall be deemed to be the fair market value of such other
consideration on the date
of issue of such securities, as determined by the Board of
Directors of the Company in the
exercise of their business judgment, less any expenses incurred
by the Company in connection
therewith. In case any shares of Common Stock or Convertible
Securities or any rights or
options to purchase such Common Stock or Convertible Securities
shall be issued in connection
with any merger or consolidation in which the Company and its
Subsidiaries, if applicable,
survive, the amount of consideration therefor shall be deemed to
be the fair market value thereof
on the date of issue, as determined by the Board of Directors of
the Company in the exercise
of their business judgment, or such portion of the assets and
business of the non-surviving
corporation as the Board of Directors shall attribute to such
Common Stock, Convertible
Securities, rights or options, as the case may be. In the event
of any consolidation or merger
of the Company or any of its Subsidiaries in which the Company or
its Subsidiaries, if
applicable, does not survive or in the event of any sale or other
disposition of all or substantially
all of the business or assets of the Company or any of its
Subsidiaries for stock or other
securities of any corporation, the Company shall be deemed to
have issued a number of shares
of its Common Stock for stock or securities of the other
corporation computed on the basis of
the actual exchange ratio on which the transaction was predicated
and for a consideration equal
to the fair market value on the date of such transaction of such
stock or securities of the other
corporation.
(h) Date of Determination. For purposes of Section 4.1 and
4.2, the date as of which
the number of shares shall be adjusted shall be the earlier of
the date upon which the Company
shall (1) enter into a firm contract for the issuance of shares
of Common Stock, rights or other
options or Convertible Securities, as the case may be, or (2)
issue such shares of Common
Stock, rights or other options or Convertible Securities, as the
case may be.
4.3 Rights of the Holder upon Rights Offering, Mergers,
Reorganizations and Certain
Other Transactions.
(a) Participation in Rights Offerings. In the event the
Company shall effect an
offering of Common Stock or other stock pro rata among its
stockholders, the Holder shall be
entitled, at the Holder's option, regardless of whether the
Warrant is otherwise then exercisable,
in lieu of the adjustments set forth in Sections 4.1 and 4.2 to
the extent that such option is
exercised by the Holder, to elect to participate in each and
every such offering as though this
Warrant had been exercised and the holder were, at the time of
any such rights offering, then
a holder of that number of shares of Common Stock to which the
Holder is then entitled on the
exercise hereof.
(b) Participation in Stock Dispositions. In the event that
the Company shall offer,
approve, accept or recommend an offering, sale, transfer,
redemption, cancellation or other
disposition of Common Stock (including without limitation, by way
of any merger, capital
reorganization, or reclassification or recapitalization of the
capital stock of the Company) to any
person (other than in any offering described in subsection (a)
above) or in the event that the
Company liquidates or dissolves following a sale or transfer of
all or substantially all of its
assets to any entity, the Company shall arrange as part of such
offering, sale or other disposition
for the participation of the Holder, with respect to including
this Warrant or the Shares issuable
upon exercise hereof in such offering, sale or other disposition
upon identical terms, without
such Holder incurring any liability under Section 16(b) of the
Securities Exchange Act of 1934,
as amended, and after taking into account the Exercise Price.
Such participation shall be at the
Holder's option, regardless of whether the Warrant is otherwise
then exercisable, in lieu of the
adjustments set forth in Sections 4.1 and 4.2, to the extent such
option is exercised by the
Holder.
In case of the consolidation or merger of the Company or any
of its Subsidiaries with or
into another corporation (each such event is herein called an
"Organic Change") and in which
the Holder does not participate as contemplated by the preceding
paragraph, then after any
required adjustment on account of such Organic Change, there
shall thereafter be deliverable
upon the exercise of this Warrant or any portion hereof (in lieu
of or in addition to the number
of shares of Common Stock theretofore deliverable) the number of
shares of stock or other
securities or property to which a holder of the number of shares
of Common Stock represented
by that portion of this Warrant so exercised would have been
entitled upon such Organic
Change, and at the same aggregate Exercise Price, as adjusted.
Prior to and as a condition of
the consolidation of any Organic Change described, the Company
shall make appropriate, written
adjustments in the application of the provisions herein set forth
satisfactory to the holders of the
Warrants entitled to not less than a majority of the shares of
Common Stock issuable upon the
exercise thereof with respect to the rights and interests of the
holders of the Warrants so that the
provisions set forth herein shall thereafter be applicable, as
nearly as possible, in relation to any
shares of stock or other securities or other property thereafter
deliverable upon exercise of the
Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement
between the Company and the successor entity and be approved by
the holders of the Warrants
entitled to not less than a majority of the shares of Common
Stock issuable upon the exercise
thereof.
(c) Dividends. In case the Company shall declare, in
any 12-month period,
dividends upon the Common Stock (excluding a dividend payable in
Common Stock or
Convertible Securities referred to in subsection (e) below) which
in the aggregate is in excess
of either 50% of net income for such 12-month period or 15% of
the net worth of the Company
(as shown on the most recent year end consolidated balance sheet
to be delivered pursuant to
ARTICLE V hereof) ("Net Worth"), then the Company shall make
provision to pay to Holder,
upon exercise of the Warrant, an amount per share acquired upon
exercise (adjusted in inverse
proportion to any adjustment made thereafter in the number of
shares pursuant to this ARTICLE
IV) the amount equal to the aggregate amount of such dividends in
excess of (x) the lesser of
(a) 50% of net income for such 12-month period and (b) 15% of Net
Worth divided by (y) all
outstanding shares of Common Stock with respect to which such
dividend is payable. Such
provision shall take effect as of the date on which a record date
is established for the purpose
of such dividend, or, if a record date is not established, the
date as of which the holders of
Common Stock of record entitled to such dividend are to be
determined.
(d) Other Distribution. In case the Company shall
distribute or grant to the holders
of shares of Common Stock (whether or not on a pro rata basis)
any evidence of its indebtedness
or any assets (including any such distribution made in connection
with a consolidation or merger
in which the Company is the continuing corporation) or rights or
options to subscribe or
purchase any such evidence of its indebtedness or assets
(excluding rights or options to subscribe
or purchase Common Stock or Convertible Securities), then the
Company shall make provision
to pay to Holder, upon exercise of the Warrant, an amount per
share acquired upon exercise
(adjusted in inverse proportion to any adjustment made thereafter
in the number of shares
pursuant to this ARTICLE IV) the amount equal to the aggregate
amount of such distribution
or grant in excess of (x) the lesser of (a) 50% of net income for
such 12-month period and (b)
15% of Net Worth divided by (y) all outstanding shares of Common
Stock with respect to which
such distribution or grant is payable. Such provision shall take
effect as of the date on which
a record date is established for the purpose of such distribution
or grant, or, if a record date is
not established, the date as of which the holders of Common Stock
of record entitled to such
distribution or grant are to be determined.
