JENKON INTERNATIONAL, INC.
and
THE BOSTON GROUP, L.P.
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DEALER MANAGER'S WARRANT AGREEMENT
Dated as of July 1, 1996
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DEALER MANAGER'S WARRANT AGREEMENT
THIS DEALER MANAGER'S WARRANT AGREEMENT (the "Agreement"), dated as of July
25, 1996, is made and entered into by and between JENKON INTERNATIONAL, INC., a
Delaware corporation (the "Company"), and THE BOSTON GROUP, L.P. ("the Dealer
Manager").
Pursuant to the terms of that certain Amended and Restated Dealer Manager
Agreement, dated as of July 25, 1996, by and among the Company, the Dealer
Manager, Xxx Xxxxxx and Xxxxx Xxxxxxx (the "Dealer Manager Agreement"), the
Company hereby agrees to issue and sell to the Dealer Manager, for $50 and other
good and valuable consideration, the receipt of which is hereby acknowledged, a
warrant, as hereinafter described (the "Warrant" and together with any warrants
subsequently issued hereunder, the "Warrants"), to purchase up to ten percent of
the total number of shares of Series A Preferred Stock, $.001 par value
("Preferred Stock"), sold by the Company in connection with the offering (the
"Offering") contemplated by the Dealer Manager Agreement and that certain
Confidential Offering Memorandum, dated July 1, 1996 (together with any and all
supplements and/or amendments thereto, the "Memorandum"), as may be adjusted
from time to time as set forth herein. The shares of Preferred Stock
purchasable upon exercise of the Warrants, as may be adjusted from time to time
as set forth herein, are hereinafter referred to as the "Warrant Stock." The
Warrant shall be issued pursuant to this Agreement on the final closing date of
the Offering (the "Closing Date").
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants, the Warrant Stock and the respective rights and
obligations thereunder, the Company and the Dealer Manager, for value received,
hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS.
1.1 REGISTRATION. All Warrants shall be numbered and shall be
registered on the books of the Company when issued.
1.2 TRANSFER. The Warrants shall be transferable only on the
books of the Company maintained at its principal office, wherever its principal
office may then be located, upon delivery thereof duly endorsed by the
registered holder of a Warrant (a "Warrantholder") or by its duly authorized
attorney or representative and with the signatures properly guaranteed,
accompanied by proper evidence of succession, assignment or authority to
transfer. Upon any registration of transfer, the Company shall execute and
deliver a new certificate evidencing each such Warrant to each person entitled
thereto.
1.3 LIMITATIONS ON TRANSFER OF THE WARRANTS. Warrants shall not
be sold, transferred, assigned or hypothecated by the Dealer Manager for a
period of one year following the date of issuance other than (i) to one or more
officers or partners of any Warrantholder, and the officers or partners of any
such partner; (ii) to any other member of
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the National Association of Securities Dealers, Inc. which participated in the
Offering and the officers or partners of any such member; (iii) to successors to
a Warrantholder or the officers or partners of any such successor; (iv) to a
purchaser of all or substantially all of the assets of a Warrantholder; or
(v) by will, pursuant to the laws of descent or distribution or by operation of
law. The Warrants may be divided or combined, upon request to the Company by a
Warrantholder, into a certificate or certificates representing the right to
purchase the same aggregate number of shares of Warrant Stock. Unless the
context indicates otherwise, the term "Warrantholder" shall include the Dealer
Manager and any transferee or transferees of the Warrants pursuant to this
subsection 1.3 and as otherwise permitted by this Agreement, and the term
"Warrants" shall include any and all Warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.
1.4 FORM OF WARRANTS. The text of the Warrants and of the form
of election to purchase Warrant Stock shall be substantially as set forth in
Exhibit A attached hereto. The aggregate number of shares of Preferred Stock
issuable upon exercise of the Warrants is subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall
be executed on behalf of the Company by its Chief Executive Officer or its
President and attested to by its Treasurer, Chief Financial Officer or its
Secretary. A Warrant bearing the signature of an individual who was at any time
the proper officer of the Company shall bind the Company, notwithstanding that
such individual shall have ceased to hold such office prior to the delivery of
such Warrant or did not hold such office on the date of this Agreement or at any
time thereafter.
