Exhibit 4.3
================================================================================
TECHNOLOGY SERVICE GROUP, INC.
AND
BROOKEHILL EQUITIES, INC.
-------------------
REPRESENTATIVE'S
WARRANT AGREEMENT
Dated as of May 10, 1996
================================================================================
REPRESENTATIVE'S WARRANT AGREEMENT, dated as of May 10,1996, by and
between TECHNOLOGY SERVICE GROUP, INC., a Delaware corporation (the "Company"),
and BROOKEHILL EQUITIES, INC. (the "Representative").
W I T N E S S T H:
WHEREAS, the Company proposes to issue to the Representative and/or
its designees (the "Holder(s)") warrants (the "Warrants") to purchase up to an
aggregate 100,000 shares of Common Stock of the Company (the "Common Stock");
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement"), of even date herewith, between the
Representative and the Company, to act as the Representative of the several
underwriters in connection with the Company's proposed initial public offering
of up to 1,000,000 Units at an initial public offering price of $9.00 per Unit
(the "Initial Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative and/or its designees in
consideration for, and as part of the Representative's compensation in
connection with, the Representative acting as the Representative of the
underwriters 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(s) is hereby granted the right to purchase, at
-----
any time from May 10, 1997 until 5:30 p.m., New York time, on May 9, 2001, up to
an aggregate 100,000 shares of Common Stock at an initial exercise price
(subject to adjustment as provided in Section 8 hereof) of $10.80 per Share,
-------
subject to the terms and conditions of this Agreement.
2. Warrant Certificates. The warrant certificates (the "Warrant
--------------------
Certificates") representing the right to purchase Warrants delivered and 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 Warrant.
-------------------
3.1 Method of Exercise. The Warrants initially are exercisable
------------------
at an initial exercise price per share of Common Stock set forth in Section 6
-------
hereof, payable by certified or official bank check in New York Clearing House
funds, subject to adjustment as provided in Section 8 hereof. Upon surrender of
-------
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as defined in Section 6.2
-------
hereof) for the shares of Common Stock purchased at the Company's principal
offices (presently located at 00 Xxxxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
00000) the registered Holder of a Warrant Certificate shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder(s) thereof, in whole or in part (but not
as to fractional shares of the Common Stock underlying the warrants). Warrants
may be exercised to purchase all or a part of the shares of Common Stock
represented by a
-2-
Warrant Certificate. In the case of the purchase of less than all the shares of
Common Stock purchasable under any Warrant Certificate, the Company shall cancel
said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the shares of
Common Stock purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the method
--------------------------------
of payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in full or in part by surrendering
the Warrant Certificate in the manner specified in Section 3.1 as payment of the
aggregate Exercise Price. The number of Warrants to be surrendered in payment
of the aggregate Exercise Price for the Warrants to be exercised shall be
determined by multiplying the number of Warrants to be exercised by the Exercise
Price per share of Common Stock, and then dividing the product thereof by an
amount equal to the Market Price (as defined below) minus the Exercise Price.
Solely for the purposes of this Section 3.2, Market Price shall be calculated
either (i) on the date on which the form of election attached hereto is deemed
to have been sent to the Company pursuant to Section 13 hereof ("Notice Date")
or (ii) as the average of the Market Price for each of the five trading days
immediately preceding the Notice Date, whichever of (i) or (ii) results in a
greater Market Price.
3.3 Definition of Market Price. As used herein, the phrase
--------------------------
"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale 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 by the Nasdaq Small Cap
-3-
Market ("Nasdaq Small Cap"), or, if the Common Stock is not listed or admitted
to trading on any securities exchange or quoted by Nasdaq Small Cap, the closing
bid price as furnished by the National Association of Securities Dealers, Inc.
(the "NASD") through Nasdaq or a similar organization if Nasdaq is no longer
reporting such information, or if the Common Stock is not quoted on Nasdaq or a
similar organization, as determined in good faith by a resolution of the Board
of Directors of the Company, based on the best information available to it.