(e) Dividends in Securities; Splits and Combinations. In
case the Company shall at
any time (i) declare a dividend or make any other distribution
upon any stock of the Company
payable in either case in Common Stock or Convertible Securities,
(ii) subdivide its outstanding
shares of Common Stock into a greater number of shares or (iii)
combine its outstanding shares
of Common Stock into a smaller number of shares, then the
Exercise Price in effect immediately
prior to such events shall be adjusted as follows: the Exercise
Price in effect immediately after
such event shall equal the product of (a) the Exercise Price in
effect immediately prior to such
event and (b)(i) the number of outstanding shares of Common Stock
immediately prior to such
event, divided by (ii) the number of outstanding shares of Common
Stock immediately after such
event. The number of shares of Common Stock issuable upon the
exercise of the Warrant
immediately after such event shall equal the product of (c) the
number of shares of Common
Stock issuable upon the exercise of the Warrant immediately prior
to such event and (d) (i) the
number of outstanding shares of Common Stock immediately after
such event, divided by (ii)
the number of shares of outstanding Common Stock immediately
prior to such event.
(f) Record Date. In case the Company shall establish a
record date of the holders
of the Common Stock for the purpose of entitling them (i) to
receive a dividend or other
distribution payable in Common Stock or in Convertible Securities
or (ii) to subscribe for or
purchase Common Stock or Convertible Securities, then effective
as of such record date such
Common Stock or Convertible Securities shall be deemed to have
been issued or sold.
Appropriate readjustment of the Exercise Price shall be made in
the event that any dividend,
distribution or subscription referred to in this subsection (f)
shall be lawfully abandoned.
(g) Shares Outstanding. Except as provided to the contrary
herein, the number of
shares of Common Stock deemed to be outstanding for purposes of
Section 4.3(c), (d) and (e)
at any given time shall be the number of shares of Common Stock
actually issued and
outstanding at such time, plus any shares of Common Stock
issuable in respect of scrip
certificates which have been issued in lieu of fractional shares
of Common Stock.
4.4 Certificates, Notices and Consents.
(a) Upon the occurrence of any Diluting Event requiring
adjustments of the Exercise
Price pursuant to Sections 4.1, 4.2 and/or 4.3, a certificate
signed (i) by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant
Secretary of the Company or (ii) by any independent firm of
certified public accountants of
recognized standing selected by, and at the expense of, the
Company setting forth in reasonable
detail the events requiring the adjustment and the method by
which such adjustment was
calculated, shall be mailed (by first class mail, postage
prepaid) to the Holder specifying the
adjusted Exercise Price after giving effect to the adjustment(s).
The certificate of any independent firm of certified public
accountants of recognized
standing selected by the Board of Directors of the Company and
reasonably acceptable to the
Holder shall be conclusive evidence, absent manifest error, of
the correctness of any
computation made under Sections 4.1, 4.2 and/or 4.3.
(b) In case the Company after the date hereof shall propose
to (i) pay any dividend
payable in stock to the holders of shares of Common Stock or to
make any other distribution to
the holders of shares of Common Stock, (ii) offer to the holders
of shares of Common Stock
rights to subscribe for or purchase any additional shares of any
class of stock or any other rights
or options or (iii) effect any reclassification involving merely
the subdivision or combination of
outstanding shares of Common Stock, or (iv) any capital
reorganization or any consolidation or
merger, or any sale or other disposition of all or substantially
all of the business or assets of the
Company, or the liquidation, dissolution or winding up of the
Company or (v) engage in any
Diluting Event not otherwise mentioned in this subsection (b),
then, in each such case, the
Company shall mail (by first class mail, postage prepaid) to the
Holder notice of such proposed
action, which shall specify the date on which the books of the
Company shall close, or a record
date shall be established, for determining holders of Common
Stock entitled to receive such
stock dividends or other distribution of such rights or options,
or the date on which such
reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition,
liquidation, dissolution or winding up shall take place or
commence, as the case may be, and
the date as of which it is expected that holders of Common Stock
of record shall be entitled to
receive securities or other property deliverable upon such
action, if any such date is to be fixed.
Such notice shall be mailed, in the case of any action covered by
clause (i) or (ii) above, at least
30 days prior to the date upon which such action takes place,
and, in the case of any action
covered by clause (iv) above, at lease 30 days prior to the date
upon which such action takes
place and 30 days prior to any record date to determine holders
of Common Stock entitled to
receive such securities or other property.
(c) Failure to file any certificate or notice or to mail
any notice, or any defect in any
certificate or notice, pursuant to this Section 4.4, shall not
affect the legality or validity of the
adjustment of the number of shares purchasable upon exercise of
this Warrant, or any transaction
giving rise thereto.
4.5 No Adjustment After Exercise. After this Warrant is
exercised in whole or in
part, the holder of any Common Stock so acquired shall not be
entitled to any adjustment in the
price or number of shares so acquired by reason of any subsequent
occurrence which would
result in an adjustment of the Exercise Price, number of shares
or other adjustments by operation
of this Article IV.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 No Impairment. The Company shall not, and shall not
permit its Subsidiaries
to, directly or indirectly, by any action, including, without
limitation, amending its Certificate
of Incorporation or through any reorganization, transfer of
assets, consolidation, merger,
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 such terms and in the taking of
all such action as may be
necessary or appropriate to protect the rights of the Holder
against impairment. Without limiting
the generality of the foregoing, the Company will (a) not
increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant
above the amount payable
therefor upon such exercise, (b) take all such action as may be
necessary or appropriate in order
that the Company may validly and legally issue fully paid and
nonassessable shares of Common
Stock upon the exercise of this Warrant and any required issuance
of additional shares of
Common Stock pursuant to Sections 4.1 and 4.2, (c) obtain all
such authorizations, exemptions
or consents from any public regulatory body having jurisdiction
thereof as may be necessary to
enable the Company to perform its obligations under this Warrant
(except that compliance with
applicable securities and blue sky laws shall be governed by the
provisions of Article VIII of this
Warrant), (d) not undertake any reverse stock split, combination,
reorganization or other
reclassification of its capital stock which would have the effect
of making this Warrant
exercisable for less than one share of Common Stock, (e) not take
or permit the taking of any
action which could subject the holder of this Warrant or shares
of Common Stock issuable upon
exercise thereof to liability under Section 16(b) of the
Securities Exchange Act of 1934, as
amended, and (f) not change the Company's fiscal year from a
fiscal year ended at the end of
October.
5.2 Affirmative Covenants. So long as the Holder is the
owner of or is entitled
upon the due exercise hereof during the Exercise Period to
purchase at least 1,039,500 shares
of the Company's Common Stock, the Company shall comply with the
requirements of this
Section 5.2:
5.2.1 Delivery of Financial and Business
Information. The Company will
deliver to the Holder:
(a) As soon as practicable after the end of each of the
first three Quarterly Fiscal
Periods in each fiscal year of the Company, and in any event
within 45 days thereafter, two
copies of:
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at
the end of such quarter, and
(ii) consolidated statements of income, retained
earnings and cash flow of
the Company and its Subsidiaries for such quarter and (in
the case of the second and
third quarters) for the portion of the fiscal year ending
with such quarter, setting forth
in each case in comparative form the figures for the
corresponding periods in the
previous fiscal year. Such statements shall be (1) prepared
in accordance with generally
accepted accounting principles consistently applied, (2) in
reasonable detail and (3)
certified as complete and correct by the principal financial
or accounting officer of the
Company;
(b) As soon as practicable after the end of each fiscal
year of the Company, and in
any event within 90 days thereafter, two copies of:
(i) a consolidated balance sheet of the Company and
its Subsidiaries as at
the end of such year, and
(ii) consolidated statements of income, retained
earnings and cash flow of
the Company and its Subsidiaries for such year;
setting forth in each case in comparative form the figures for
the previous fiscal year, all in
reasonable detail and accompanied by a report thereon by a firm
of independent certified public
accountants of recognized standing selected by the Company, which
report shall state that such
financial statements fairly present the financial position of the
company being reported upon at
the end of such year and the results of its operations and
changes in its financial position for
such year in conformity with generally accepted accounting
principles applied consistently
(except for changes in accounting principles with which such
accountants concur) and that their
examination of such financial statements has been made in
accordance with generally accepted
auditing standards and accordingly included such tests of the
accounting records and other
auditing procedures as they considered necessary in the
circumstances;
(c) Promptly upon their becoming available one copy of each
report, notice or proxy
statement sent by the Company to its stockholders generally, and
of each regular or periodic
report (pursuant to the Securities Exchange Act of 1934, as
amended) and any registration
statement, prospectus or written communication (other than
transmittal letters) (pursuant to the
Securities Act), filed by the Company with (i) the Commission or
(ii) any securities exchange
on which shares of the Common Stock are listed;
(d) With reasonable promptness, such other data and
information as from time to time
may be reasonably requested by the Holder; and
(e) Promptly upon, and in any event within 10 days after,
the adoption, initiation or
undertaking of any plan, arrangement, negotiations, intention or
commitment to enter into any
of the transactions described in Sections 4.1, 4.2, or 4.3,
notice of any such transactions,
including information in reasonable detail pertaining to the
terms, conditions and consummation
of any such transactions.