The Warrants shall be dated as of the date of signature
thereof by the Company either upon initial issuance or upon division, exchange,
substitution or transfer.
1.5 LEGEND ON WARRANTS AND WARRANT STOCK. Each certificate
evidencing a Warrant (or Warrant Stock issued upon exercise of a Warrant)
initially issued upon exercise of a Warrant shall bear the following legend,
unless, at the time of exercise, such Warrant Stock is subject to a currently
effective Registration Statement under the Securities Act of 1933, as amended
(the "Act"):
"THIS WARRANT AND THE SECURITIES PURCHASABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH WARRANTS AND SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO SUCH SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED."
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Any certificate issued at any time in exchange or substitution
for any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to an effective registration
statement under the Act, of the securities represented thereby) shall also bear
the above legend unless, in the opinion of the Company's counsel, the securities
represented thereby need no longer be subject to such restrictions.
SECTION 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the Warrantholder
to purchase a like aggregate number of shares of Warrant Stock as the
certificate or certificates surrendered then entitled such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate or certificates as so requested.
SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Subject to the terms of this Agreement, the
Warrantholder shall have the right, at any time during the period commencing at
6:30 a.m., Pacific Time, on July 1, 1997 and ending at 5:00 p.m., Pacific Time,
on June 30, 2001 (the "Termination Date"), to purchase from the Company up to
the number of fully paid and nonassessable shares of Warrant Stock to which the
Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly completed and executed, and upon payment to the
Company of the Warrant Price (as defined in and determined in accordance with
the provisions of this Section 3 and Sections 7 and 8 hereof) for the number of
shares of Warrant Stock in respect of which such Warrants are then exercised,
but in no event for less than 100 shares of Warrant Stock (unless less than an
aggregate of 100 shares of Warrant Stock are then purchasable under all
outstanding Warrants held by such Warrantholder). This Warrant, when
exercisable, may be exercised from time to time in whole or in part.
(b) Payment of the Warrant Price shall be made in cash,
by certified or official bank check in Los Angeles Clearing House funds (next
day funds), or any combination thereof.
(c) In addition to the method of payment set forth in
Section 3(b) above and in lieu of any cash payment required thereunder, unless
otherwise prohibited by law, the Warrantholders shall have the right at any
time, when exercisable, and from time to time to exercise the Warrants in full
or in part (i) by receiving from the Company the number of shares of Warrant
Stock equal to the number of shares of Warrant Stock otherwise issuable upon
such exercise less the number of shares of Warrant Stock having an aggregate
value on the date of exercise equal to the Warrant Price multiplied by the
number of shares of Warrant Stock for which this Warrant is being exercised
and/or (ii) by delivering to the Company the
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number of shares of Preferred Stock having an aggregate value on the date of
exercise equal to the Warrant Price multiplied by the number of shares of
Warrant Stock for which this Warrant is being exercised. For purposes hereof,
the "value" of a share of Preferred Stock on a given date shall equal to the
Current Market Price on such date as defined in Section 9 of this Agreement.
(d) Upon surrender of the Warrants and payment of the
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Warrantholder,
and (subject to any applicable restrictions on transfer) in such name or names
as the Warrantholder may designate, a certificate or certificates for the number
of full shares of Warrant Stock so purchased upon such exercise of the Warrant,
together with cash, as provided in Section 9 hereof, in respect of any
fractional shares otherwise issuable upon such surrender. Such certificate or
certificates, to the extent permitted by law, shall be deemed to have been
issued and any person so designated to be named therein shall be defined to have
become a holder of record of such securities as of the date of surrender of the
Warrants and payment of the Warrant Price, as aforesaid, notwithstanding that
the certificate or certificates representing such securities shall not actually
have been delivered or that the stock transfer books of the Company shall then
be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a Warrant is exercised in respect of less than all of the shares of Warrant
Stock specified therein at any time prior to the Termination Date, a new Warrant
evidencing the remaining shares of the Warrant Stock purchasable by such
Warrantholders hereunder shall be issued by the Company to such Warrantholders.
