Exhibit 4.2
WARRANT
to Purchase ______ Shares of
Common Stock of
SELECT COMFORT CORPORATION
THIS CERTIFIES that ______________________________________________ or any
permitted successor or assign (the "Holder") is entitled to purchase from Select
Comfort Corporation (the "Company"), at any time during the period commencing on
the date of this warrant (together with any warrant or warrants issued in
substitution or exchange therefor, the "Warrant") and ending at 5:00
p.m., Minneapolis, Minnesota time, on December 28, 2005, _________ fully paid
and nonassessable shares of the common stock of the Company, $.01 par value (the
"Common Stock"), or such greater or lesser number of shares as may be determined
by application of the anti-dilution provisions of this Warrant (such shares or
other securities purchasable upon exercise of this Warrant being herein called
the "Shares"), at the purchase price of $5.25 per share. The foregoing purchase
price, as it may be adjusted pursuant to the anti-dilution provisions of this
Warrant, is referred to herein as the "Purchase Price."
This Warrant is subject to the following provisions, terms and conditions:
1. EXERCISE; OPTIONAL CONVERSION; TRANSFERABILITY.
(a) The rights represented by this Warrant may be exercised, in whole or
in part (but not as to a fractional share of Common Stock), by surrendering
this Warrant, with the Purchase Form attached hereto (or a reasonable facsimile)
duly executed, at the principal office of the Company, and by paying the
Purchase Price in full for the Shares to be purchased upon such exercise in cash
or by certified or official bank check payable to the order of the Company.
(b) In addition to the purchase rights set forth above and without
limiting the rights of the holder of this Warrant, the holder of this Warrant
shall have the right (the "Conversion Right") to convert this Warrant or any
portion thereof into shares of Common Stock as provided in this Section 1 at any
time or from time to time after the date hereof and prior to its expiration.
Upon exercise of the Conversion Right with respect to a particular number of
shares subject to this Warrant (the "Converted Warrant Shares"), the Company
shall deliver to the holder of this Warrant, without payment by the holder of
any exercise price of cash or other consideration, that number of shares of
Common Stock equal to the quotient obtained by dividing the Net Value (as
hereinafter defined) of the Converted Warrant Shares by the fair market value
(as defined in paragraph (d) below) of a single share of Common Stock,
determined in each case as of the close of business on the Conversion Date (as
hereinafter defined). The "Net Value" of the Converted Warrant Shares shall be
determined by subtracting the aggregate Purchase Price of the Converted Warrant
Shares from the aggregate fair market value of the Converted Warrant Shares.
Notwithstanding anything in this Section 1 to the contrary, the Conversion Right
cannot be exercised with respect to a number of Converted Warrant Shares having
a Net Value below $100. No fractional shares shall be issuable upon exercise
of the Conversion Right, and if the number of shares to be issued in accordance
with the foregoing formula is other than a whole number, the
Company shall pay to the holder of this Warrant an amount in cash equal to
the fair market value of the resulting fractional share.
(c) The Conversion Right may be exercised by the holder of this Warrant by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being exercised pursuant to this Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), but not later than the expiration date of this Warrant.
Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right, together with a check in payment of any fractional share and,
in the case of a partial exercise, a new warrant evidencing the shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder of this Warrant within 10 days following the Conversion
Date.
(d) For purposes of this Section 1, the "fair market value" of a share of
Common Stock as of a particular date shall mean, if the Common Stock is traded
on a securities exchange or on the NASDAQ National Market System, the closing
price of the Common Stock on such exchange or on the NASDAQ National Market
System, or, if the Common Stock is otherwise traded in the over-the-counter
market, the closing bid price, in each case averaged over a period of 20
consecutive business days prior to the date as of which "market price" is to be
determined. If at any time the Common Stock is not traded on an exchange or the
NASDAQ National Market System, or otherwise traded in the over-the-counter
market, the "fair market value" shall be deemed to be the higher of (i) the book
value thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company as of the
last day of any month ending within 60 days preceding the date as of which the
determination is to be made, or (ii) the fair value thereof determined in good
faith by the Board of Directors of the Company as of a date which is within 15
days of the date as of which the determination is to be made.
(e) This Warrant is issued only as a registered Warrant and until it is
transferred on the records of the Company, the Company may treat the person in
whose name it is registered as the absolute owner of this Warrant for all
purposes, notwithstanding any notice to the contrary.
2. ISSUANCE OF SHARES.
The Company agrees that the Shares purchased upon exercise or optional
conversion of this Warrant shall be and are deemed to be issued as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made or optional conversion exercised for such Shares. Certificates for
the Shares purchased shall be delivered to the Holder within 10 days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the number of Shares, if
any, with respect to which this Warrant has not been exercised shall also be
delivered to the Holder within such time. Notwithstanding the foregoing,
however, the Company shall not be required to deliver any certificates for the
Shares, except in accordance with the provisions and subject to the limitations
of Section 6 below.
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3. COVENANTS OF COMPANY.