5.2.2 Disputed Financial Statements. If the Common
Stock of the Company
is not then listed or admitted to trading on a stock exchange nor
reported by NASDAQ, the
Holder shall have the right at any time after receipt thereof to
object to any financial statements
delivered to the Holder pursuant to subsections (a) or (b) of
Section 5.2.1 by specifying in
writing to the Company the nature of its objection, and, unless
such objection is resolved by
agreement of the Company and the Holder, the Company and the
Holder shall each have the
right to submit the disputed financial statements to separate
firms of independent accountants of
recognized standing for a joint resolution (based upon written
submissions) of the objection of
the Holder (which firms of independent accountants may, in either
case, be the firm of
accountants regularly retained by the Company or the Holder). If
such firms cannot jointly
resolve the objection of the Holder, then, unless otherwise
directed by agreement of the
Company and the Holder, such firms shall in their sole discretion
choose another firm of
independent certified public accountants of recognized standing
not the regular auditor of the
Holder or of the Company, which firm shall resolve such
objection. In either case, the
determination so made shall be conclusive and binding on the
Company solely for purposes of
this Warrant, the Holder and all persons claiming under or
through either of them, and any
adjustment in the disputed financial statements and the Common
Stock Valuation Price resulting
from such determination shall be made. The cost of any such
determination shall be borne by
the Company if it results in an increase in the applicable Common
Stock Valuation Price or by
the Holder if it results in no adjustment or a decrease in the
Common Stock Valuation Price;
5.2.3 Budget. The Company will deliver to the Holder
not less than thirty (30)
days prior to the commencement of each fiscal year, an annual
business plan, including a budget
and detailed financial projections for the Company and its
Subsidiaries (the "Budget"), all in
reasonable detail, together with underlying assumptions and
approved by a majority of the entire
Board;
5.2.4 Auditors' Reports. The Company will deliver to
the Holder promptly
upon receipt thereof, copies of all other material reports, if
any, submitted to the Company by
independent public accountants in connection with any annual or
interim audit of the books of
the Company and its Subsidiaries made by such accountants;
5.2.5 Lender Information. The Company will deliver to
the Holder a copy
of each material financial statement, report, notice or
communication that the Company or any
Subsidiary delivers to any of their lenders or creditors;
5.2.6 Litigation. The Company will deliver to the
Holder promptly upon the
Company's learning thereof, notice of any litigation, suit or
administrative proceeding that could
reasonably be expected to have a material adverse affect on the
Company's or any Subsidiary's
business, affairs, assets, prospects, operations, employee
relations or condition, financial or
otherwise, whether or not the claim is considered by the Company
to be covered by insurance;
5.2.7 Default. The Company will deliver to the Holder
notice of any default
under any senior or subordinated loan agreements promptly upon
the occurrence thereof;
5.2.8 Material Adverse Developments. The Company will
deliver to the
Holder promptly upon the occurrence thereof, notice of any event
which has had, or could
reasonably be expected to have, a material adverse impact on the
business, affairs, assets,
prospects, operations, employee relations or condition, financial
or otherwise, of the Company
or any Subsidiary, including, without limitation, the institution
or threat of any material litigation
or investigation with respect to the Company or any Subsidiary;
5.2.9 Other Information. The Company will deliver to
the Holder with
reasonable promptness, all press releases issued by the Company
or any Subsidiary, any filings
made with the Commission by the Company or any Subsidiary and
such other data and
information as from time to time may be reasonably requested by
the Holder or such other data
as the Company may from time to time furnish to any of the
holders of its securities;
5.2.10 Auditors. The Company will deliver to the
Holder promptly after the
occurrence thereof, notice of the engagement or termination of
any individual or firm that
provides accounting advice to the Company;
5.2.11 Inspection and Meeting Rights; Budget Review.
The Company will
permit First Source to visit and inspect the properties of the
Company and its Subsidiaries,
including, without limitation, its and their books and records
(and to make extracts therefrom)
and to discuss its and their affairs, finances and accounts with
its and their officers and
personnel, all at such reasonable times and as often as such
party may reasonably request. First
Source also shall have the right to meet with the Company's key
management, including, without
limitation, the Company's Chief Executive Officer and Chief
Financial Officer, on a quarterly
basis, to discuss the state of the Company's finances, business
operations and prospects, and any
other matters relating to the affairs of the Company and its
Subsidiaries;
5.2.12 Accounting. The Company will maintain and will
cause each of its
Subsidiaries to maintain a system of accounting established and
administered in accordance with
GAAP and all financial statements or information delivered under
Section 5.2.1(a) and (b) (in
the case of 5.2.1(b) exclusive of footnote disclosures) will be
prepared in accordance with
GAAP;
5.2.13 Insurance. The Company agrees to maintain or
cause to be maintained,
with financially sound and reputable insurers, insurance with
respect to its assets and business
and the assets and business of its Subsidiaries against loss or
damage of the kinds customarily
insured against by similarly situated corporations of established
reputation engaged in the same
or similar businesses, in adequate amounts, and at the request of
the Holder shall furnish the
Holder with evidence of the same;
5.2.14 Payment of Taxes. The Company agrees to pay or
cause to be paid all
taxes, assessments and other governmental charges levied upon any
of its assets or those of its
Subsidiaries or in respect of its or their respective franchises,
businesses, income or profits,
which if unpaid might become a lien upon any asset of the Company
or any Subsidiary, before
the same become delinquent, except that (unless and until
foreclosure, distraint, sale or other
similar proceedings shall have been commenced) no such charge
need be paid if being contested
in good faith and by appropriate measures promptly initiated and
diligently conducted if (a) a
reserve or other appropriate provision, if any, as shall be
required by sound accounting practice
shall have been made therefor, and (b) such contest does not have
a material adverse effect on
the financial condition of the Company and no material assets are
in imminent danger of
forfeiture;
5.2.15 Compliance With Laws. The Company agrees to use
its best efforts to
comply, and shall use its best efforts to cause each Subsidiary
to comply, with all laws, rules,
regulations, judgments, orders and decrees of any governmental or
regulatory authority
applicable to it and its respective assets, and with all
contracts, and agreements to which it is
a party or shall become a party, and to perform all obligations
which it has or shall incur, the
violation of which would reasonably be anticipated to have a
material adverse effect on the
business, affairs, assets, prospects, operations or condition,
financial or otherwise, of the
Company and its Subsidiaries taken as a whole;
5.2.16 Preservation of Corporate Existence and
Property; Operations. The
Company agrees to preserve, protect, and maintain, and cause each
Subsidiary to preserve,
protect, and maintain, (a) its corporate existence, and (b) all
rights, franchises, accreditations,
privileges, and properties the failure of which to preserve,
protect, and maintain would
reasonably be anticipated to have a material adverse effect on
the business, affairs, assets,
prospects, operations, or condition, financial or otherwise, of
the Company and its Subsidiaries
taken as a whole;
5.2.17 Holder as Observer. The Company agrees at all
times to permit a
representative of Holder to attend and observe all meetings of
Company's Board of Directors
and each committee thereof, and cause Holder to receive
reasonably adequate notice of all such
meetings; provided, however, that Holder shall not be entitled to
attend or observe any portion
of a meeting relating solely and exclusively to action proposed
to be taken by Company with
respect to Company's relationship with Holder. The Company
acknowledges and agrees that
attendance by a designee of Holder at any meeting of Company's
Board of Directors or any
committee thereof shall not constitute approval by Holder of or
consent by Holder to any action
authorized at such meeting, or constitute a waiver or
modification of any provision of this
Warrant or any right hereunder. The Company agrees to reimburse
Holder for all reasonable
travel, lodging, and meal expenses incurred in connection with
the foregoing; and
5.2.18 Confidential Information. Holder acknowledges
that pursuant to the
provisions of this Section 5.2, Holder may receive insider
information concerning the Company
which Holder may be precluded from acting upon by applicable
securities and other laws.
