THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED FOR RESALE UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES FILED UNDER THE ACT, OR AN EXEMPTION FROM REGISTRATION, AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH REGISTRATION IS
NOT REQUIRED AND THAT SUCH LAWS ARE COMPLIED WITH. THE REGISTERED HOLDER OF THIS
WARRANT, BY ITS/HIS/HER ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL,
TRANSFER OR ASSIGN THIS WARRANT PRIOR TO THAT DATE.
VOID AFTER 12:00 P.M., SPOKANE, WASHINGTON TIME, ON , 2006
-------------------
Warrant to subscribe for and purchase shares of Common Stock, $0.001
par value, of ----------
INTERNATIONAL TEST SYSTEMS, INC., INC.
This is to Certify That,
FOR VALUE RECEIVED, PUBLIC SECURITIES, INC., a Washington Corporation, (the
"Holder") is entitled to purchase, subject to the provisions of this Warrant,
from INTERNATIONAL TEST SYSTEMS, INC., a Delaware Corporation ("Company"), at
any time on or after , 2002, and not later than 12:00 p.m., Spokane, Washington
Time, on , 2006, a total of XXXXX shares of Common Stock of the Company
("Securities") exercisable at a purchase price of $0.56 for the Securities which
is 140% of the public offering price. The number of Securities to be received
upon the exercise of this Warrant and the price to be paid for the Securities
may be adjusted from time to time as hereinafter set forth. The purchase price
of a Security in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Exercise Price." This Warrant is or
may be one of a series of Warrants identical in form issued by the Company to
purchase an aggregate of Shares of Common Stock. The Securities, as adjusted
from time to time, underlying the Warrants are hereinafter sometimes referred to
as "Warrant Securities". The Securities issuable upon the exercise hereof are in
all respects identical to the securities being purchased by the Underwriter for
resale to the public pursuant to the terms and conditions of the Underwriting
Agreement entered into on this date between the Company and Holder.
(1.) Exercise of Warrant. Subject to the provisions of Section (7) hereof, this
Warrant may be exercised in whole or in part at anytime or from time to
time on or after , 2003, but not later than 12:00 p.m., Spokane, Washington
Time on , 2007, or if -------------------------------------------
---------------------------- , 2007 is a day on which banking institutions
are authorized by law to close, then on the next succeeding day which shall
not be such a day, by presentation and surrender hereof to the Company or
at the office of its stock transfer agent, if any, with the Purchase Form
annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of shares of Common Stock or Redeemable Warrants, as
the case may be as specified in such Form, together with all federal and
state taxes applicable upon such exercise. The Company agrees to provide
notice to the Holder that any tender offer is being made for the Securities
no later than the first business day after the day the Company becomes
aware that any tender offer is being made for the Securities. If this
Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the right of the Holder to purchase the balance of the shares
purchasable hereunder along with any additional Redeemable Warrants not
exercised. Upon receipt by the Company of this Warrant at the office of the
Company or at the office of the Company's stock transfer agent, in proper
form for exercise and accompanied by the total Exercise Price, the Holder
shall be deemed to be the holder of record of the Securities issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Securities
shall not then be actually delivered to the Holder.
(2.) Reservation of Securities. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of Securities as shall be required for
issuance or delivery upon exercise of this Warrant. The Company covenants
and agrees that, upon exercise of the Warrants and payment of the Exercise
Price therefor, all Securities 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
Warrants shall be outstanding, the Company shall use its best efforts to
cause all Securities issuable upon the exercise of the Warrants 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 and/or quoted on NASDAQ.
(3.) Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. With respect to
any fraction of a share called for upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied
by the current market value of such fractional share, determined as
follows:
(a) If the Securities are listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange, the current
value shall be the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise
of this Warrant or if no such sale is made on such day, the average of
the closing bid and asked prices for such day on such exchange; or,
(b) If the Securities are not so listed or admitted to unlisted trading
privileges, the current value shall be the mean of the last reported
bid and asked prices reported by the National Association of
Securities Dealers Automated Quotation System (or, if not so quoted on
NASDAQ or quoted by the National Quotation Bureau, Inc.) on the last
business day prior to the date of the exercise of this Warrant; or (c)
If the Securities are not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current
value shall be an amount, not less than book value, determined in such
reasonable manner as may be prescribed by the Board of Directors of
the Company, such determination to be final and binding on the Holder.
