XXXXXX ELECTRONICS, INC.
AND
THE THORNWATER COMPANY, L.P.
REPRESENTATIVE'S
WARRANT AGREEMENT
REPRESENTATIVE'S WARRANT AGREEMENT dated as of April 6, 1998 by and between
XXXXXX ELECTRONICS, INC., (the "Company") and THE THORNWATER COMPANY, L.P.
("Representative" or "Thornwater") individually ("Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative 120,000
warrants (each a "Representative's Stock Warrant") each to purchase a share of
the Company's common stock, par value $.01 per share (the "Common Stock") and/or
183,000 warrants (each a "Representative's Underlying Warrant") each to purchase
a redeemable Common Stock purchase warrant (the "Redeemable Warrant") each
Redeemable Warrant exercisable to purchase one share of Common Stock.
WHEREAS, the Representative has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated March 31, 1998, by and between
the Representative and the Company, to act as the Representative in connection
with the Company's proposed initial public offering (the "Initial Public
Offering") of 1,200,000 shares of Common Stock and 1,830,000 redeemable warrants
(the "Offering Securities"); and
WHEREAS, the Representative's Stock Warrants and Representative's
Underlying Warrants to be issued pursuant to this Agreement (collectively,
"Representative's Warrant") will be issued on Closing Date I (as such term is
defined in the Underwriting Agreement) by the Company to the Representative in
consideration for, and as part of, the Representatives' compensation in
connection with the Representatives acting as the Representatives pursuant to
the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of Ten Dollars ($10.00), the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Holder (as defined in Section 3 below) is hereby granted the
right to purchase, at any time from March 31, 1999 until 5:00 p.m., New York
time, March 30, 2003, an aggregate of up 120,000 shares of Common Stock and/or
183,000 Redeemable Warrants, at an initial purchase price (subject to adjustment
as provided in Section 8 hereof) of $8.00 per share of Common Stock and $.16 per
Redeemable Warrant, subject to the terms and conditions of this Agreement. The
securities issuable upon exercise of the Representative's Warrant are sometimes
referred to herein as the "Representative's Securities." The Representative's
Warrant shall be identical to the redeemable warrants included in the Offering
Securities, except the purchase price for one share of Common Stock upon
exercise of the warrant provided in the Representative's Securities shall be
$8.80.
2. Warrant Certificates. The warrant certificate (the "Representative's
Warrant Certificate") to be delivered pursuant to this Agreement shall be in the
form set forth in Exhibit A attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Representative's Warrant.
(a) The Representative's Warrant is exercisable during the term set forth
in Section 1 hereof payable by certified or cashier's check or money order in
lawful money of the United States. Upon surrender of an Representative's Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Representative's Securities (and such other amounts, if any, arising pursuant to
Section 4 hereof) at the Company's principal office currently located at 000
Xxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, the registered holder of an
Representative's Warrant Certificate ("Holder" or "Holders") shall be entitled
to receive a certificate or certificates for the Representative's Securities so
purchased. The purchase rights represented by each Representative's Warrant
Certificate are exercisable at the option of the Holder or Holders thereof, in
whole or in part as to Representative's Securities. The Representative's Warrant
may be exercised to purchase all or any part of the Representative's Securities
represented thereby. In the case of the purchase of less than all the
Representative's Securities purchasable on the exercise of the Representative's
Warrant represented by an Representative's Warrant Certificate, the Company
shall cancel the Representative's Warrant Certificate represented thereby upon
the surrender thereof and shall execute and deliver a new Representative's
Warrant Certificate of like tenor for the balance of the Representative's
Securities purchasable thereunder.
(b) In lieu of the payment of cash upon exercise of the Representative's
Warrant as provided in Section 3(a), the Holder may exercise the
Representative's Warrant by surrendering the Warrant Certificate at the
principal office of the Company, accompanied by a notice stating (i) the
Holder's intent to effect such exercise by an exchange, (ii) whether Common
Stock, Redeemable Warrants or a combination (stating the ratio of each) are to
be issued upon the exchange, (iii) whether Representative's Stock Warrants,
Representative's Underlying Warrants or a combination (stating the ratio) are to
be surrendered in connection with the exchange, and (iv) the date on which the
Holder requests that such exchange is to occur. The Purchase Price for the
Representative's Securities to be acquired in the exchange shall be paid by the
surrender as indicated in the notice, of Representative's Stock Warrants or
Representative's Underlying Warrants, or a combination, having a "Value", as
defined below, equal to the Purchase Price. "Value" as to each Representative's
Stock Warrant shall mean the difference between the "Market Price", as
hereinafter defined, of a share of Common Stock and the then Purchase Price for
a share of Common Stock hereunder and as to each Representative's Underlying
Warrant shall mean the difference between the Market Price of the Redeemable
Warrant and the then Purchase Price of a Redeemable Warrant hereunder.