Except as otherwise required by law or judicial order or decree
or by any governmental agency
or authority, each Person entitled to receive information
regarding the Company and its
Subsidiaries under this Section 5.2 shall use its best efforts to
maintain the confidentiality of all
nonpublic information obtained by it hereunder; provided that
each such Person may disclose
such information in connection with the sale or transfer or
proposed sale or transfer of this
Warrant or of any Common Stock, provided such Person's transferee
or proposed transferee
agrees in writing to be bound by the provisions of this Warrant
and such disclosure would not
materially and adversely affect the Company.
ARTICLE VI
RESERVATION OF S TOCK ISSUABLE
ON EXERCISE OF
WARRANT; PREEMPT IVE RIGHTS
The Company will at all times reserve and keep available,
solely for issuance, sale and
delivery upon the exercise of this Warrant, a number of shares of
Common Stock equal to the
number of full shares of Common Stock issuable upon the exercise
of this Warrant. All shares
of Common Stock issuable upon the exercise of this Warrant shall,
when issued upon such
exercise, (a) be duly and validly authorized and issued, fully
paid and nonassessable, and (b) be
free from all taxes, liens and charges with respect to the issue
thereof other than any stock
transfer taxes in respect of any transfer occurring
contemporaneously with such issue. No
stockholder of the Company has or shall have any preemptive
rights to subscribe for such shares
of Common Stock.
ARTICLE VII
LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any
securities exchange, it will
during the Exercise Period, at its expense, list thereon,
maintain and, when necessary, increase
such listing of, all shares of Common Stock issued or, to the
extent permissible under the rules
of the applicable securities exchange or automated quotation
system, issuable upon the exercise
of this Warrant so long as any shares of Common Stock shall be so
listed.
ARTICLE VIII
RESTRICTIONS ON TRANSFER
The conditions contained in the following sections of this
ARTICLE VIII are intended
to insure compliance with the Securities Act in respect of the
transfer of Warrants or Common
Stock issuable upon the exercise of Warrants. Reference in this
ARTICLE VIII to shares of
Common Stock issuable upon the exercise of Warrants includes
shares of Common Stock
theretofore issued upon the exercise of any Warrants which are
then evidenced by certificates
required to bear the legend set forth in Section 8.6.
8.1 Notice of Proposed Transfer; Transfers Without
Registration. The Holder or the
holder of any shares of Common Stock issuable upon the exercise
of this Warrant, by acceptance
hereof or thereof, agrees to give written notice to the Company,
prior to any transfer of this
Warrant, such shares of Common Stock or any portion thereof which
bear the legend described
in Section 8.6, of its intention to make such transfer, which
notice shall include a brief
description of such proposed transfer. A copy of such notice
shall be sent to Independent
Counsel.
If in the opinion of Independent Counsel the proposed
transfer may be effected without
registration or qualification under any Federal or State law,
such counsel shall, as promptly as
practicable, notify the Company and the Holder of such opinion
and of the terms and conditions,
if any, to be observed in such transfer, whereupon the Holder
shall be entitled to transfer such
shares of Common Stock in accordance with the terms of the notice
delivered to the Company
and the opinion of Independent Counsel. In the event this Warrant
shall be exercised as an
incident to such transfer, such exercise shall relate back and
for all purposes of this Warrant be
deemed to have occurred as of the date of such notice regardless
of delays incurred by reason
of the provisions of this ARTICLE VIII which may result in the
actual exercise on any later
date.
8.2 Registration and Qualification. The provisions of
Section 8.2 (a), 8.2 (b), and
8.9 below are subject to the terms of the First Amended and
Restated Registration Rights
Agreement, dated as of July 1, 1988 (the "Original Registration
Agreement"), among the
Company, First Source and the stockholders listed therein, as the
same may be amended,
modified or supplemented from time to time with the consent
required by Section 8.11 (the
"Registration Agreement"), and if, prior to an amendment of the
Original Registration
Agreement as amended by any effective amendment thereof, any
conflict exists between the
provisions of the Original Registration Agreement as amended by
any effective amendment
thereof, and Section 8.2 (a), 8.2 (b) and 8.9, the applicable
conflicting provisions of the Original
Registration Agreement as amended by any effective amendment
thereof shall control, but only
to the extent of the conflict, and the holder of any Warrant and
the shares of Common Stock
issuable upon exercise thereof shall have the applicable
conflicting rights contained in the
Original Registration Agreement as amended by any effective
amendment thereof but only to the
extent of the conflict, until such time as the Original
Registration Agreement as amended by any
effective amendment thereof is so amended.
(a) Piggyback Registration. If the Company proposes
(whether on its own behalf or
at the request of any other person or entity) to register any
security under the Securities Act on
any registration form (otherwise than for the registration of
securities to be offered and sold
pursuant to (a) an employee benefit plan, (b) a dividend or
interest reinvestment plan, (c) other
similar plans or (d) reclassifications of securities, mergers,
consolidations and acquisitions of
assets on Form S-4 or any successor thereto) prescribed by the
Commission permitting a
secondary offering or distribution, not less than 60 days prior
to each such registration, the
Company shall give to the holders of the Warrants or shares of
Common Stock issuable upon
the exercise thereof written notice of such proposal which shall
describe in detail the proposed
registration and distribution (including those jurisdictions
where registration or qualification
under the securities or blue sky laws is intended) and, upon the
written request of any holder
of a Warrant or shares of Common Stock issuable upon the exercise
thereof given within 30 days
after the date of any such notice, proceed to include in such
registration such shares of Common
Stock as have been requested by any such holder to be included in
such registration; provided,
however, that the Company shall not be required to include fewer
than 50,000 shares (subject
to adjustment upon any combination or split of shares or similar
event) of Common Stock in any
such registration pursuant to this Section 8.2(a). Any holder of
a Warrant or shares of Common
Stock issuable upon the exercise thereof shall in its request
describe briefly the proposed
disposition of such shares of Common Stock. The Company will in
each instance use its best
efforts to cause any shares of Common Stock issuable upon the
exercise of the Warrants (the
holders of which shall have so requested registration thereof) to
be registered under the
Securities Act and qualified under the securities or blue sky
laws of any jurisdiction requested
by a prospective seller, all to the extent necessary to permit
the sale or other disposition thereof
(in the manner stated in such request) by a prospective seller of
the securities so registered.