The Company covenants and agrees that all Shares that may be issued upon
the exercise of this Warrant have been duly authorized and reserved for issuance
upon the exercise of this Warrant, and the Shares, when so issued, delivered and
paid for upon such exercise in accordance with the terms of this Warrant, will
be validly issued, fully paid and nonassessable, and free from all taxes, liens
and charges with respect to the issuance thereof. The Company further covenants
and agrees that until expiration of this Warrant, the Company will at all times
have authorized, and reserved for the purpose of issuance or transfer upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
4. ANTI-DILUTION ADJUSTMENTS.
The foregoing provisions are, however, subject to the following:
(a) The Purchase Price shall be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the Purchase Price, the Holder of
this Warrant shall thereafter be entitled to purchase, at the Purchase Price
resulting from such adjustment, the number of Shares obtained by multiplying
the Purchase Price in effect immediately prior to such adjustment by the number
of Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Purchase Price resulting from such
adjustment.
(b) In case the Company shall at any time subdivide the outstanding shares
of its Common Stock into a greater number of shares or declare a dividend
payable in Common Stock, securities convertible into Common Stock or rights or
options to purchase Common Stock or securities convertible into Common Stock,
the Purchase Price in effect immediately prior to such subdivision or dividend
shall be proportionately reduced, and conversely, in case the outstanding shares
of its Common Stock shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall be
proportionately increased. In case prior to the exercise of this Warrant the
Company shall declare a dividend or distribution upon the Common Stock payable
other than in cash out of earnings or surplus or other than in Common Stock,
then from the date of such declaration, the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
for which this Warrant is exercisable, and, in addition and without payment
therefor, the property which the holder of this Warrant would have received as a
dividend if continuously since the record date for any such dividend or
distribution such holder (a) had been the record holder of the number of shares
of Common Stock received upon exercise and (B) had retained all dividends or
distributions in stock or securities payable with respect to such Common Stock
or with respect to any stock or securities paid as dividends or distributions
and originating directly or indirectly from such Common Stock.
(c) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of the
Company's Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for such Common Stock, then, as a condition of
such
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reorganization, reclassification, consolidation, merger or sale, the Holder
of this Warrant shall have the right to purchase and receive on the basis and on
the terms and conditions specified in this Warrant and in lieu of the shares of
the Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby or upon the
consummation of any such transaction, such shares of stock, securities or assets
as would have been issued or delivered to the Holder of this Warrant if the
Holder had exercised this Warrant and received upon exercise of this Warrant the
Common Stock prior to or upon the consummation of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the Holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the Purchase Price and of the
number of shares purchasable upon exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company
shall not effect any such consolidation, merger or sale unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to the Holder at
the last address of the Holder appearing on the books of the Company the
obligation to deliver to such Holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase.
(d) Except for the grant of options, and the issuance of shares pursuant
to the exercise of such options, granted to employees and consultants of the
Company and to directors of the Company, as approved from time to time by the
Board of Directors of the Company or a committee thereof, if and whenever the
Company shall issue or sell any shares of Common Stock for a consideration per
share less than the Purchase Price then in effect (other than dividends payable
in Common Stock, securities convertible into Common Stock or rights or options
to purchase Common Stock or securities convertible into Common Stock) or shall
issue any convertible securities, options, warrants or other rights for the
purchase of such shares at a consideration per share that is less than the
Purchase Price then in effect, then, upon such issuance or sale of such shares,
convertible securities, options, warrants, or other purchase rights, the
Purchase Price in effect immediately prior to such issuance or sale shall be
reduced to (y) if such issuance or sale occurs on or before December 31, 1997,
the price at which such shares of Common Stock were sold or at which shares of
Common Stock are issuable upon the exercise of such convertible securities,
options, warrants or other purchase rights or (z) if such issuance or sale
occurs after December 31, 1997, the price (calculated to the nearest cent)
determined by dividing (A) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the then existing Purchase Price and (2) the consideration, if
any, received by the Company upon such issuance or sale, by (B) an amount equal
to the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issuance or sale and (2) the number of shares of Common Stock thus
issued or sold and the number of shares of Common Stock issuable upon the
exercise of such convertible securities, options, warrants or other purchase
rights. Solely for purposes of (A) and (B) above, the term "Common Stock
outstanding" shall include those shares of Common Stock issuable upon conversion
of outstanding shares of Preferred Stock of the Company. If any options or
purchase rights that are taken into account in any such adjustment of the
Purchase Price subsequently expire without exercise, the Purchase Price shall be
recomputed at the time of expiration by deleting such options or purchase
rights.
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(e) If the Company takes any other action, or if any other event occurs,
which does not come within the scope of the provisions of Sections 4(b), 4(c) or
4(d), but which should, in the Company's opinion, result in an adjustment in the
Purchase Price and/or the number of Shares subject to the Warrant in order to
fairly protect the rights of the Holder of this Warrant, then the Company shall
make an appropriate adjustment in the Purchase Price or the number of Shares to
be received upon exercise of this Warrant.
(f) No adjustment of the Purchase Price shall be made if the amount of
such adjustment is less than $.01 per share, but in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any other adjustment or adjustments so carried forward,
shall amount to not less than $.01 per share.