By way of example of the application of the formula, assume that the Market
Price of the Common Stock is $8.00, the Purchase Price of the Representative's
Stock Warrant is $6.00, the Market Price of a Redeemable Warrant is $2.24 and
the Purchase Price of the Representative's Underlying Warrant is $.12. On such
assumptions, the Value of a Representative's Stock Warrant is $2.00
($8.00-$6.00) and therefore for each three Representative's Stock Warrant
surrendered, the Holder could acquire one share of Common Stock in the exchange;
and the Value of a Representative's Underlying Warrant is $2.12 and for each 57
Representative's Underlying Warrants surrendered, the Holder could acquire 1,000
Redeemable Warrants. Notwithstanding the example, the Holder shall not be
limited to exchanging Representative's Stock Warrants for Common Stock or
Representative's Underlying Warrants for Redeemable Warrants.
The Warrant Exchange shall take place on the date specified in the notice
or if the date the notice is received by the Company is later than the date
specified in the notice, on the date the notice is received by the Company.
In the event the Redeemable Warrant as to which the Representative's
Warrant may be exercised is not identical to the Redeemable Warrant sold in the
Initial Public Offering, the Representative's Underlying Warrants shall not be
able to be surrendered as provided herein, but the right to exchange shall be
limited to the exchange of Representative's Stock Warrants for Common Stock or
Redeemable Warrants.
4. Issuance of Certificates. Upon the exercise of the Representative's
Warrant and payment of the Purchase Price therefor, the issuance of certificates
representing the Representative's Securities or other securities, properties or
rights underlying such Representative's Warrant, shall be made forthwith (and in
any event within five (5) business days thereafter) without further charge to
the Holder thereof, and such certificates shall (subject to the provisions of
Sections 5 and 7 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Representative's Warrant Certificates and the certificates representing the
Representative's Securities or other securities, property or rights (if such
property or rights are represented by certificates) shall be executed on behalf
of the Company by the manual or facsimile signature of the then present Chairman
or Vice Chairman of the Board of Directors or President or Vice President of the
Company, attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of the
Company. The Representative's Warrant Certificates shall be dated the date of
issuance thereof by the Company upon initial issuance, transfer or exchange.
5. Restriction On Transfer of Representative's Warrant. The Holder of an
Representative's Warrant Certificate (and its Permitted Transferee, as defined
below), by its acceptance thereof, covenants and agrees that the
Representative's Warrant may be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, until March 30, 1999 (one year
following the effective date of the Initial Public Offering), only to officers
and partners of the Representatives, or any Initial Public Offering selling
group member and their respective officers and partners, ("Permitted
Transferees"). Thereafter the Representative's Warrant may be transferred,
assigned, hypothecated or otherwise disposed of in compliance with applicable
law.
6. Purchase Price.
(a) Initial and Adjusted Purchase Price. Except as otherwise provided in
Section 8 hereof, the initial purchase price of the Representative's Securities
shall be $8.00 per share of Common Stock and $.16 per Redeemable Warrant. The
adjusted purchase price shall be the price which shall result from time to time
from any and all adjustments of the initial purchase price in accordance with
the provisions of Section 8 hereof.
(b) Purchase Price. The term "Purchase Price" herein shall mean the initial
purchase price or the adjusted purchase price, depending upon the context.
7. Registration Rights.
(a) Registration Under the Securities Act of 1933 as amended ("Act"). The
Representative's Warrant may have not been registered under the Act. The
Representative's Warrant Certificates may bear the following legend:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 (the "Act"), and may not be offered for sale or
sold except pursuant to (i) an effective registration statement under the Act,
or (ii) an opinion of counsel, if such opinion and counsel shall be reasonably
satisfactory to counsel to the issuer, that an exemption from registration under
the Act is available".