If the managing underwriter, who shall be selected by the
Company (subject to the
approval, not unreasonably withheld, of a majority of the holders
that have requested registration
(which must include First Source if First Source is then a holder
and requesting registration))
to manage the distribution of the shares of Common Stock being
registered, advises the
Company in writing that, in its opinion, the inclusion of the
shares of Common Stock requested
to be included in such registration by a holder of a Warrant or
shares of Common Stock issuable
upon the exercise thereof with the securities being registered by
the Company and other
prospective sellers would materially adversely affect the
distribution of all such securities, then:
(a) (i) if such registration has been initially proposed by the
Company, the Company shall
include in such registration the number of shares proposed to be
registered by the Company and
by the holders of the Warrants or shares of Common Stock issuable
upon the exercise thereof
before including any other securities in the registration, and,
if an additional reduction in the
number of securities being registered is necessary, the Company
shall include in such
registration such shares of the Company and the holders of the
Warrants or shares of Common
Stock issuable upon the exercise thereof pro rata based on the
number of shares originally
proposed to be registered by the Company and by the holders of
the Warrants or shares of
Common Stock issuable upon the exercise thereof or (ii) if such
registration has been initially
proposed by a holder of securities other than the Company or the
holders of Warrants or shares
of Common Stock issuable upon exercise thereof, the Company shall
include in such registration
the number of shares proposed to be registered by such other
holder and the holders of Warrants
or shares of Common Stock issuable upon exercise thereof before
including any other securities
in the registration and, if an additional reduction in the number
of securities being registered is
necessary, the Company shall include in such registration such
shares of such other holder and
the holders of Warrants or shares of Common Stock issuable upon
exercise thereof pro rata
based on the number of shares originally proposed to be
registered by such other holder and by
each holder of Warrants or shares of Common Stock issuable upon
exercise thereof; or (b) any
holder of a Warrant or shares of Common Stock issuable upon the
exercise thereof may, at its
sole option, delay its offering and sale for a period not to
exceed 120 days after the effective
date of such registration as such managing underwriter shall
reasonably request. In the event
of such delay, the Company: (i) shall use its best efforts to
effect any registration or qualification
under the Securities Act and the securities or blue sky laws of
any jurisdiction as may be
necessary to permit such prospective seller to make its proposed
offering and sale following the
end of such period of delay; and (ii) during such period of delay
and for at least 90 days
thereafter, shall not file or cause to be effected any other
registration of its capital stock or
securities convertible into or exchangeable or exercisable for
any such capital stock, whether on
its own behalf or at the request of any other person or entity,
and shall not sell any shares of
its capital stock or securities convertible into or exchangeable
or exercisable for any such capital
stock.
The holder of a Warrant or shares of Common Stock issuable
upon the exercise thereof
who has requested shares of Common Stock to be included in a
registration pursuant to this
Section 8.2(a) by acceptance hereof or thereof, agrees to execute
an underwriting agreement with
such underwriter that is (i) reasonably satisfactory to such
holder and (ii) in customary form.
Nothing in this Section 8.2(a) shall be deemed to require
the Company to proceed with
any registration of its securities after giving the notice herein
provided.
(b) Demand Registration. The holders of the Warrants and
of any shares of Common
Stock issuable upon the exercise thereof may, on up to four
separate occasions (unless such
request is withdrawn in accordance with the terms hereof) (the
"Demands"), require the
Company to effect the registration of the Shares pursuant to the
provisions of this Section 8.2(b).
Such Demands shall consist of two demands for which the Company
shall pay all the fees and
expenses as set forth in Section 8.4 (the "Free Demands") and two
demands for which the
holders shall pay their proportionate share of the fees and
expenses set forth in Section 8.4 (the
"Charged Demands"). If the holders of the Warrants and of any
shares of Common Stock
issuable upon the exercise thereof representing a total of more
than 50% of the shares of
Common Stock then issued and issuable upon the exercise of the
Warrants (which must include
First Source if First Source is then a holder) shall give notice
to the Company to the effect that
such holders intend to (i) transfer all or any part of the Shares
or (ii) exercise all or any part of
the Warrants and transfer all or any part of the Shares under
such circumstances that a public
distribution (within the meaning of the Securities Act) of the
Shares will be involved, then the
Company shall (A) within 10 days after receipt of such notice,
give written notice of the
proposed registration to the other holders of Warrants and shares
of Common Stock issuable
upon exercise thereof, and (B) within 30 days after receipt of
such notice, file a registration
statement pursuant to the Securities Act to the effect that such
shares may be sold under the
Securities Act as promptly as is practicable thereafter and the
Company will use its best efforts
to cause any such registration to become effective and to keep
the prospectus included therein
current for at least six months after the effective date thereof
or until the distribution shall have
been completed, whichever first occurs; provided, however, that
such holders shall furnish the
Company with such appropriate information (relating to the
intention of such holders) in
connection therewith as the Company may reasonably request in
writing; and provided, further,
that the Company shall not be required to register fewer than
200,000 (subject to adjustment
upon any combination or split of shares or similar event) shares
of Common Stock in any
registration pursuant to this Section 8.2(b). As long as the
Company is not in default on its
obligations under Section 5.2.1(a) and (b), the Company's
obligation to file a registration
statement, at any time when it is impossible or impracticable to
include the Company's fiscal
year-end financial statements as the most recent certified
financial statements required to be
included therein, shall be suspended until the Company's next
fiscal year-end financial statements
are due in accordance with Section 5.2.1(b), unless the request
for registration pursuant to this
Section 8.2(b) has been withdrawn. The managing underwriter for
offerings made pursuant to
this Section 8.2(b) shall be selected by the parties requiring
registration hereunder (which must
include First Source if First Source is then a holder and
requesting registration), subject to the
consent, not unreasonably withheld, of the Company.