(e) In the event that the outstanding shares of Preferred
Stock are automatically converted into Common Stock pursuant to the terms of the
Certificate of Designation, Preferences and Rights of Series A Preferred Stock
then in effect, the Warrants shall automatically convert into Warrants to
purchase the number of shares of Common Stock that would have been issuable to
Warrantholder had the Warrants been exercised in full immediately prior to the
date of conversion of the Preferred Stock into Common Stock.
SECTION 4. VALIDITY; PAYMENT OF TAXES. All securities delivered upon
exercise of a Warrant shall be duly and validly issued and non-assessable. The
Company shall pay all documentary stamp taxes, if any, attributable to the
initial issuance of the Warrants and the shares of Warrant Stock issuable upon
the exercise of the Warrants; provided, however, the Company shall not be
required to pay any tax which may be payable in respect of any secondary
transfer of the Warrants or the Warrant Stock.
SECTION 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence
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reasonably satisfactory to the Company of such loss, theft or destruction of
such Warrant which may include an indemnity of lost certificate or such other
documentation as is required by applicable law.
SECTION 6. RESERVATION OF SHARES. The Company represents and warrants to
the Warrantholder that there has been reserved, and the Company shall at all
times keep reserved so long as the Warrants remain outstanding, out of its
authorized Preferred Stock, such number of shares of Preferred Stock as shall be
subject to purchase under the Warrants. Every transfer agent for the Preferred
Stock and other securities of the Company issuable upon the exercise of the
Warrants shall be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite for
such purpose. The Company shall keep a copy of this Agreement on file with
every transfer agent for the Preferred Stock and other securities of the Company
issuable upon the exercise of the Warrants. The Company shall supply every such
transfer agent with duly executed stock and other certificates, as appropriate,
for such purpose and shall provide or otherwise make available any cash which
may be payable in lieu of the issuance of fractional shares, as provided in
Section 9 hereof.
SECTION 7. WARRANT PRICE. The price per share at which shares of Warrant
Stock shall be purchasable upon the exercise of the Warrants shall be $2.10,
subject to adjustment pursuant to Section 8 hereof (as so adjusted from time to
time, the "Warrant Price").
SECTION 8. ADJUSTMENTS OF NUMBER OF SHARES OF WARRANT STOCK AND WARRANT
PRICE. The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
8.1 ADJUSTMENTS. The number of shares of Warrant Stock
purchasable upon the exercise of each Warrant and the Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend or make
a distribution on its Preferred Stock in shares of its capital stock or other
securities, (ii) subdivide its outstanding shares of Preferred Stock into a
greater number of shares, (iii) combine its outstanding Preferred Stock into a
smaller number of shares or (iv) issue, by reclassification of its Preferred
Stock, shares of its capital stock or other securities of the Company (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), the number of shares of Warrant
Stock purchasable upon exercise of a Warrant immediately prior thereto shall be
adjusted so that the Warrantholder shall be entitled to receive the kind and
number of shares of Warrant Stock, shares of its capital stock and other
securities of the Company which such holder would have owned or would have been
entitled to receive immediately after the happening of any of the events
described above, had the Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. Any adjustment
made pursuant to this subsection 8.1(a) shall become effective immediately after
the effective date of such event.