(b) Demand Registration. (1) At any time commencing on the first
anniversary of and expiring on the fifth anniversary of the effective date of
the Company's Registration Statement relating to the Initial Public Offering
(the "Effective Date"), the Holders of a Majority (as hereinafter defined) in
interest of the Representative's Warrant, or the Majority in interest of the
Representative's Securities (assuming the exercise of all of the
Representative's Warrant) shall have the right, exercisable by written
notice to the Company, to have the Company prepare and file with the U.S.
Securities and Exchange Commission (the "Commission"), on one (1) occasion, a
registration statement on Form XX-0, X-0 or other appropriate form, and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale, for
a period of nine (9) months, of the Representative's Securities by such Holders
and any other Holders of the Representative's Warrant and/or the
Representative's Securities who notify the Company within fifteen (15) business
days after receipt of the notice described in Section 7(b)(2). The Holders of
the Representative's Warrant may demand registration prior to exercising the
Representative's Warrant, and may pay such exercise price from the proceeds of
such public offering
(2) The Company covenants and agrees to give written notice of any
registration request under this Section 7(b) by any Holders to all other
registered Holders of the Representative's Warrant and the Representative's
Securities within ten (10) calendar days from the date of the receipt of any
such registration request.
(3) For purposes of this Agreement, the term "Majority" in reference to the
Holders of the Representative's Warrant or Representative's Securities, shall
mean in excess of fifty percent (50%) of the then outstanding Representative's
Warrant or Representative's Securities that (i) are not held by the Company, an
affiliate, officer, creditor, employee or agent thereof or any of their
respective affiliates, members of their family, persons acting as nominees or in
conjunction therewith, or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
(c) Piggyback Registration. (1) If, at any time within the period
commencing on the first anniversary and expiring on the sixth anniversary of the
Effective Date, the Company should file a registration statement with the
Commission under the Act (other than in connection with a merger or other
business combination transaction or pursuant to Form S-8), it will give written
notice at least twenty (20) calendar days prior to the filing of each such
registration statement to the Representative and to all other Holders of the
Representative's Warrant and/or the Representative's Securities of its intention
to do so. If an Representative or other Holders of the Representative's Warrant
and/or the Representative's Securities notify the Company within fifteen (15)
calendar days after receipt of any such notice of its or their desire to include
any Representative's Securities in such proposed registration statement, the
Company shall afford the Representative and such Holders of the Representative's
Warrant and/or Representative's Securities the opportunity to have any such
Representative's Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7(c)(1) and the provisions of
Section 7(d), the Company shall have the right at any time after it shall have
given written notice pursuant to this Section 7(c)(1) (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
(2) If the managing underwriter of an offering to which the above piggyback
rights apply, in good faith and for valid business reasons, objects to such
rights, such objection shall preclude such inclusion.
(d) Covenants of the Company With Respect to Registration. In connection
with any registrations under Sections 7(b) and 7(c) hereof, the Company
covenants and agrees as follows:
(1) The Company shall use its best efforts to file a registration statement
within thirty (30) calendar days of receipt of any demand therefor pursuant to
Section 7(b); provided, however, that the Company shall not be required to
produce audited or unaudited financial statements for any period prior to the
date such financial statements are required to be filed in a report on Form 10-K
or Form 10-Q, as the case may be. The Company shall use its best efforts to have
any registration statement declared effective at the earliest possible time, and
shall furnish each Holder desiring to sell Representative's Securities such
number of prospectuses as shall reasonably be requested.
(2) The Company shall pay all costs (excluding fees and expenses of
Holders' counsel and any underwriting discounts or selling fees, expenses or
commissions), fees and expenses in connection with any registration statement
filed pursuant to Sections 7(b) and 7(c) hereof including, without limitation,
the Company's legal and accounting fees, printing expenses, blue sky fees and
expenses.
(3) The Company will use its best efforts to qualify or register the
Representative's Securities included in a registration statement for offering
and sale under the securities or blue sky laws of such states as reasonably are
requested by the Holders, provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(4) The Company shall indemnify the Holders of the Representative's
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement, but only to the same
extent and with the same effect as the provisions pursuant to which the Company
has agreed to indemnify the Representative contained in Section 8 of the
Underwriting Agreement.
(5) The Holders of the Representative's Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 8 of the
Underwriting Agreement pursuant to which the Representative has agreed to
indemnify the Company.
(6) Nothing contained in this Agreement shall be construed as requiring the
Holders to exercise their Representative's Warrant prior to the initial filing
of any registration statement or the effectiveness thereof, provided that such
Holders have made arrangements reasonably satisfactory to the Company to pay the
exercise price from the proceeds of such offering.