If the managing underwriter for any offering made pursuant
to this Section 8.2(b) advises
the Company in writing that, in its opinion, the inclusion of all
of the shares of Common Stock
requested to be included in such registration by the holders of
Warrants and shares of Common
Stock issuable upon the exercise thereof would materially
adversely affect the distribution of all
such securities, then (a) there shall be included in such
registration shares of the holders of
Warrants or shares of Common Stock issuable upon the exercise
thereof pro rata based on the
number of shares originally proposed to be registered by each
holder of Warrants or shares of
Common Stock issuable upon the exercise thereof or (b) any holder
of a Warrant or shares of
Common Stock issuable upon the exercise thereof may, at its sole
option, delay its offering and
sale for a period not to exceed 120 days after the effective date
of such registration as such
managing underwriter shall reasonably request. In the event of
such delay, the Company (i)
shall use its best efforts to effect any registration or
qualification under the Securities Act and
the securities or blue sky laws of any jurisdiction as may be
necessary to permit such prospective
seller to make its proposed offering and sale following the end
of such period of delay; and (ii)
during such period of delay and for at least 90 days thereafter,
shall not file or cause to be
effected any other registration of its capital stock or
securities convertible into or exchangeable
or exercisable for any such capital stock, whether on its own
behalf or at the request of any
other person or entity, and shall not otherwise sell any of its
capital stock or securities
convertible into or exchangeable or exercisable for any such
capital stock. A registration shall
not reduce the number of Demands available to the holders under
this Section 8.2(b) until such
registration has become effective and the holders of the Warrants
or shares of Common Stock
issuable upon the exercise thereof participating in the demand
registration are able to register
and sell at least 80% of the shares of Common Stock originally
requested to be included in such
registration; provided, however, that if in connection with a
proposed Demand made pursuant
to Section 8.2(b) the holders of the Warrants or shares of Common
Stock issuable upon the
exercise thereof participating in the demand registration are
able to register and sell more than
50% but less than 80% of the shares of Common Stock originally
requested to be included in
such registration, the number of Free Demands shall be reduced by
one, and the number of
Charged Demands shall be increased by one.
8.3 Registration and Qualification Procedures. Whenever
the Company is required
by the provisions of Section 8.2 to use its best efforts to
effect the registration of any of its
securities under the Securities Act, the Company will, as
expeditiously as is possible:
(a) prepare and file with the Commission a registration
statement with respect to such
securities;
(b) prepare and file with the Commission such amendments
and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to
keep such registration statement effective and the prospectus
current and to comply with the
provisions of the Securities Act with respect to the sale of all
securities covered by such
registration statement whenever the seller of such securities
shall desire to sell the same,
including the offering or sale of such securities on a continuous
or delayed basis pursuant to
Rule 415 under the Securities Act as the same shall be in effect
from time to time;
(c) furnish to each seller such number of copies of
preliminary prospectuses and
prospectuses and each supplement or amendment thereto and such
other documents as each seller
may reasonably request in order to facilitate the sale or other
disposition of the securities owned
by such seller in conformity with (i) the requirements of the
Securities Act and (ii) the seller's
proposed method of distribution;
(d) register or qualify the securities covered by such
registration statement under the
securities or blue sky laws of such jurisdictions within the
United States as each seller shall
reasonably request, and do such other reasonable acts and things
as may be required of it to
enable each seller to consummate the sale or other disposition in
such jurisdictions of the
securities owned by such seller; provided, however, that the
Company shall not be required to
(i) qualify as a foreign corporation or consent to a general and
unlimited service of process in
any such jurisdictions, (ii) qualify as a dealer in securities or
(iii) register or qualify at its own
expense securities of such seller in any jurisdiction not
described in the notice of the Company
referred to in the first paragraph of Section 8.2(a), in any case
in order to accomplish any of the
foregoing;
(e) furnish, at the request of any seller on the date such
securities are delivered to the
underwriters for sale pursuant to such registration or, if such
securities are not being sold
through underwriters, on the date the registration statement with
respect to such securities
becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for
the purposes of such registration, addressed to the underwriters,
if any, and to the seller making
such request, covering such legal matters with respect to the
registration in respect of which such
opinion is being given as the seller of such securities may
reasonably request and are customarily
included in such opinion and (ii) letters, dated, respectively,
(1) the effective date of the
registration statement and (2) the date such securities are
delivered to the underwriters, if any,
for sale pursuant to such registration, from a firm of
independent certified public accountants
of recognized standing selected by the Company, addressed to the
underwriters, if any, and to
the seller making such request, covering such financial,
statistical and accounting matters with
respect to the registration in respect of which such letters are
being given as the seller of such
securities may reasonably request and are customarily included in
such letters;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations
of the Commission, and make available to its security holders as
soon as reasonably practicable,
but not later than 16 months after the effective date of the
registration statement, an earnings
statement covering a period of at least 12 months beginning after
the effective date of the
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of
the Securities Act;
(g) enter into and perform an underwriting agreement with
the managing underwriter,
if any, selected as provided in Section 8.2, as the case may be,
containing customary terms of
offer and sale of the securities, payment provisions,
underwriting discounts and commissions,
representations, warranties, covenants, indemnities, terms and
conditions; and
(h) keep each seller advised in writing as to the
initiation and progress of any
registration under Section 8.2, as the case may be.
8.4 Allocation of Expenses. If the Company is required by
the provisions of Section
8.2 to use its best efforts to effect the registration or
qualification under the Securities Act or
any state securities or blue sky laws of any of the shares of
Common Stock issuable upon the
exercise of the Warrants, the Company will pay all expenses in
connection therewith, including,
without limitation, (a) all expenses incident to filing with the
National Association of Securities
Dealers, Inc., (b) registration fees, (c) printing expenses, (d)
the Company's accounting and
legal fees and expenses, (e) expenses of any special audits
incident to or required by any such
registration or qualification, (f) premiums for insurance in such
amount, if any, deemed
appropriate by the managing underwriter and (g) expenses of
complying with the securities or
blue sky laws of any jurisdictions in connection with such
registration or qualification; provided,
however, that the holders of any Warrant or shares of Common
Stock issuable upon exercise
thereof participating in a Charged Demand shall be liable for the
amount of such expenses in
connection with such Charged Demand made pursuant to Section
8.2(b) equal to the product of
(a) all such expenses and (b) the proportion which the number of
shares of Common Stock
issuable upon exercise of the Warrants for which registration has
become effective and which
are sold pursuant to Section 8.2(b) bears to the total number of
all shares included in such
registration; and provided, further, that the Company shall not
be liable for (1) any discounts
or commissions to any underwriter or (2) any stock transfer taxes
incurred in respect of the
shares of Common Stock issuable upon the exercise of the Warrants
sold by the sellers.
8.5 Indemnification. In connection with any registration or
qualification of securities
under Section 8.2 or 8.3, the Company hereby indemnifies the
Holder and the holders of any
shares of Common Stock issuable upon the exercise of the Warrants
and each underwriter
thereof, including each person, if any, who controls the Holder
or such stockholder or
underwriter within the meaning of Section 15 of the Securities
Act, against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation) caused by any
untrue, or alleged untrue, statement of a material fact contained
in any registration statement,
preliminary prospectus, prospectus or notification or offering
circular (as amended or
supplemented if the Company shall have furnished any amendments
or supplements thereto) or
caused by any omission, or alleged omission, to state therein a
material fact required to be stated
therein or necessary to make the statements therein not
misleading, except insofar as such losses,
claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue
statement or omission or alleged omission made in reliance upon
and in conformity with
information furnished in writing to the Company by the Holder or
any such stockholder or
underwriter expressly for use therein. The Holder and the
holders of any shares of Common
Stock issuable upon the exercise of the Warrants hereby indemnify
the Company and each
officer, director and controlling person of the Company or
underwriter within the meaning of
Section 15 of the Securities Act against all losses, claims,
damages, liabilities and expenses
(including reasonable costs of investigation) caused by any
untrue, or alleged untrue, statement
of a material fact contained in any registration statement,
preliminary prospectus or notification
or offering circular (as amended or supplemented if the Company
shall have furnished any
amendments or supplements thereto) or caused by any omission, or
alleged omission, to state
therein a material fact required to be stated therein or
necessary to make the statements therein
not misleading, but only to the extent that such untrue statement
or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with information
furnished in writing to the Company by the Holder or any such
stockholder expressly for use
therein.