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(b) In case the Company shall issue rights, options,
warrants or convertible securities to holders of its Preferred Stock, without
any charge to such holders, containing the right to subscribe for or purchase
Preferred Stock, the number of shares of Warrant Stock thereafter purchasable
upon the exercise of each Warrant shall be determined by multiplying the number
of shares of Warrant Stock theretofore purchasable upon exercise of a Warrant by
a fraction, of which the numerator shall be the number of shares of Preferred
Stock outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional shares of
Preferred Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Preferred Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities. Such adjustment shall be made whenever such rights,
options, warrants or convertible securities are issued, and shall become
effective immediately upon issuance of such rights, options, warrants or
convertible securities. In the event of such adjustment, corresponding
adjustments shall be made to the Warrant Price.
(c) In case the Company shall distribute to holders of
its Preferred Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions out of current earnings made in the ordinary course
of business consistent with past practices), then in each case the number of
shares of Warrant Stock thereafter purchasable upon the exercise of each Warrant
shall be determined by multiplying the number of shares of Warrant Stock
theretofore purchasable upon exercise of such Warrant by a fraction, of which
the numerator shall be the then Current Market Price (as defined below) on the
date of such distribution, and of which the denominator shall be such Current
Market Price on such date minus the then fair value (determined as provided in
subsection 8(f) below) of the portion of the assets or evidences of indebtedness
so distributed applicable to one share of Preferred Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
on the date of distribution.
(d) No adjustment in the number of shares of Warrant
Stock purchasable pursuant to subsections 8.1(b) or (c) hereof shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the number of shares of Warrant Stock then purchasable upon the
exercise of the Warrants or, if the Warrants are not then exercisable, the
number of shares of Warrant Stock purchasable upon the exercise of the Warrants
on the first date thereafter that the Warrants would become exercisable;
provided, however, that any adjustments which by reason of this subsection
8.1(d) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(e) Whenever the number of shares of Warrant Stock
purchasable upon the exercise of a Warrant is adjusted as herein provided, the
Warrant Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of shares of Warrant Stock
purchasable upon the exercise of such Warrant immediately prior to such
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adjustment, and of which the denominator shall be the number of shares of
Warrant Stock purchasable immediately thereafter.
(f) To the extent not covered by subsections 8.1(b) or
(c) hereof, in case the Company shall sell or issue Preferred Stock or rights,
options, warrants or convertible securities containing the right to subscribe
for, purchase or exchange into shares of Preferred Stock at a price per share
(determined, in the case of such rights, options, warrants or convertible
securities, by dividing (i) the total amount received or receivable by the
Company in consideration of the sale or issuance of such rights, options,
warrants or convertible securities, plus the total consideration payable to the
Company upon exercise, conversion or exchange thereof, by (ii) the total number
of shares covered by such rights, options, warrants or convertible securities)
lower than the then Current Market Price or the Warrant Price in effect
immediately prior to such sale or issuance, then the Warrant Price shall be
reduced to a price (calculated to the nearest cent) determined by dividing (I)
an amount equal to the sum of (A) the number of shares of Preferred Stock
outstanding immediately prior to such sale or issuance multiplied by the then
existing Warrant Price, plus (B) the consideration received or receivable by the
Company upon such sale or issuance, by (II) the total number of shares of
Preferred Stock outstanding immediately after such sale or issuance. The number
of shares of Warrant Stock purchasable upon the exercise of a Warrant shall
thereafter be that number determined by multiplying the number of shares of
Warrant Stock purchasable upon exercise immediately prior to such adjustment by
a fraction, of which the numerator shall be the Warrant Price in effect
immediately prior to such adjustment and the denominator shall be the Warrant
Price as so adjusted. For the purposes of such adjustments, the Preferred Stock
which the holders of any such rights, options, warrants or convertible