(g) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share of Common Stock which would otherwise be issuable in
an amount equal to the same fraction of the fair market value (as defined in
Section 1(d) above) per share of Common Stock.
(h) Upon any adjustment of the Purchase Price, the Company shall give
written notice thereof, by first-class mail, postage prepaid, addressed to the
registered Holder of this Warrant at the address of such Holder as shown on the
books of the Company, which notice shall state the Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
(i) In case any time:
(1) the Company shall declare any cash dividend on its Common Stock
at a rate in excess of the rate of the last cash dividend theretofore paid;
(2) the Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends) to the
holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other rights;
(4) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb)
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such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of Common
Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least
20 days prior to the action in question and not less than 20 days prior to
the record date or the date on which the Company's transfer books are closed
in respect thereto.
5. NO RIGHTS OF SHAREHOLDERS.
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company.
6. RESTRICTIONS ON TRANSFER.
The Holder, by acceptance hereof, represents and warrants that it is
acquiring this Warrant for its own account for investment purposes only and not
with a view to its resale or distribution, and it has no present intention to
resell or otherwise dispose of all or any part of this Warrant. Other than
pursuant to registration under federal and state securities laws or an
exemption from such registration, the availability of which shall be reasonably
determined by the Company, the Company will not accept the exercise of this
Warrant or issue certificates for Shares, and neither this Warrant nor any
Shares may be sold, pledged, assigned or otherwise disposed of (whether
voluntarily or involuntarily). The Company may condition such issuance or sale,
pledge, assignment or other disposition on the receipt from the party to whom
this Warrant is to be so transferred or to whom Shares are to be issued or so
transferred of any representations and agreements requested by the Company in
order to permit such issuance or transfer to be made pursuant to exemptions from
registration under federal and applicable state securities laws. Each
certificate representing the Warrant (or any part thereof) and any Shares shall
be stamped with the appropriate legends setting forth these restrictions on
transferability. The Holder, by acceptance hereof, agrees to give written
notice to the Company before exercising or transferring this Warrant or
transferring any Shares of the Holder's intention to do so, describing briefly
the manner of any proposed exercise or transfer and providing the Company with
an opinion of counsel, acceptable to the Company, that such transfer complies
with federal and applicable state securities laws or exemptions thereunder.
Within thirty (30) days of receiving such written notice, the Company shall
notify the Holder as to whether such exercise or transfer may be effected.
7. COMMON STOCK DEFINITION. As used herein, the term "Common Stock"
shall mean and include the Company's presently authorized Common Stock and shall
also include any capital stock of any class of the Company hereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company; provided that the shares purchasable pursuant to this Warrant
shall include shares designated as Common Stock of the Company on the date of
original issue of this Warrant or, in the case of any reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
paragraph 4(c) above.
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8. REGISTRATION RIGHTS. The holder of this Warrant and of the Common
Stock issuable or issued upon the exercise hereof shall be entitled to the
registration rights set forth in the Amended and Restated Registration Rights
Agreement dated as of December 28, 1995, as amended.
9. SUCCESSORS AND ASSIGNS.
All the covenants and provisions of this Warrant by or for the benefit of
the Company or the Holder shall bind and inure to the benefit of their
respective successors and assigns.
10. MODIFICATION OF WARRANT.
Neither this Warrant nor any term hereof may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer this 24th day of May, 1996, effective as of the 28th
day of December, 1995.
SELECT COMFORT CORPORATION
By ________________________________
Its _______________________________
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES WILL BE MADE BY THE
COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
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TO: SELECT COMFORT CORPORATION
* * * *
PURCHASE FORM--To be Executed by the Registered Holder in Order to Exercise
Warrants
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to purchase thereunder, _____
shares of Common Stock provided for therein, and request that certificates for
such shares be issued in the name of:
Please insert social security or other
identifying number of registered _____________________________
holder of certificate (Name)
_______________________________ _____________________________
(Address)
_____________________________
(Name)
_____________________________
(Address)
Date: _________________________ Signature(s):
_____________________________
_____________________________
and if such number of shares shall not be all of the shares purchasable
hereunder, that a new Warrant for the balance of the shares purchasable under
such Warrant be registered in the name of the undersigned Holder or his or her
Assignee as below indicated and delivered to the address stated below.
Name of Holder or Assignee:
_____________________________
(please print)
Address:
_____________________________
_____________________________
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ASSIGNMENT FORM--To be Executed by the Registered Holder in Order to Transfer
Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
______________________ of the Warrants represented by the attached Warrant unto:
Please insert social security or Please print or typewrite name
other identifying number of and address including zip code
assignee of assignee
_____________________________
_____________________________
_____________________________
and does hereby irrevocably constitute and appoint _______________ Attorney to
transfer the Warrant on the records of the Company with full power of
substitution in the premises.
Date: _________________________ Signature(s):
_____________________________
_____________________________
* * * *
NOTICE--The Signature(s) to the Purchase Form or the Assignment Form must
correspond to the name as written upon the face of the Warrant in every
particular without alteration or enlargement or any change whatsoever.
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