(4.) Exchange, Assignment or Loss of Warrant. This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and
surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
Holder thereof to purchase (under the same terms and conditions as provided
by this Warrant) in the aggregate the same number of Securities purchasable
hereunder. This Warrant may not be sold, transferred, assigned, or
hypothecated until after one year from the effective date of the
registration statement except that it may be (i) assigned in whole or in
part to the officers of the "Underwriter(s)", and (ii) transferred to any
successor to the business of the "Underwriter(s)." Any such assignment
shall be made by surrender of this Warrant to the Company, or at the office
of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and with funds sufficient to pay any transfer tax;
whereupon the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in-such instrument of assignment,
and this Warrant shall promptly be canceled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
hereof at the office of the Company or at the office of its stock transfer
agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which
this Warrant may be divided or exchanged. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and
deliver a new Warrant of like tenor and date. Any such new Warrant executed
and delivered shall constitute an additional contractual obligation on the
part of the Company, whether or not the Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
(5.) Rights of the Holder. The Holder shall not, by virtue hereof, be entitled
to any rights of a stockholder in the Company, either at law or equity, and
the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth
herein.
(6.) Notices to Warrant Holders. So long as this Warrant shall be outstanding
and unexercised (i) if the Company shall pay any dividend exclusive of a
cash dividend, or make any distribution upon the Common Stock, or (ii) if
the Company shall offer to the holders of Common Stock for subscription or
purchase by them any shares of stock of any class or any other rights, or
(iii) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or
winding up of the Company shall be effected, then, in any such case, the
Company shall cause to be delivered to the Holder, at least ten (10) days
prior to the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action and stating
the date on which (x) a record is to be taken for the purpose of such
dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any, is to be
fixed, as of which the holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for equivalent securities or other
property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
(7.) Adjustment of Exercise Price and Number of Shares of Common Stock
Deliverable.
(A)
(i) Except as hereinafter provided, in the event the Company shall, at any
time or from time to time after the date hereof, issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or
subdivide or combine the outstanding shares of Common Stock into a
greater or lesser number of shares (any such issuance, subdivision or
combination being herein call a "Change of Shares"), then, and
thereafter upon each further Change of Shares, the Exercise Price of
the Common Stock issuable upon the exercise of the Warrant and the
Redeemable Warrant in effect immediately prior to such Change of
Shares shall be changed to a price (including any applicable fraction
of a cent to the nearest cent) determined by dividing (i) the sum of
(a) the total number of shares of Common Stock outstanding immediately
prior to such Change of Shares, multiplied by the Exercise Price in
effect immediately prior to such Change of Shares, and (b) the
consideration, if any, received by the Company upon such issuance,
subdivision or combination by (ii) the total number of shares of
Common Stock outstanding immediately after such Change of Shares;
provided, however, that in no event shall the Exercise Price be
adjusted pursuant to this computation to an amount in excess of the
Exercise Price in effect immediately prior to such computation, except
in the case of a combination of outstanding shares of Common Stock.
For the purposes of any adjustment to be made in accordance with this
Section (7) the following provisions shall be applicable:
(I) Shares of Common Stock issuable by way of dividend or other
distribution on any capital 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 shareholders
entitled to receive such dividend or other distribution and shall be
deemed to have been issued without consideration.
(II) The number of shares of Common Stock at any one time outstanding shall
not be deemed to include the number of shares 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.
(ii) Upon each adjustment of the Exercise Price pursuant to this Section
(7), the number of shares of Common Stock and Redeemable Warrants
purchasable upon the exercise of each Warrant shall be the number
derived by multiplying the number of shares of Common Stock and
Redeemable Warrants purchasable immediately prior to such adjustment
by the Exercise Price in effect prior to such adjustment and dividing
the product so obtained by the applicable adjusted Exercise Price.