securities shall be entitled to subscribe for, purchase or exchange into shall
be deemed issued and outstanding as of the date of such sale or issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants or
convertible securities, plus the consideration or premiums stated in such
rights, options, warrants or convertible securities to be payable for the
Preferred Stock covered thereby. In case the Company shall sell or issue
Preferred Stock or rights, options, warrants or convertible securities
containing the right to subscribe for, purchase or exchange into Preferred Stock
for a consideration consisting, in whole or in part, of property other than cash
or its equivalent, then, in determining the "price per share" of Preferred Stock
and the "consideration received by the Company" for purposes of the first
sentence of this subsection 8.1(f), the Board of Directors shall determine the
fair value of said property, and such determination, if based upon the Board of
Directors, good faith business judgment, shall be binding upon the
Warrantholders. In determining the "price per share" of Preferred Stock, any
underwriting discounts or commissions paid to brokers, dealers or other selling
agents shall not be deducted from the price received by the Company for sales of
securities registered under the Act or issued in a private placement. There
shall be no adjustment of the Warrant Price pursuant to this subsection 8.1(f)
if the amount of such adjustment would be less than $.01 per share of Preferred
Stock; provided, however, that any adjustment which by reason of this provision
is not required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
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(g) For the purpose of this Section 8, the term
"Preferred Stock" shall mean (i) the class of stock designated as the Preferred
Stock of the Company at the date of this Agreement or (ii) any other class of
stock (other than Common Stock) resulting from successive changes or
reclassifications of such Preferred Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant to this
Section 8, a Warrantholder shall become entitled to purchase any securities of
the Company other than Preferred Stock, (i) if the Warrantholder's right to
purchase is on any other basis than that available to all holders of the
Company's Preferred Stock, the Company shall obtain an opinion of a reputable
investment banking firm valuing such other securities and (ii) thereafter the
number of such other securities so purchasable upon exercise of a Warrant and
the Warrant Price of such securities shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in this Section 8.
(h) Upon the expiration of any rights, options, warrants
or conversion privileges, if such shall not have been exercised, the number of
shares of Warrant Stock purchasable upon exercise of a Warrant and the Warrant
Price, to the extent a Warrant has not then been exercised, shall, upon such
expiration, be readjusted and shall thereafter be such number and such price as
they would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) on the basis of (A) the fact
that the only shares of Preferred Stock issued in respect of such rights,
options, warrants or conversion privileges were the shares of Preferred Stock,
if any, actually issued or sold upon the exercise of such rights, options,
warrants or conversion privileges, and (B) the fact that such shares of
Preferred Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion privileges whether or not exercised;
provided, however, that no such readjustment shall have the effect of decreasing
the numbers of shares of Warrant Stock purchasable upon exercise of a Warrant or
increasing the Warrant Price by an amount in excess of the amount of the
adjustment made in respect of the issuance, sale or grant of such rights,
options, warrants or conversion privileges.
(i) Whenever the number of shares of Warrant Stock
purchasable upon the exercise of a Warrant or the Warrant Price is adjusted
pursuant to this Section 8, the Company shall cause to be promptly mailed to
each Warrantholder by first class mail, postage prepaid, notice of such
adjustment or adjustments and a certificate of the chief financial officer of
the Company setting forth the number of shares of Preferred Stock, capital stock
and other securities purchasable upon the exercise of such Warrantholder's
Warrant and the applicable Warrant Price after such adjustment, a brief
statement of the facts requiring such adjustment and the computation by which
such adjustment was made.
8.2 NO ADJUSTMENT FOR DIVIDENDS. Except as specifically
provided in subsection 8.1, no adjustment in respect of any cash dividends or
distributions on the
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Company's Preferred Stock out of current earnings made in the ordinary course of
business consistent with past practices shall be made during the term of the
Warrants or upon the exercise of the Warrants.