4. Issuance of Certificates. Upon the exercise of the Warrants and
------------------------
payment of the Exercise Price therefor, the issuance of certificates for shares
of Common Stock or other securities underlying such Warrants, shall be made
forthwith (and in any event such issuance shall be made within five (5) business
days thereafter), without any other charge to the Holder(s) thereof including,
without limitation, any tax which may be payable in respect of the issuance
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(s) 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 requesting such a transfer and the Company shall not be required to issue
or deliver such certificates unless or until the person or persons requesting
such a transfer 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 Warrant Certificates and the certificates representing the shares
of Common Stock, and the other securities for which such Warrant Certificates
are exercisable, shall be executed on behalf of the Company by the manual or
facsimile signature of the then
-4-
Chairman or Vice Chairman of the Board of Directors or the Chief Executive
Officer, President or Vice President of the Company, under its corporate seal,
and attested to by the manual or facsimile signature of the then Secretary or
Assistant Secretary of the Company. Warrant Certificates shall be dated the date
of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5. Restriction on Transfer of Warrants. Each Holder of a Warrant
-----------------------------------
Certificate, by his, her or its acceptance thereof, covenants and agrees that
the Warrants are being acquired as an investment and not with a view to the
distribution thereof and that the Warrants may not be sold, transferred,
assigned, pledged or hypothecated for a period of one (1) year from the date
hereof, except to officers of the Representative.
6. Exercise Price.
--------------
6.1 Initial and Adjusted Exercise Price. Except as otherwise
-----------------------------------
provided in Section 8 hereof, the initial exercise price of each Warrant shall
-------
be $10.80 per share of Common Stock. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Section 8 hereof.
-------
6.2 Exercise Price. The term "Exercise Price" herein shall
--------------
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
-------------------
7.1 Registration Under the Securities Act of 1933. (a) The
---------------------------------------------
Warrants, the shares of Common Stock or other securities issuable upon exercise
of the Warrants have not been registered under the Securities Act of 1933, as
amended (the "Act"). The Warrants,
-5-
and, upon exercise in part or in whole of the Warrants, certificates
representing the shares of Common Stock or other securities underlying the
Warrants, (all of the foregoing hereinafter collectively referred to as the
"Warrant Securities") shall bear a legend substantially similar to the
following:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable,
Rule 144 under the Act (or any similar rule under the Act relating to
the disposition of securities), or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under the Act is
available.
7.2 Piggyback Registration. If, at any time commencing after
----------------------
the effective date of the Registration Statement and expiring on May 9, 2003,
the Company proposes to register any of its securities under the Act (other than
in connection with a merger or pursuant to Form X-0, X-0 or comparable
registration statement) it will give written notice by registered mail, at least
thirty (30) business days prior to the filing of each such registration
statement, to the Representative and to all Holder(s) of the Warrants and/or the
Warrant Securities of its intention to do so. If the Representative or other
Holder(s) of the Warrants and/or the Warrant Securities notify the Company
within twenty (20) business days after receipt of any such notice of its or
their desire to include any of such securities in such proposed registration
statement, the Company shall afford the Representative and such Holder(s) of the
Warrants and/or Warrant Securities the opportunity to have any such Warrants
and/or Warrant Securities registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall
--------
have the right at any time after it shall have given written notice pursuant to
this Section 7.2
-------
-6-
(irrespective of whether a written request for inclusion of any securities shall
have been made) to effect not to file any such proposed registration statement,
or to withdraw the same after the filing but prior to the effective date
thereof.