Promptly upon receipt by a party indemnified under this
Section 8.5 of notice of the
commencement of any action against such indemnified party in
respect of which indemnity or
reimbursement may be sought against any indemnifying party under
this Section 8.5, such
indemnified party shall notify the indemnifying party in writing
of the commencement of such
action, but the failure so to notify the indemnifying party shall
not relieve it of any liability
which it may have to any indemnified party, unless such failure
shall materially adversely affect
the defense of such action. In case notice of commencement of
any such action shall be given
to the indemnifying party as above provided, the indemnifying
party shall be entitled to
participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly
notified, to assume the defense of such action at its own
expense, with counsel chosen by it and
satisfactory to such indemnified party. The indemnified party
shall have the right to employ
separate counsel in any such action and participate in the
defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the
indemnified party unless (a) the indemnifying party agrees to pay
the same, (b) the indemnifying
party fails to assume the defense of such action with counsel
reasonably satisfactory to the
indemnified party or (c) the named parties to any such action
(including any impleaded parties)
have been advised by such counsel that representation of such
indemnified party and the
indemnifying party by the same counsel would be inappropriate
under applicable standards of
professional conduct (in which case the indemnifying party shall
not have the right to assume
the defense of such action on behalf of such indemnified party);
provided that the indemnifying
party shall not be required to pay the fees and expenses of more
than one counsel to indemnified
parties claiming indemnification pursuant to this Section 8.5.
No indemnifying party shall be
liable for any settlement entered into without its consent.
If the indemnification provided for in this Section 8.5
shall for any reason be
unenforceable by an indemnified party, although otherwise
available in accordance with its
terms, then each indemnifying party shall, in lieu of
indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified
party as a result of the losses,
claims, damages, liabilities or expenses with respect to which
such indemnified party has
claimed indemnification, in such proportion as is appropriate to
reflect the relative fault of the
indemnified party on the one hand and the indemnifying party on
the other in connection with
the statements or omissions which resulted in such losses,
claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.
The Company, each holder of
the Warrants and each holder of Shares of Common Stock issued
upon the exercise thereof agree
that it would not be just and equitable if contribution pursuant
hereto were to be determined by
pro rata allocation or by any other method of allocation which
does not take into account such
equitable considerations. The amount paid or payable by an
indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to
herein shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified
party in connection with
investigating or defending against any action or claim which is
the subject hereof. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not
guilty of such fraudulent
misrepresentation.
Each Holder of the Warrants and each holder of shares of
Common Stock issued upon
the exercise thereof and bearing the legend required by Section
8.6, by acceptance thereof,
agrees to the indemnification provisions of this Section 8.5.
8.6 Legend on Certificates. In case any shares of Common
Stock are issued upon the
exercise in whole or in part of the Warrants or are thereafter
transferred, in either case under
such circumstances that no registration under the Securities Act
is required, each certificate
representing such shares shall bear on the face thereof the
following legend:
The shares represented by this certificate have not been
registered under the Securities
Act of 1933, as amended, and any transfer thereof is subject
to the conditions specified
in the Warrant, dated as of October 31, 1997, which is an
amendment and restatement
of the Warrant originally issued by Optek Technology, Inc.
(the "Company") to First
Source Financial LLP, dated as of January 31, 1991. A copy
of the form of such
Warrant is on file with the Secretary of the Company at 0000
Xxxx Xxxxxx Xxxx,
Xxxxxxxxxx, Xxxxx 00000 and will be furnished without charge
by the Company to the
holder of this certificate upon written request to the
Secretary of the Company at such
address.
In case (a) a registration statement covering shares of
Common Stock represented by a
certificate bearing the legend specified above becomes effective
under the Securities Act or (b)
the Company receives an opinion of Independent Counsel that such
legend is no longer necessary
on such certificate to protect the Company from a violation of
the Securities Act, the Company
shall, or shall instruct its transfer agent and registrar to,
issue in lieu thereof a new certificate
or certificates for such shares in the name of the holder of such
shares without such legend on
the face thereof.
8.7 Supplying Information. The Company, the Holder and
each holder of shares of
Common Stock issuable upon the exercise of the Warrant shall
cooperate with each other in
supplying such information as may be necessary for any of such
parties to complete and file any
information reporting forms presently or hereafter required by
the Commission or any
commissioner or other authority administering the blue sky or
securities laws of any jurisdiction
where shares of Common Stock are proposed to be sold pursuant to
Section 8.2 or 8.3.
8.8 Damages. In the event the Company fails to comply with
any provision of Section
8.2 or 8.3, upon written request of the Holder of the Warrant or
any holder of shares of
Common Stock issuable upon the exercise thereof, the Company
shall promptly obtain from an
independent investment banking firm acceptable to such person an
opinion estimating the net
proceeds which such person would have received (after deducting
underwriting commissions and
discounts and any other expenses that would have been for the
account of such Holder or holder
of shares of Common Stock in connection with the registration or
qualification of such shares
of Common Stock) upon the sale of shares of Common Stock proposed
to be sold pursuant to
such registration or qualification. Such opinion of the
independent investment banking firm shall
be (a) delivered in writing to the Company, with a copy to such
person, within 15 days after the
date of the request of such person to the Company and (b)
conclusive and binding on the
Company and such person.
Within 21 days of receipt by the Company of such estimate,
if such person so elects, the
Company shall pay to such person an amount, equal to such
estimated net proceeds related to
the Warrants or shares of Common Stock, as the case may be.
Payment of such amount shall
be made at the option of such person, by (i) wire transfer to an
account in a bank located in the
United States designated by such person for such purpose or (ii)
a certified or official bank
check drawn on a member of the Chicago or New York Clearing House
payable to the order of
such person. Upon payment to such person of such amount, such
person shall assign to the
Company this Warrant and, if issued, the shares of Common Stock
issued upon the exercise of
this Warrant proposed to be sold pursuant to the registration or
qualification in question without
any representation or warranty (other than that such Holder has
good and valid title thereto free
and clear of liens, claims, encumbrances and restrictions of any
kind arising by or through such
Holder). If less than all of the shares of Common Stock issuable
upon exercise of this Warrant
were proposed to be sold pursuant to the registration or
qualification in question, the Company
shall cancel the Warrant and issue in the name of, and deliver
to, the Holder, pursuant to
Section 2, a new Warrant for the shares of Common Stock issuable
upon the exercise thereof
not required to be assigned to the Company pursuant to the
provisions of the preceding sentence.
The Company agrees that the amount of actual damages that would
be sustained by the Holder
as a result of the failure of the Company to comply with any
provisions of Section 8.2 or 8.3
is not capable of ascertainment on any other basis.