8.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or other entity or in case of any sale,
lease, conveyance or other transfer to another corporation, person or other
entity of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, person or other entity, as the case may be, shall execute with the
Warrantholder, and the agreements governing such consolidation, merger, sale,
lease, conveyance or other transfer shall require such execution of, an
agreement that the Warrantholder shall have the right thereafter upon payment of
the Warrant Price in effect immediately prior to such event, upon exercise of
the Warrants, to receive the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease, conveyance or other
transfer had the Warrants (and each underlying security) been exercised
immediately prior to such action. The Company shall promptly mail to each
Warrantholder by first class mail, postage prepaid, notice of the execution of
any such agreement. In the event of a merger described in Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, in which the Company is the surviving
corporation, the right to purchase shares of Warrant Stock under the Warrants
shall terminate on the date of such merger and thereupon the Warrants shall
become null and void, but only if the controlling corporation shall agree to
substitute for the Warrants its warrant which entitles the holder thereof to
purchase upon its exercise the kind and amount of shares and other securities
and property which it would have owned or been entitled to receive had the
Warrants been exercised immediately prior to such merger. Any such agreements
referred to in this subsection 8.3 shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
Section 8 hereof, and shall provide for terms and provisions at least as
favorable to the Warrantholder as those contained in this Agreement. The
provisions of this subsection 8.3 shall similarly apply to successive
consolidations, mergers, sales, leases, conveyances or other transfers.
8.4 PAR VALUE OF SHARES OF PREFERRED STOCK. Before taking any
action which would cause an adjustment effectively reducing the portion of the
Warrant Price allocable to each share of Warrant Stock below the then par value
per share, if any, of the Warrant Stock issuable upon exercise of the Warrants,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Stock upon exercise of the Warrants.
8.5 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any
adjustments in the number of securities issuable upon exercise of Warrants,
Warrant certificates theretofore or thereafter issued may continue to express
the same number of securities as are stated in the similar Warrant certificates
initially issuable pursuant to this Agreement, provided that such
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expression shall in no way affect the number of shares of Warrant Stock actually
purchasable upon the exercise of such Warrants.
SECTION 9. FRACTIONAL SHARES; CURRENT MARKET PRICE. The Company shall not
be required to issue fractional shares of Preferred Stock on the exercise of a
Warrant. If any fraction of a share of Preferred Stock would, except for the
provisions of this Section 9, be issuable upon the exercise of a Warrant (or
specified portion thereof), the Company shall in lieu thereof pay an amount in
cash equal to the then Current Market Price multiplied by such fraction. For
purposes of this Agreement, the term "Current Market Price" shall mean (i) if
the Preferred Stock is traded on the Nasdaq National Market ("NNM") or on a
national securities exchange, the average per share closing price of the
Preferred Stock for the five (5) consecutive trading days preceding the date of
exercise, as reported by the NNM or on the principal stock exchange on which it
is listed, as the case may be, on the date of exercise of the Warrant or, with
respect to any adjustment pursuant to Section 8.1 hereof, on the date
immediately preceding the announcement of the event causing such adjustment or
(ii) if the Preferred Stock is traded in the over-the-counter market and not in
the NNM or on any national securities exchange, the average of the per share
closing bid prices of the Preferred Stock on the thirty (30) consecutive trading
days immediately preceding the date in question, as reported by The Nasdaq Small
Cap Market (or an equivalent generally accepted reporting service if quotations
are not reported on The Nasdaq Small Cap Market). The closing price referred to
in clause (i) above shall be the last reported sale price or, in the case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices, in either case in the NNM or on the principal stock
exchange on which the Preferred Stock is then listed. For purposes of clause
(ii) above, if trading in the Preferred Stock is not reported by The Nasdaq
Small Cap Market, the bid price referred to in said clause shall be the lowest
bid price as reported in the Nasdaq Electronic Bulletin Board or, if not
reported thereon, as reported in the "pink sheets" published by National
Quotation Bureau, Incorporated, and, if such Preferred Stock is not so reported,
shall be the price of a share of Preferred Stock determined by the Company's
Board of Directors in good faith (which shall, in no event, be less than the
"Current Market Price" (calculated as set forth above) of the securities into
which the shares of Preferred Stock could be converted). In the event that the
Preferred Stock is automatically converted into Common Stock, the Current Market
Price of the Common Stock shall be calculated in the same manner as described
above.