(B) In case of any reclassification or change of outstanding Securities
issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value or as
a result of a subdivision or combination), or in case of any consolidation
or merger of the Company with or into another corporation other than a
merger with a "Subsidiary" (which shall mean any corporation or
corporations, as the case may be, of which capital stock having ordinary
power to elect a majority of the Board of Directors of such corporation
(regardless of whether or not at the time capital stock of any other class
or classes of such corporation shall have or may have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned by the Company or by one or more Subsidiaries) or by the
Company and one or more Subsidiaries in which merger the Company is the
continuing corporation and which does not result in any reclassification or
change of the then outstanding shares of Common Stock or other capital
stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value
or as a result of subdivision or combination) or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, then, as a condition of such
reclassification, change, consolidation, merger, sale or conveyance, the
Company, or such successor or purchasing corporation, as the case may be,
shall make lawful and adequate provision whereby the Holder of each Warrant
then outstanding shall have the right thereafter to receive on exercise of
such Warrant the kind and amount of securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of securities issuable upon exercise of such Warrant
immediately prior to such reclassification, change, consolidation, merger,
sale or conveyance and shall forthwith file at the principal office of the
Company a statement signed on its behalf by its President or a Vice
President and by its Treasurer or an Assistant Treasurer or its Secretary
or an Assistant Secretary evidencing such provision. Such provisions shall
include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in Section (7)(A). The
above provisions of this Section (7)(B) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(C) Irrespective of any adjustments or changes in the Exercise Price or the
number of Securities purchasable upon exercise of the Warrants, the Warrant
Certificates theretofore and thereafter issued shall (unless the Company
shall exercise its option to issue new Warrant Certificates pursuant
hereto) continue to express the Exercise Price per share and the number of
shares purchasable thereunder as the Exercise Price per share and the
number of shares purchasable thereunder as expressed in the Warrant
Certificates when the same were originally issued.
(D) After each adjustment of the Exercise Price pursuant to this Section (7),
the Company will promptly prepare a certificate signed on its behalf by the
President or Vice President, and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary, of the Company setting forth:
(i) the Exercise Price as so adjusted, (ii) the number of Securities
purchasable upon exercise of each Warrant, after such adjustment, and (iii)
a brief statement of the facts accounting for such adjustment. The Company
will promptly file such certificate in the Company's minute books and cause
a brief summary thereof to be sent by ordinary first class mail to each
Holder at his last address as it shall appear on the registry books of the
Company. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder
to whom the Company failed to mail such notice, or except as to the holder
whose notice was defective. The affidavit of an officer or the Secretary or
an Assistant Secretary of the Company that such notice has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
(i) Intent of Provisions. Notwithstanding any provision to the contrary,
if any event occurs as to which, in the opinion of the Board of
Directors of the Company, the other provisions of this Section 7 are
not strictly applicable or if strictly applicable, would not fairly
protect the rights of the Holders' Warrant in accordance with the
essential intent and principles of such provisions, then such Board of
Directors shall appoint a firm of independent certified public
accountants (which may be the regular auditors of the Company) which
shall give their opinion upon the adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to
preserve, without dilution, the rights of the Holders. Upon receipt of
such opinion by the Board of Directors of the Company, the Company
shall forthwith make the adjustments described therein
(E) No adjustment of the Exercise Price shall be made as a result of or in
connection with the issuance or sale of Securities if the amount of said
adjustment shall be less than $0.10, 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 that shall amount, together with any adjustment so
carried forward, to at least $.10. In addition, Holders shall not be
entitled to cash dividends paid by the Company prior to the exercise of any
Warrant or Warrants held by them.
(F) In the event that the Company shall at any time prior to the exercise of
all Warrants declare a dividend consisting solely of shares of Common Stock
or otherwise distribute to its stockholders any assets, property, rights,
or evidences of indebtedness, the Holders of the unexercised Warrants shall
thereafter be entitled, in addition to the Securities or other securities
and property receivable upon the exercise thereof, to receive, upon the
exercise of such Warrants, the same property, assets, rights, or evidences
of indebtedness, that they would have been entitled to receive at the time
of such dividend or distribution as if the Warrants had been exercised
immediately prior to such dividend or distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to
ensure the timely performance of the provisions of this Section (7).