7.3 Demand Registration.
-------------------
(a) At any time commencing after the effective date of the
Registration Statement and expiring May 9, 2001, the Holder(s) of the Warrants
and/or any Warrant Securities representing a "Majority" (calculated in
accordance with Section 7.4(m) hereof) of such securities shall have the right
-------
(which right is in addition to the registration rights under Section 7.2
-------
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 Representative and Holder(s), in order to comply with the
provisions of the Act, so as to permit a public offering and sale of their
respective Warrants and Warrant Securities for nine (9) consecutive months by
such Holder(s) and any other Holder(s) 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 7.3 (whether such request is made
-------
pursuant to Section 7.3(a) or Section 7.3(c) hereof) by any Holder(s) to all
------- -------
other registered Holder(s) of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
-7-
(c) In addition to the registration rights under Section 7.2 and
-------
Section 7.3(a), at any time commencing after the effective date of the
-------
Registration Statement and expiring May 9, 2001, any Holder(s) of Warrants
and/or Warrant Securities shall have the right, exercisable by written request
to the Company, to have the Company prepare and file with the Commission, on one
occasion, a registration statement so as to permit a public offering and sale
for nine (9) consecutive months by any such Holder(s) of its or their Warrants
and/or Warrant Securities; provided, however, that the provisions of Section
----------------- -------
7.4(b) hereof shall not apply to any such registration request and all costs
incident thereto shall be at the expense of the Holder(s) making such request.
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrants and the
Warrant Securities within the time period specified in Section 7.4(a) hereof
-------
pursuant to the written notice specified in Section 7.3(a) hereof of the
-------
Holder(s) of a Majority of the Warrants and/or the Warrant Securities, the
Company, at its option (and with written notice of the election to such effect
of all Holder(s) of the Warrants and/or the Warrant Securities), may repurchase
(i) any and all Securities at the higher of the Market Price per share of Common
Stock determined as of (x) the date of the notice sent pursuant to Section
-------
7.3(a) hereof or (y) the expiration of the period specified in Section 7.4(a)
-------
hereof and (ii) the other securities, if any, issuable upon exercise of the
Warrants at a price agreed upon by the Company and a Majority of the Holder(s)
of the Warrants and all such other securities. If the Company elects the
repurchase option, the repurchase shall be in immediately available funds and
shall close within two (2) days after the later of (i) the expiration of the
period specified in Section 7.4(a) hereof or (ii) the delivery of the written
-------
notice of election specified in this Section 7.3(d).
-------
-8-
7.4 Covenants of the Company With Respect to Registration. In
-----------------------------------------------------
connection with any registration under Section 7.2 or Section 7.3 hereof, the
------- -------
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within forty-five (45) days of receipt of any demand
there or, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each
Holder(s) desiring to sell Warrants and/or 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 or
other charges of any broker-dealer acting on behalf of Holder(s)), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) 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 7.4(a), the Company
-------
shall, in addition to any other equitable or other relief available to the
Holder(s), be liable for any and all incidental or special damages sustained by
the Holder(s) requesting registration of its or their Warrants and/or Warrant
Securities.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrants and the Warrant 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 Holder(s),
provided that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
-9-
(d) The Company shall indemnity the Holder(s) of the Warrants and the
Warrant Securities to be sold pursuant to any registration statement and each
person, if any, who controls such Holder(s) within the meaning of Section 15 of
the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("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
contained in Section 7 of the Underwriting Agreement pursuant to which the
Company has agreed to indemnity the Underwriters.
(e) The Holder(s) of the Warrants and Warrant Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnity 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 any
of them may become subject under the Act, the Exchange Act or otherwise arising
from information furnished by or on behalf of such Holder(s), 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
7 of the Underwriting Agreement pursuant to which the Underwriters have agreed
to indemnity the Company.
-10-
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise its or 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 Warrants and the Warrant Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof, or permit any other registration
-------
statement to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 7.3 hereof, without the prior written
-------
consent of the Holder(s) of the Warrants and the 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(s) and underwriter(s), of (i) 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 (ii) 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.
-11-
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within fifteen (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 twelve (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 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 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 the rules of the 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(s) shall
reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holder(s) of a Majority
of the Warrants and the Warrant Securities requested to be included in such
underwriting. Such agreement shall be satisfactory in form and substance to the
Company, a Majority of such Holder(s) and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in
-12-
agreements of that type used by the managing underwriters. The Holder(s) shall
be parties to any underwriting agreement relating to an underwritten sale of
their Warrants and/or 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 Holder(s). Such Holder(s) 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 Holder(s) and their intended
methods of distribution.
(l) In addition to the Warrants and the Warrant Securities, upon the
written request therefor by Holder(s) of the Warrants and the Warrant Securities
representing a Majority of such securities, the Company shall include in the
registration statement any other securities of the Company held by such
Holder(s) as of the date of filing of such registration statement, including,
without limitation, restricted shares of Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in reference
to the Holder(s) of Warrants or Warrant Securities shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Securities (assuming
the exercise of all the Warrants) 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 or 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.