SECTION 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER. Except as
expressly provided herein, nothing contained in this Agreement or in the
Warrants shall be construed as conferring upon the Warrantholder or its
transferees any rights as a stockholder of the Company, including the right to
vote, receive dividends, consent or receive notices as a stockholder in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter. If, however, at any time prior to the expiration of the
Warrants and prior to their exercise, any one or more of the following events
shall occur:
(a) any action which would require an adjustment pursuant
to Section 8 hereof;
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(b) an issuance by the Company of rights, options,
warrants or convertible securities to all or substantially all holders of its
Preferred Stock, without any charge to such holders, containing the right to
subscribe for or purchase Preferred Stock; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety or substantially as an entirety)
shall be proposed;
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 12 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to any relevant dividend,
distribution or other rights or for the determination of stockholders entitled
to vote on such proposed dissolution, liquidation or winding up; provided that
the failure to give such notice shall not affect the validity of such action.
Such notice shall specify such record date or the date of closing the transfer
books, as the case may be.
SECTION 11. REGISTRATION RIGHTS; INDEMNIFICATION. The Warrantholders
shall have (i) piggy back registration rights identical to those granted to the
purchasers of Preferred Stock in the Offering, and (ii) one demand registration
right exercisable by holders of a majority of the shares of Preferred Stock
issued or issuable upon exercise of the Warrants which are identical to the
demand registration rights granted to purchasers of shares of Preferred Stock in
the Offering, except that the demand registration rights of the holders of the
Warrants (or underlying shares of Preferred Stock) shall be exercisable
separately from the demand registration rights of purchasers of shares in the
Offering.
SECTION 12. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed, delivered by hand or transmitted by any
standard form of telecommunication. Notices to the Warrantholders or a holder
of Warrant Stock shall be directed to the record address of such Warrantholder
with a copy to The Boston Group, L.P. at 0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xx. Xxxxxx X. XxXxxxxx. Notices to the
Company shall be directed to the Company, attention President, at its principal
executive offices as set forth in the Memorandum. Any address for purposes of
notice may be changed by giving notice of such change to the other parties
hereto in the same manner as provided herein.
SECTION 13. PARTIES. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Dealer Manager, the Company and the
Warrantholders and the holders of Warrant Stock, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained.
SECTION 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in the Dealer Manager Agreement, any schedule, exhibit, certificate or
other instrument
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delivered by or on behalf of the parties hereto, or in connection with the
transactions contemplated by this Agreement, shall be deemed to be
representations and warranties hereunder. Notwithstanding any investigations
made by or on behalf of the parties to this Agreement, all representations,
warranties and agreements made by the parties to this Agreement or pursuant
hereto shall survive the termination of this Agreement and the issuance, sale
and delivery of the Warrant and the Warrant Stock.
SECTION 15. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without giving effect to conflict of laws principles thereof.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
SECTION 17. ENTIRE AGREEMENT, AMENDMENTS. This Agreement and the Dealer
Manager Agreement constitute the entire agreement of the parties hereto
concerning the subject matter hereof and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. To the extent that the terms or provisions of this Agreement are
inconsistent with the terms or provisions of the Dealer Manager Agreement, the
terms of this Agreement shall govern. This Agreement may not be amended,
modified or altered except in a writing signed by the Dealer Manager and the
Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
JENKON INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------
Xxxxx Xxxxxxx
President and CEO
THE BOSTON GROUP, L.P.
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Xxxxxxx Xxxxx
Director of Corporate Finance
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THIS WARRANT AND THE SECURITIES PURCHASABLE HEREUNDER HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH WARRANTS
AND SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO SUCH SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
WARRANT CERTIFICATE NO. ___
WARRANT TO PURCHASE
_____ SHARES OF SERIES A PREFERRED STOCK
VOID AFTER 5:00 P.M.