(G)
(G.1)Right to Exercise on a Net Issuance Basis. In lieu of exercising this
Warrant for cash, the Holder shall have the right to exercise this
Warrant or any portion thereof (the "Net Issuance Right") into Common
Stock as provided in this Section G.1 at any time or from time to time
during the period specified on page one of this Warrant Agreement,
hereof by the surrender of this Warrant to the Company with a duly
executed and completed Exercise Form marked to reflect net issuance
exercise. Upon exercise of the Net Issuance Right with respect to a
particular number of shares subject to this Warrant and noted on the
Exercise Form (the "Net Issuance Warrant Shares"), the Company shall
deliver to the Holder (without payment by the Holder of any Exercise
Price or any cash or other consideration) (X) that number of shares of
fully paid and nonassessable shares of Common Stock equal to the
quotient obtained by dividing the value of this Warrant (or the
specified portion hereof) on the Net Issuance Exercise Date, which
value shall be determined by subtracting (A) the aggregate Exercise
price of the Net Issuance Warrant Shares immediately prior to the
exercise of the Net Issuance Right from (B) the aggregate fair market
value of the Net Issuance Warrant Shares issuable upon exercise of
this Warrant (or the specified portion hereof) on the Net Issuance
Exercise Date (as herein defined) by (Y) the fair market value one
share of Common Stock on the Net Issuance Exercise Date (as herein
defined). Expressed as a formula as shown below, such net issuance
exercise shall be computed as follows: X = B-A -- Y Where: X = the
number of shares of Common Stock that may be issued to the Holder Y =
the fair market value ("FMV") of one share of Common Stock as of the
Net Issuance Exercise Date A = the aggregate Exercise Price (i.e. the
product determined by multiplying the Net Issuance Warrant Shares by
the Exercise Price) B = the aggregate FMV (i.e. the product determined
by multiplying the FMV by the Net Issuance Warrant Shares).
(G.1.2) Determination of Fair Market Value. For purposes of this Section
G.1.2, "fair market value" of a share of Common Stock as of the Net
Issuance Exercise Date shall mean:
(i) if the Net Issuance Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's
registration Statement relating to such Public Offering has been
declared effective by the SEC, then the initial "Price to Public"
specified in the final Prospectus with respect to such offering.
(ii) if the Net Issuance Right is not exercised in connection with and
contingent upon a Public Offering, then as follows:
(a) If traded on a securities exchange, the fair market value of
the Common Stock shall be deemed to be the last reported
sale price or if no reported sale takes place, the average
of the last reported sale prices for the last three (3)
trading days prior to the Net Issuance Date;
(b) If traded on the Nasdaq National Market or the Nasdaq Small
Cap Market, the fair market value of the Common Stock shall
be deemed to be the average of the last reported sale price
of the common Stock on such Market over the last three (3)
trading days prior to the Net Issuance Exercise Date;
(c) If traded over-the-counter other than on the Nasdaq National
market or the Nasdaq SmallCap Market, the fair market value
of the Common Stock shall be deemed to be the average of the
midpoint between the closing bid and ask prices of the
Common Stock over the 3-day trading period prior to the Net
Issuance Exercise Date; and,
(d) If there is no public market for the Common Stock, then the
fair market value shall be determined by mutual agreement of
the Warrantholder and the Company, and if the Warrantholder
and the company are unable to so agree, at the Company's
sole expense, by an investment banker of national reputation
selected by the Company and reasonably acceptable to the
Warrantholder.