8.9 Holdback Agreements. The Company agrees: (i) not to
effect any public sale or
distribution of or otherwise dispose of any of its capital stock
or securities convertible into or
exchangeable or exercisable for any such capital stock during the
seven days prior to or 135 days
after the date any registration pursuant to Section 8.2(a) or
8.2(b) has become effective, except
as part of such registration and except pursuant to any
registration of securities to be offered and
sold pursuant to (A) an employee benefit plan, (B) a dividend or
interest reinvestment plan, (C)
other similar plans or (D) reclassifications of securities,
mergers, consolidations and acquisitions
of assets on Form S-4 or any successor thereto; and (ii) to cause
each person or entity which
owns any capital stock of the Company as of the date of this
Warrant (other than persons or
entities holding nonrestricted stock that can be freely traded
pursuant to Section 4(1) of the
Securities Act and persons or entities who obtained stock
pursuant to a registration described in
Section 8.9(i)(A), (B), (C) or (D)) and each person or entity
which purchases the Company's
capital stock or securities convertible into or exchangeable or
exercisable for any such capital
stock at any time after the date of this Warrant (other than in a
public offering and other than
persons or entities holding nonrestricted stock that can be
freely traded pursuant to Section 4(1)
of the Securities Act and persons or entities who obtained stock
pursuant to a registration
described in Section 8.9(i)(A), (B), (C) or (D)) to agree not to
effect any such public sale or
distribution during such period.
8.10 Rule 144 Reporting. With a view to making available to
the holders of Warrants
and of shares of Common Stock issuable upon exercise thereof the
benefits of certain rules and
regulations of the Commission which may permit the sale of
Warrants or shares of Common
Stock issuable upon exercise thereof to the public without
registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in
Rule 144 under the Securities Act or any successor rule or
regulation from time to time in
effect; (b) file with the Commission in a timely manner all
reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) furnish to the Holder
or a holder of Common Stock issuable upon exercise of Warrants
forthwith upon request a
written statement by the Company as to its compliance with the
reporting requirements of Rule
144 and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company
filed with the Commission and such other reports and documents of
the Company and other
information in the possession of or reasonably obtainable by the
Company as the Holder or such
holders may reasonably request in availing themselves of any rule
or regulation of the
Commission allowing them to sell securities without registration
under the Securities Act.
8.11 Consent for Additional Registration Rights. The
Company shall not grant rights
to register any of its securities under the Securities Act to any
person or entity, and shall not
permit the amendment, supplement or modification of any such
rights existing as of the Closing
Date, without the consent of the holders of Warrants and shares
of Common Stock issuable upon
exercise thereof representing more than 50% of the shares of
Common Stock issued or issuable
upon exercise of the Warrants (which must include First Source if
First Source is then a
Holder), except for the rights described by the Registration
Agreement.
ARTICLE IX
MISCELLAN
EOUS
9.1 Nonwaiver and Expenses.
No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right
or otherwise prejudice the Holder's rights, power or remedies.
If the Company fails to make,
when due, any payments provided for herein or fails to comply
with any other provision of this
Warrant, the Company shall pay to the Holder (a) interest at the
Default Rate on any amounts
due and owing to the Holder and (b) such further amounts as shall
be sufficient to cover any
costs and expenses including, but not limited to, reasonable
attorneys fees, incurred by the
Holder in collecting any amounts due pursuant to this Warrant or
in otherwise enforcing any of
its rights, powers or remedies hereunder.
9.2 Holder Not a Stockholder. Except as otherwise provided
herein, prior to the
exercise of this Warrant as hereinbefore provided, the Holder
shall not be entitled to any of the
rights of a stockholder of the Company, including, without
limitation, the right as a stockholder
to (a) vote or consent, or (b) receive dividends or any other
distributions made to stockholders.
9.3 Notice Generally. Any notice, demand or delivery to be
made pursuant to the
provisions of this Warrant shall be sufficiently given or made if
sent by first class mail, postage
prepaid, addressed to (a) the Holder at its last known address
appearing on the books of the
Company maintained for such purpose or (b) the Company at its
principal office referred to in
Section 2.2. The Holder and the Company may each designate a
different address by notice to
the other pursuant to this Section 9.3.
9.4 Payment of Certain Expenses. The Company shall pay all
expenses in connection
with, and all taxes (other than stock transfer taxes and income
taxes) and other governmental
charges that may be imposed in respect of, the issue, sale and
delivery of (a) the shares of
Common Stock issuable upon the exercise of this Warrant or (b)
this Warrant. The Company
shall reimburse First Source for all reasonable expenses incurred
by First Source in monitoring
the Company's compliance with the covenants of this Warrant.
9.5 Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure
to the benefit of and be binding upon the successors of the
Company and the Holder. The
provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of
this Warrant, and shall be enforceable by any such Holder.
9.6 Amendment. This Warrant may not be modified or amended
except by an
instrument in writing signed by the party against which
enforcement is sought.
9.7 Headings. The headings of the Articles and Sections of
this Warrant are for
convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
9.8 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS FOR CONTRACTS ENTERED INTO AND TO
BE PERFORMED IN SUCH STATE.
9.9 Subsidiaries. The provisions of this Warrant referring
to "Subsidiaries" of the
Company or to "consolidated" financial statements shall only
apply during such times as the
Company has one or more Subsidiaries.
9.10 No Section 338 Election or Step-Up in Asset Value on
Books of the Company.
The Company acknowledges that the definition of Adjusted
Operating Profits is based upon the
assumption that neither the Company nor any of its Subsidiaries
will (or will be deemed to)
make a Section 336 election under the Internal Revenue Code of
1986, as amended, or otherwise
write-up the value of any of its assets on its books used for
computing Adjusted Operating
Profits. The Company hereby agrees and covenants that neither it
nor any of its Subsidiaries
will (or will be deemed to) make any such election or write-up.
9.11 Replacement. This Warrant is an amendment and
restatement of, and is issued
in replacement of, the warrant dated as of December 12, 1995
which was issued to First Source
Financial, Inc., and that warrant and its predecessors and all
rights thereunder are hereby
cancelled and terminated.
9.12 Termination Agreement. Nothing in that certain
Termination Agreement dated
as of October 31, 1997 between the parties hereto is intended to
or shall release any obligations
of the Company to First Source under this Warrant.
PAGE
Dated as of October 31, 1997.
OPTEK TECHNOLOGY, INC.
By:
Its:
Attest:
Secretary
(AFFIX CORPORATE SEAL)
AGREED AND ACCEPTED TO:
FIRST SOURCE FINANCIAL LLP
By:
Its:
PAGE
NOTICE OF EXERCISE FORM
(To be executed only upon partial
or full exercise of the within Warrant)
The undersigned registered Holder of the within Warrant
irrevocably exercises the within
Warrant for and purchases _____________ shares of Common Stock of
Optek Technology, Inc.
and agrees to make payment therefor in the amount of $__________,
all at the price and on the
terms and conditions specified in the within Warrant and requests
that a certificate (or
______________ certificates in denominations of __________
shares) for the shares of Common
Stock of Optek Technology, Inc. hereby purchased be issued in the
name of and delivered to
(choose one) (a) the undersigned or (b) ___________________,
whose address is
____________________, and if such shares of Common Stock shall
not include all the shares
of Common Stock issuable as provided in the within Warrant, that
a new Warrant of like tenor
for the number of shares of Common Stock of Optek Technology,
Inc. not being purchased
hereunder be issued in the name of and delivered to [choose one]
(a) the undersigned or (b)
_________________ whose address is _____________________.
Dated:_______________________, 19___
By
(Signature of Registered
Holder)
Signature Guaranteed:
By
[Title]
NOTICE: The signature of this Notice of Exercise must
correspond exactly with the name
of the Holder as specified on the face of the within
Warrant.
The signature to this Notice of Exercise must be
guaranteed by a commercial
bank or trust company in the United States or a member
firm of the New York
Stock Exchange of business).