(7) The Company shall furnish to each Representative for the offering, if
any, such documents as such Representative may reasonably require.
(8) The Company shall as soon as practicable after the effective date of
the registration statement, and in any event within 15 months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying with
Section 11(a) of the Act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(9) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence described below and any managing
Representative copies of all correspondence between the Commission and the
Company, its counsel or auditors with respect to the registration statement and
permit each Holder and Representative to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(10) The Company shall enter into an underwriting agreement with the
managing underwriter selected for such underwriting by Holders holding a
Majority of the Representative's Securities requested to be included in such
underwriting, provided, however that such managing underwriter shall be
reasonably acceptable to the Company, except that in connection with an offering
for which the Holders have piggyback rights, the Company shall have the sole
right to select the managing underwriter or underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the Company, a Majority
of such Holders (in respect of a registration under Section 7(b) only) and such
managing underwriter, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Representative's Securities.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
8. Adjustments to Purchase Price and Number of Securities.
(a) Computation of Adjusted Purchase Price. Except as hereinafter provided,
in case the Company shall at any time after the date hereof issue or sell any
shares of Common Stock (other than the issuances referred to in Section 8(g)
hereof), including shares held in the Company's treasury, for a consideration
per share less than the "Market Price" (as defined in Section 8(a)(6) hereof)
per share of Common Stock on the date immediately prior to the issuance or sale
of such shares, or without consideration, then forthwith upon any such issuance
or sale, the Purchase Price of the Common Stock shall (until another such
issuance or sale) be reduced to the price (calculated to the nearest full cent)
determined by dividing (1) the product of (a) the Purchase Price in effect
immediately before such issuance or sale and (b) the sum of (i) the total number
of shares of Common Stock outstanding immediately prior to such issuance or
sale, and (ii) the number of shares determined by dividing (A) the aggregate
consideration, if any, received by the Company upon such sale or issuance, by
(B) the Market Price, and by (2) the total number of shares of Common Stock
outstanding immediately after such issuance or sale provided, however, that in
no event shall the Purchase Price be adjusted pursuant to this computation to an
amount in excess of the Purchase Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 8(c) hereof.
For the purposes of this Section 8, the term "Purchase Price" shall mean
the Purchase Price of the Common Stock forming a part of the Representative's
Securities set forth in Section 6 hereof, as adjusted from time to time pursuant
to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with this
Section 8(a), the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if such securities shall
be sold to Representatives or dealers for public offering without a subscription
offering, the initial public offering price) before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by Representatives or dealers or others performing similar services, or
any expenses incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as a dividend or other
distribution on any stock of the Company, and otherwise than on the exercise of
options, rights or warrants or the conversion or exchange of convertible or
exchangeable securities) of shares of Common Stock (or of other securities
deemed hereunder to involve the issuance or sale of shares of Common Stock) for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(3) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(4) The reclassification of securities of the Company other than shares of
Common Stock into securities including shares of Common Stock shall be deemed to
involve the issuance of such shares of Common Stock for a consideration other
than cash immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in Section 8(a)(2).
(5) The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares of Common Stock issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights or warrants and upon the conversion or exchange of convertible
or exchangeable securities.
(6) As used herein in the phrase "Market Price" at any date shall be deemed
to be the last reported sale price, or, in the case no such reported sale takes
place on such day, the average of the last reported sales prices for the last
three (3) trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, the average closing bid price as furnished by the NASD
through the NASD Automated Quotation System ("NASDAQ") or similar organization
if NASDAQ is no longer reporting such information, or if the Common Stock is not
quoted on NASDAQ, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
(b) Options, Rights, Warrant and Convertible and Exchangeable Securities.