PACIFIC TIME, ON JUNE 30, 2001
JENKON INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received, ___________________________, the
registered holder hereof or assigns (the "Warrantholder"), is entitled to
purchase from JENKON INTERNATIONAL, INC. (the "Company"), at any time during the
period commencing at 6:30 am., Pacific time, on July 1, 1997, and before 5:00
p.m., Pacific time, on June 30, 2001, at the purchase price per share of Series
A Preferred Stock, $0.001 par value (the "Preferred Stock") of $2.10 (the
"Warrant Price"), __________ shares of Preferred Stock of the Company (the
"Warrant Stock "). The number of shares of Preferred Stock of the Company
purchasable upon exercise of each Warrant evidenced hereby shall be subject to
adjustment from time to time as set forth in the Dealer Manager's Warrant
Agreement, dated as of July 1, 1996, by and between the Company and The Boston
Group, L.P. (the "Dealer Manager's Warrant Agreement").
The Warrants evidenced hereby represent the right to purchase an aggregate
of up to ___________ shares of Warrant Stock (subject to adjustment as provided
in the Dealer Manager's Warrant Agreement) and are issued under and in
accordance with the Dealer Manager's Warrant Agreement, and are subject to the
terms and provisions contained in the Dealer Manager's Warrant Agreement, to all
of which the Warrantholder by acceptance hereof consents.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided hereon) and simultaneous
payment of the Warrant Price at the
principal office of the Company. Payment of such price shall be made at the
option of the Warrantholder in any manner allowed in the Dealer Manager's
Warrant Agreement.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder a new Warrant Certificate in respect of
the shares of Warrant Stock as to which the Warrants evidenced hereby shall not
have been exercised. These Warrants may be exchanged at the office of the
Company by surrender of this Warrant Certificate properly endorsed for one or
more new Warrants of the same aggregate number of shares of Warrant Stock as
evidenced by the Warrant or Warrants exchanged. No fractional securities shall
be issued upon the exercise of rights to purchase hereunder, but the Company
shall pay the cash value of any fraction upon the exercise of one or more
Warrants. These Warrants are transferable at the office of the Company in the
manner and subject to the limitations set forth in the Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a stockholder of the Company.
JENKON INTERNATIONAL, INC.
By:
--------------------------------
Xxxxx Xxxxxxx
President and CEO
Dated , 1996
------------ --
ATTEST:
--------------------------------------
Xxxxxx X. Xxxxxx
Treasurer
JENKON INTERNATIONAL, INC.
PURCHASE FORM
JENKON INTERNATIONAL, INC (the "Company")
-----------------------------------
-----------------------------------
Attention: President
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
_____ shares of Series A Preferred Stock of the Company (the "Warrant Stock")
provided for therein, and requests that certificates for the Warrant Stock be
issued in the name of:
--------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
--------------------------------------------------------------
--------------------------------------------------------------
and, if said number of shares of Warrant Stock shall not be all the Warrant
Stock purchasable hereunder, that a new Warrant Certificate for the balance of
the Warrant Stock purchasable under the within Warrant Certificate be registered
in the name of the undersigned Warrantholder or his Assignee as below indicated
and delivered to the address stated below.
Dated:
-----------------
Name of Warrantholder
or Assignee:
-------------------------
(Please Print)
Address:
-------------------------
-------------------------
Signature:
-------------------------
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed:
-----------------------------
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange of the National Association of Securities Dealers, Inc.)
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers the
right to purchase _____ shares of Warrant Stock represented by the within
Warrant Certificate unto, and requests that a certificate for such Warrant be
issued in the name of:
------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
------------------------------------------------------------
------------------------------------------------------------
hereby irrevocably constituting and appointing _______________ Attorney to
transfer said Warrants on the books of the Company, with full power of
substitution in the premises and, if said number of shares of Warrant Stock
shall not be all of the Warrant Stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the Warrant Stock
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Warrantholder and delivered to such Warrantholder's address as
then set forth on the Company's books.
Dated:
--------------- ------------------------------------
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:
-----------------------------
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