(8.) Piggyback Registration. If, at any time commencing one year from the
effective date of the registration statement and expiring four (4) years
thereafter, the Company proposes to register any of its securities under
the Securities Act of 1933, as amended (the "Act") (other than in
connection with a merger or pursuant to Form X-0, X-0 or other comparable
registration statement) it will give written notice by registered mail, at
least thirty (30) days prior to the filing of each such registration
statement, to the Holders and to all other Holders of the Warrants and/or
the Warrant Securities of its intention to do so. If the Holder or other
Holders of the Warrants and/or Warrant Securities notify the Company within
twenty (20) days after receipt of any such notice of its or their desire to
include any such securities in such proposed registration statement, the
Company shall afford each of the Underwriter and such Holders of the
Warrants and/or Warrant Securities the opportunity to have any such Warrant
Securities registered under such registration statement. In the event any
underwriter underwriting the sale of securities registered by such
registration statement shall limit the number of securities includable in
such registration by shareholders of the Company, the number of such
securities shall be allocated pro rata among the holders of Warrants and
the holders of other securities entitled to piggyback registration rights.
Notwithstanding the provisions of this Section, the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section (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.
(9.) Demand Registration.
(a) At any time commencing one year from the effective date of the
registration statement and expiring four (4) years thereafter, the
Holders of the Warrants and/or Warrant Securities representing a
"Majority" (as hereinafter defined) of such securities (assuming the
exercise of all of the Warrants) shall have the right (which right is
in addition to the registration rights under Section (i) hereof),
exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the
"Commission"), on one occasion, a registration statement and such
other documents, including a prospectus, as may be necessary in the
opinion of both counsel for the Company and counsel for the
Underwriter and Holders, in order to comply with the provisions of the
Act, so as to permit a public offering and sale of their respective
Warrant Securities for nine (9) consecutive months by such Holders and
any other holders of the Warrants and/or Warrant Securities who notify
the Company within ten (10) days after receiving notice from the
Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section (i) by any Holder or Holders
to all other registered Holders of the Warrants and the Warrant
Securities within ten (10) days from the date of the receipt of any
such registration request.
(c) In addition to the registration rights under this Section (9) at any
time commencing one year after the effective date of the registration
statement and expiring four (4) years thereafter, the Holders of
Representative's Warrants and/or Warrant Securities shall have the
right, exercisable by written request to the Company, to have the
Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for
nine (9) consecutive months by such Holders of its Warrant Securities;
provided, however, that the provisions of Section (9)(b) hereof shall
not apply to any such registration request and registration and all
costs incident thereto shall be at the expense of the Holder or
Holders making such request.
(10.)Covenants of the Company With Respect to Registration. In connection with
any registration under Section (8) or (9) hereof, the Company covenants and
agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor,
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 Warrant Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees
and expenses in connection with all registration statements filed
pursuant to Sections (h), (i) and (j) hereof including, without
limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. If the Company shall fail to
comply with the provisions of Section (10)(a), the Company shall, in
addition to any other equitable or other relief available to the
Holder(s), extend the Exercise Period by such number of days as shall
equal the delay caused by the Company's failure.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or
blue sky laws of such states as are reasonably requested by the
Holder(s), 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.
(d) The Company shall indemnify the Holder(s) of the Warrant 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, as
amended ("Exchange Act"), from and 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 Underwriter contained in
Section 7 of the Underwriting Agreement relating to the offering.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall
severally, and not jointly, 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 (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) 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 with the same effect as the provisions contained in
Section 7 of the Underwriting Agreement pursuant to which the
Underwriter has agreed to indemnify the Company.
(f) The Holder(s) may exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Warrant Securities to be included in any registration
statement filed pursuant to Section (9) hereof, or permit any other
registration statement to be or remain effective during the
effectiveness of a registration statement filed pursuant to Section
(9) hereof, other than a secondary offering of equity securities of
the Company, without the prior written consent of the Holders of the
Warrants and Warrant Securities representing a Majority of such
securities.
(h) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (x) an opinion of counsel to the
Company, dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), and (y) a "cold comfort" letter dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(i) 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.
(j) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below
and to the managing underwriters, copies of all correspondence between
the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff
with respect to the registration statement and permit each Holder and
underwriter 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") or an Exchange. 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 or underwriter shall
reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters, which may be the Underwriter. Such agreement
shall be satisfactory in form and substance to the Company, and such
managing underwriters, and shall contain such representations,
warranties and covenants by the Company and such other terms as are
customarily contained in agreements of that type used by the managing
underwriter; provided however, that no Holder shall be required to
make any representations, warranties or covenants or grant any
indemnity to which it shall object in any such underwriting agreement.