Except in the case of the Company issuing rights to subscribe for shares of
Common Stock distributed to all the stockholders of the Company and Holders of
Representative's Warrant pursuant to Section 8(i) hereof, if the Company shall
at any time after the date hereof issue options, rights or warrants to purchase
shares of Common Stock, or issue any securities convertible into or exchangeable
for shares of Common Stock (other than the issuances referred to in Section 8(g)
hereof), (i) for a consideration per share less than the Market Price (including
the issuance thereof without consideration such as by way of dividend or other
distribution), or (ii) without consideration, the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares of Common Stock issuable or that
may become issuable under such options, rights or warrants (assuming exercise in
full even if not then currently exercisable or currently exercisable in full)
shall be deemed to be issued and outstanding at the time such options, rights or
warrants were issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as consideration
received on the issue or sale of shares in accordance with the terms of the
Representative's Warrant), if any, received by the Company for such options,
rights or warrants; provided, however, that upon the expiration or other
termination of such options, rights or warrants, if any thereof shall not have
been exercised, the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this Section 8(b)(1) (and for the purposes of Section
8(a)(5) hereof) shall be reduced by such number of shares as to which options,
warrants and/or rights shall have expired or terminated unexercised, and such
number of shares shall no longer be deemed to be issued and outstanding, and the
Purchase Price then in effect shall forthwith be readjusted and thereafter be
the price which it would have been had adjustment been made on the basis of the
issuance only of shares actually issued or issuable upon the exercise of those
options, rights or warrants as to which the exercise rights shall not be expired
or terminated unexercised.
(2) The aggregate maximum number of shares of Common Stock issuable upon
conversion or exchange of any convertible or exchangeable securities (assuming
conversion or exchange in full even if not then currently convertible or
exchangeable in full) shall be deemed to be issued and outstanding at the time
of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of the
Representative's Warrant) received by the Company for such securities, plus the
minimum consideration, if any, receivable by the Company upon the conversion or
exchange thereof; provided, however, that upon the expiration or other
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason or redemption or otherwise), the number of shares
deemed to be issued and outstanding pursuant to this Sectio 8(b)(2) (and for the
purpose of Section 8(a)(5) hereof) shall be reduced by such number of shares as
to which the conversion or exchange rights shall have expired or terminated
unexercised, and such number of shares shall no longer be deemed to be issued
and outstanding and the Purchase Price then in effect shall forthwith be
readjusted and thereafter be the price which it would have been had adjustment
been made on the basis of the issuance only of the shares actually issued or
issuable upon the conversion or exchange of those convertible or exchangeable
securities as to which the conversion or exchange rights shall not have expired
or terminated unexercised.
(3) If any change shall occur in the price per share provided for in any of
the options, rights or warrants referred to in Section 8(b)(1), or in the price
per share at which the securities referred to in Section 8(b)(2) are convertible
or exchangeable, and if a change in the Purchase Price has not occurred by
reason of the event giving rise to the change in the price per share of such
other options, rights, warrants, or convertible or exchangeable securities, such
options, rights or warrants or conversion or exchange rights, as the case may
be, to the extent not theretofore exercised, the shall be deemed to have expired
or terminated on the date when such price change became effective in respect of
shares not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at the new
price in respect of the number of shares issuable upon the exercise of such
options, rights or warrants or the conversion or exchange of such convertible or
exchangeable securities.
(c) Subdivision and Combination. In case the Company shall at any time
issue any shares of Common Stock in connection with a stock dividend in shares
of Common Stock or subdivide or combine the outstanding shares of Common Stock,
the Purchase Price shall forthwith be proportionately decreased in the case of a
stock dividend or a subdivision or increased in the case of combination.
(d) Adjustment in Number of Securities. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Section 8, the number of
Representative's Securities issuable upon the exercise of the Representative's
Warrant shall be adjusted to the nearest whole share by multiplying a number
equal to the Purchase Price in effect immediately prior to such adjustment by
the number of Representative's Securities issuable upon exercise of the
Representative's Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Purchase Price.
(e) Definition of Common Stock. For the purpose of this Agreement, the term
"Common Stock" shall mean the class of stock designated as Common Stock in the
Certificate of Incorporation, of the Company as it may be amended as of the date
hereof.
(f) Reclassification, Merger or Consolidation. The Company will not merge,
reorganize or take any other action which would terminate the Representative's
Warrant without first making adequate provision for the Representative's
Warrant. In case of any reclassification or change of the outstanding shares of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value to no par value, or from nor par value to par value, or as a result of a
subdivision or combination), or in case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification or
change of the outstanding Common Stock except a change as a result of a
subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation or
other entity of the property of the Company as an entirety or substantially as
an entirety, the Holders of each Representative's Warrant then outstanding or to
be outstanding shall have the right thereafter (until the expiration of such
Representative's Warrant) to purchase, upon exercise of such Representative's
Warrant, the kind and number of shares of stock and other securities and
property receivable upon such reclassification, change, consolidation, merger,
sale or conveyance as if the Holders were the owner of the shares of Common
Stock underlying the Representative's Warrant immediately prior to any such
events at a price equal to the product of (x) the number of shares issuable upon
exercise of the Representative's Warrant and (y) the Purchase Price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance, as if such Holders had exercised the
Representative's Warrant. In the event of a consolidation, merger, sale or
conveyance of property, the corporation formed by such consolidation or merger,
or acquiring such property, shall execute and deliver to the Holders a
supplemental Representative's warrant agreement to such effect. Such
supplemental Representative's warrant agreement shall provide for adjustments
which shall be identical to the adjustment provided for in this Section 8. The
provisions of this Section 8(f) shall similarly apply to successive
consolidations or mergers.
(g) No Adjustment of Purchase Price in Certain Cases. No adjustment of the
Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the Representative's Warrant or the
securities underlying the Representative's Warrant, (ii) the securities sold
pursuant to the Initial Public Offering, including the securities underlying the
Redeemable Warrant sold as part of the Initial Public Offering (including those
sold upon exercise of the Representative's over-allotment option), or (iii) the
shares issuable pursuant to the options, warrants, rights, stock purchase
agreements or convertible or exchangeable securities outstanding or in effect on
the date hereof as described in the prospectus relating to the Initial Public
Offering.
(2) If the amount of said adjustments shall aggregate less than two ($.02)
cents for one (1) share of Common Stock; provided, however, that 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 adjustment so carried forward, shall
aggregate at least two ($.02) cents for one (1) share of Common Stock. In
addition, Registered Holders shall not be entitled to cash dividends paid by the
Company prior to the exercise of any Warrant or Warrants held by them.
9. Exchange and Replacement of Warrant Certificates. Each Representative's
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holders at the principal executive office of the Company, for
a new Representative's Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Representative's
Securities in such denominations as shall be designated by the Holders thereof
at the time of such surrender.
10. Loss, Theft etc. of Certificates Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Representative's Warrant Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of the Representative's Warrant
Certificates, if mutilated, the Company will make and deliver a new
Representative's Warrant Certificate of like tenor, in lieu thereof.
11. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock and/or
Redeemable Warrant upon the exercise of the Representative's Warrant, nor shall
it be required to issue scrip or pay cash in lieu of fractional interests;
provided, however, that if a Holder exercises all Representative's Warrant held
of record by such Holder the fractional interests shall be eliminated by
rounding any fraction to the nearest whole number of shares of Common Stock or
other securities, properties or rights. Notwithstanding the foregoing, in no
event shall the Company be required to issue scrip, cash on fractional shares of
Common Stock upon the exercise of an odd number of Redeemable Warrant, it being
the understanding that Redeemable Warrant may only be exercised in pairs.
12. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Representative's Warrant,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof and the exercise of the
Redeemable Warrant. The Company covenants and agrees that, upon exercise of
Representative's Warrant and payment of the Purchase Price therefor, all the
shares of Common Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. As long as the Representative's Warrant
shall be outstanding, the Company shall use its best efforts to cause the Common
Stock to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock issued to the public in connection herewith
may then be listed or quoted.
13. Notices to Representative's Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Representative's Warrant and their exercise, any
of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all
of its property, assets and business as an entirety shall be proposed; then, in
any one or more of said events, the Company shall give written notice of such
event at least fifteen (15) calendar 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 such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
14. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or five days after being mailed by registered or certified mail,
return receipt requested:
If to the registered Holders of the Representative's Warrant, to the
address of such Holders as shown on the books of the Company; or
(b) If to the Company to 000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 or
to such other address as the Company may designate by notice to the Holders,
with a courtesy copy to Xxxx Xxxxxx, Esq., Ruskin, Moscow, Xxxxx & Faltishek
P.C. 000 Xxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxx
15. Supplements and Amendments. The Company and the Representative may from
time to time supplement or amend this Agreement without the approval of any
Holders of Representative's Warrant Certificates (other than the Representative)
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provision in regard to matters or questions arising hereunder
which the Company and the Representative may deem necessary or desirable and
which the Company and the Representative deem shall not adversely affect the
interests of the Holders of Representative's Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Representative, the
Holders and their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of business on
March 31, 2003. Notwithstanding the foregoing, the indemnification provisions of
Section 7 shall survive such termination until the close of business on the
expiration of any applicable statue of limitations.
18. Governing Law; Submission to Jurisdiction. This Agreement and each
Representative's Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said state without giving effect to
the rules of said state governing the conflicts of laws
19. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement, to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and thereof. This Agreement may not be modified or amended
except by a writing duly signed by the Company and the Holders of a Majority in
Interest of the Representative's Securities (for this purpose, treating all then
outstanding Representative's Warrant as if they had been exercised).