The Holders shall be parties to any underwriting agreement relating to
an underwritten sale of their Warrant Securities and may, at their
option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters
shall also be made to and for the benefit of such Holders. 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.
(l) For purposes of this Agreement, the term "Majority" in reference to
the Holders of Warrants or Warrant Securities, shall mean in excess of
fifty (50%) of the then outstanding Warrants and Warrant 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.
(11.)Buy-Out of Registration Demand. In lieu of carrying out its obligations to
effect a Piggyback Registration or Demand Registration of any registrable
securities pursuant to the Section, the Company may carry out such
obligation by offering to purchase and purchasing such Registrable
Securities requested to be registered in an amount in cash equal to the
difference between (a) 95% of the last sale price of the Common Stock on
the day the request for registration is made and (b) the Exercise Price in
effect on such day; the purchase transaction closing within three (3)
business days; provided however, that the Holder or Holders may decline
such request rather than accept such offer by the Company.
(12.)Conditions of Company's Obligations. The Company's obligation under
Section 10 hereof shall be conditioned as to each such public offering,
upon a timely receipt by the Company in writing of: (a) Information as to
the terms of such public offering furnished by or on behalf of the Holders
making a public distribution of their Warrant Securities.
(13.)Continuing Effect of Agreement. The Company's agreements with respect to
the Warrant Securities in this Warrant will continue in effect regardless
of the exercise or surrender of this Warrant.
(14.)Notices. Any notices or certificates by the Company to the Holder and by
the Holder to the Company shall be deemed delivered if in writing and
delivered personally or sent by certified mail, to the Holder, addressed to
him or sent to 000 Xxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx
00000, or, if the Holder has designated, by notice in writing to the
Company, any other address, to such other address, and, if to the Company,
addressed to Xxxxx Birmingham, 0000 Xxxxxxx Xxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxx 00000. The Company may change its address by written notice to the
Holder.
(15.)Limited Transferability. This Warrant Certificate and the Warrant may not
be sold, transferred, assigned or hypothecated for a one-year period after
the effective date of the Registration Statement except to underwriters of
the Offering referred to in the Underwriting Agreement or to individuals
who are either partners or officers of such an underwriter or by will or by
operation of law and if transfer occurs after one year, the warrant must be
exercised immediately upon transfer or it shall lapse. The Warrant may be
divided or combined, upon request to the Company by the Warrant holder,
into a certificate or certificates evidencing the same aggregate number of
Warrants. The Warrant may not be offered, sold, transferred, pledged or
hypothecated in the absence of any effective registration statement as to
such Warrant filed under the Act, or an exemption from the requirement of
such registration, and compliance with the applicable federal and state
securities laws. The Company may require an opinion of counsel satisfactory
to the Company that such registration is not required and that such laws
are complied with. The Company may treat the registered holder of this
Warrant as he or it appears on the Company's book at any time as the Holder
for all purposes. The Company shall permit the Holder or his duly
authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants.
(16.)Transfer to Comply With the Securities Act of 1933. The Company may cause
the following legend, or one similar thereto, to be set forth on the
Warrants and on each certificate representing Warrant Securities, or any
other security issued or issuable upon exercise of this Warrant not
theretofore distributed to the public or sold to underwriters for
distribution to the public pursuant to Sections (8) or (9) hereof; unless
counsel satisfactory to the Company is of the opinion as to any such
certificate that such legend, or one similar thereto, is unnecessary: "The
warrants represented by this certificate are restricted securities and may
not be offered for sale, sold or otherwise transferred unless an opinion of
counsel satisfactory to the Company is obtained stating that such offer,
sale or transfer is in compliance wrath state and federal securities law.
(17.)Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Washington, without giving effect
to conflict of law principles.
(18.)Amendment/Assignability. This Warrant may not be amended except in a
writing signed by each Holder and the Company. This Warrant Certificate and
the options evidenced hereby may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except by Will, the Laws of Descent
and Distribution, or other testamentary transfer. Each Holder of this
Warrant Certificate, and any shares of capital stock of the Company issued
upon exercise of any such warrant, by taking or holding the same, consents
to and agrees to be bound by the provisions of this Section 7.
Notwithstanding the above the Holder may transfer twelve (12) months from
the date herein, a portion or all of the Holder's Warrants to certain
persons, including but not limited to the Holder's officers, directors,
shareholders, employees or Registered Representatives,
(19.)Severability. If any provisions of this Warrant shall be held to be
invalid or unenforceable, such invalidity or enforceability shall not
affect any other provision of this Warrant.
(20.)Survival of Indemnification Provisions. The indemnification provisions of
this Warrant shall survive until , 2012.
(21) Company to Provide Reports. Etc. While this Warrant Certificate remains
outstanding, the Company shall mail to the persons in whose name this
Warrant Certificate is registered copies of all reports and correspondence
which the Company mails to its stockholders.
(22) Representations and Warranties of Holder. The Holder hereby represents and
warrants to the Company:
(a) The Holder understands that this Warrant Certificate and the Common
Shares to be issued herein, HAS NOT BEEN APPROVED OR DlSAPPROVED BY
TME UNITED STATES SECURITIES AND EXCHANGE COMMISION, THE STATE OF
DELAWARE, OR ANY OTHER STATE SECURITIES AGENCIES.
(b) This Warrant Certificate and the Common Stock to be issued herein may
not be transferred, encumbered, sold, hypothecated, or otherwise
disposed of to any person, without the express prior written consent
of the Company and the prior opinion of counsel for the Company, that
such disposition will not violate Federal and/or State Securities
Acts. Disposition shall include, but is not limited to acts of
selling, assigning, transferring, pledging, encumbering,
hypothecating, giving, and any form of conveying, whether voluntary or
not.
(c) To the extent that any Federal and/or State Securities laws shall
require, the Holder hereby agrees that any shares acquired pursuant to
this Warrant Certificate shall be without preference as to dividends,
assets, or voting rights and shall have no greater or lesser rights
per share than the securities issued for cash or its equivalent.
(d) This Warrant is subject in all respects to the terms and provisions of
an Underwriting Agreement between the Company and Public Securities,
Inc., (the Underwriter therein and the initial Holder hereof),
relating to a public offering of the Common Stock and Warrants of the
Company dated , 2002.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officers and to be sealed with the seal of the Company this day of
May, 2002.
INTERNATIONAL TEST SYSTEMS, INC., INC.
By
------------------------------------
Xxxxx Birmingham, President
Date:
--------------------------------
Attest:
Secretary
PURCHASE FORM
The Undersigned hereby exercises the Warrant Certificate to subscribe for and
purchase shares of Common Stock, $0.001 par value ("Common Shares"), of
INTERNATIONAL TEST SYSTEMS, a Delaware Corporation, evidenced by the within the
Warrant Certificate and herewith makes payment of the Exercise. Kindly issue
certificates for the Common Shares in accordance with the instructions given
below. The certificate for the unexercised balance, if any, of the within
Warrant Certificate will be registered in the name of the undersigned.
Dated:
(Signature)
Instructions for registration of Common Shares
Name (Please print)
Social Security or Other Identifying Number:
Address:
Street
City, State and Zip Code
HOLDER:
PUBLIC SECURITIES, INC.
By:
--------------------------------------------
Title: President
Instructions for registration of certificate representing the unexercised
balance of Warrant (if any)
Name (Please print)
Social Security or Other Identifying Number:
Address:
Street
City, State and Zip Code
FORM OF ASSIGNMENT
(to be executed by the registered holder hereof)
FOR VALUE RECEIVED, does hereby sell, assign and transfer unto the right to
purchase shares of the Common Stock of the Company, $0.001 par value ("Common
Shares"), of INTERNATIONAL TEST SYSTEMS, a Delaware Corporation, evidenced by
the within Warrant, and does hereby irrevocably constitute and appoint attomey,
to transfer such right on the books of the Company with full power of
substitution in the premises.
DATED: , 200
------------------------- ------
(Signature)
(Signature guaranteed)