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holders of the Representative's Warrant
Certificates or Representative's Securities any legal or equitable right, remedy
or claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Representative and any other Holders of
the
Representative's Warrant Certificates or Representative's Securities.
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
24. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Company, the Representative and their respective successors and
assigns and the Holders from time to time of the Representative's Warrant
Certificates or any of them.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
XXXXXX ELECTRONICS, INC.
By:/s/Xxxxxxx Xxxxx
-----------------------------
Xxxxxxx Xxxxx, Chairman
THE THORNWATER COMPANY, L.P., for
itself and as Representative of the
Several Underwriters listed
Schedule A
By:/s/Xxxxxx X. X'Xxxxxx
-----------------------------
Name: Xxxxxx X. X'Xxxxxx
Title: Chief Executive Officer
Schedule A
to
Representative's Warrant Agreement
Between
Xxxxxx Electronics, Inc.
and
The Thornwater Company, L.P.
Representative
The Thornwater Company, L.P.
Underwriters:
X.X. Xxxxxx & Co., Inc.
X.X. Xxxxxxx & Co., Inc.
Xxxx Xxxx & XxXxxx Clearing Corp.
2
XXXXXX ELECTRONICS, INC.
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED FOR SALE OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING March 31, 1999 THROUGH
5:00 P.M., NEW YORK TIME ON Xxxxx 00, 0000
Xxxxxxx covering 32,484 shares of Common Stock and/or 49,538 Redeemable
Warrant
No. UW-1
This Warrant Certificate certifies that The Thornwater Company L.P. or
registered assigns, is the registered holder of Warrant to purchase initially,
at any time from March 31, 1999, until 5:00 p.m., New York time on March 30,
2003 (the "Expiration Date"), up to 32,484 shares of Common Stock, $.01 par
value (the "Common Stock") of Xxxxxx Electronics, Inc. ("Company") and/or 49,538
Redeemable Common Stock Purchase Warrants ("Redeemable Warrant") exercisable to
purchase one share of Common Stock at a purchase price of $8.00 per share and
$.16 per Redeemable Warrant (the "Purchase Price"), upon the surrender of this
Warrant Certificate and payment of the applicable Purchase Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
Representative's Warrant Agreement, dated as of April 6, 1998, by and between
the Company and The Thornwater Company, L.P. (the "Warrant Agreement"). Payment
of the Purchase Price shall be made by certified or cashier's check or money
order payable to the order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrant evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrant evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrant issued pursuant to the Warrant Agreement between the
Company and the Representative, which Warrant Agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Purchase Price and the type and/or number of the Company's securities
issuable upon the exercise of this Warrant, may, subject to certain conditions,
be adjusted. In such event, the Company will, at the request of the holder,
issue a new Warrant Certificate evidencing the adjustment in the Purchase Price
and the number and/or type of securities issuable upon the exercise of the
Warrant; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrant shall be issued to the transferee(s) in exchange as provided herein,
without any charge except for any tax or other governmental charge imposed in
connection with such transfer.
Upon the exercise of less than all of the Warrant evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrant.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate this 6th
day of April, 1998.
XXXXXX ELECTRONICS, INC.
By:/s/Xxxxxxx Xxxxx
-------------------------------
Xxxxxxx Xxxxx, Chairman
ATTEST:
By: /s/Xxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Secretary
3
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________________
hereby sells, assigns and transfers unto _____________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_____________________ Attorney, to transfer the within Warrant Certificate on
the books of Xxxxxx Electronics, Inc., with full power of substitution.
Dated:
Signature_____________________
(Signature must conform in all respects to the name of holder as specified
on the face of the Warrant Certificate.)
[Signature guarantee] ________________________________
(Insert Social Security or Other
Identifying Number of Holders)
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock and/or ______Redeemable Warrant and herewith tenders in payment for such
securities a certified or cashier's check or money order payable to the order of
Xxxxxx Electronics, Inc. in the amount of $______, all in accordance with the
terms hereof. The undersigned requests that certificates for such securities be
registered in the name of ___________________________ whose address is
_____________________ and that such certificates be delivered to
_____________________________________ whose address is
____________________________________________________________.
Dated:
Signature______________________
(Signature must conform in all respects to the name of holder as specified
on the face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holders)
[Signature guarantee]