-13-
8. Adjustments to Exercise Price and Number of Shares.
--------------------------------------------------
8.1 Subdivision and Combination. In case the Company shall at
---------------------------
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price for the shares of Common Stock shall forthwith be proportionately
decreased in the case of subdivision or increased in the case of combination.
The provisions of this Section 8.1 shall be applicable to successive
-------
subdivisions and combinations.
8.2 Stock Dividends and Distributions. In case the Company
---------------------------------
shall pay a dividend in, or make a contribution of, shares of Common Stock or of
any capital stock of the Company convertible into Common Stock, the Exercise
Price for the shares of Common Stock shall forthwith be proportionately
decreased. An adjustment made pursuant to this Section 8.2 shall be made as of
-------
the record date for the subject stock dividend or distribution.
8.3 Adjustment in Number of Shares. Upon each adjustment of the
------------------------------
Exercise Price for the shares of Common Stock pursuant to the provisions of
Section 8.1 or Section 8.2 hereof, the number of Warrant Securities issuable
------- -------
upon the exercise of the Warrants at the adjusted exercise price of each Warrant
shall be adjusted to the nearest full amount by multiplying a number equal to
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Securities issuable upon exercise of the Warrants immediately prior
to such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
8.4 Definition of Common Stock. For the purpose of this
--------------------------
Agreement, the term "Common Stock" shall mean (a) the class of stock designated
as Common Stock in the charter of the Company, as in effect on the date hereof,
or (b) any other class of stock resulting from any change or reclassification of
such Common Stock consisting
-14-
solely of a change or changes in par value, or from
par value to no par value, or from no par value to par value.
8.5 Merger or Consolidation. 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 which does not result
in any reclassification or change of the outstanding shares of Common Stock or
other securities issuable upon exercise of the Warrants, or in the case of any
sale or conveyance to another person or entity of the property of the Company as
an entirety or substantially as an entirety, then, as a condition of such
consolidation, merger, sale or conveyance, the Company, or such successor or
purchasing entity, as the case may be, shall execute and deliver to the
Holder(s) a supplemental warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger by a holder of the number
of shares of Common Stock of the Company for which such Warrant might have been
exercised immediately prior to such consolidation, merger sale or conveyance.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
-------
this Section 8.5 shall similarly apply to successive consolidations, mergers,
-------
sales or conveyances.
8.6 No Adjustment of Exercise Price in Certain Cases. No
------------------------------------------------
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than two cents ($.02) per 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
-15-
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
two cents ($.02) per share of Common Stock.
9. Exchange and Placement of Warrant Certificates. Each Warrant
----------------------------------------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder(s) at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of shares of Common Stock in such
denominations as shall be designated by the Holder(s) thereof at the time of
such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any 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 Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock,
or other securities underlying the Warrants upon the exercise of the Warrants,
nor shall it be required to issue scrip or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock, or other securities underlying the Warrants.
11. 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
-16-
purpose of issuance upon the exercise of the Warrants, such number of shares of
Common Stock as shall be issuable upon the exercise thereof. The Company shall
at all times reserve and keep available, solely for the purpose of issuance upon
the exercise of the Warrants and the Redeemable Warrants, any other securities
underlying the Warrants and the Redeemable Warrants. The Company covenants and
agrees that, upon exercise of the Warrants and payment of the Exercise Price for
the shares of Common Stock or other securities underlying the Warrants, all
shares of Common Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable, not subject to the
preemptive or similar rights of any shareholder and free from all taxes, liens
and charges with respect to the issuance thereof. As long as the Warrants shall
be outstanding, the Company shall use its best efforts to cause all shares of
Common Stock 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 in the Initial Public Offering may then be listed and/or quoted on
the Nasdaq Stock Market.
12. Notices to Warrant Holder(s). Nothing contained in this
----------------------------
Agreement shall be construed as conferring upon the Holder(s) the right to vote
or to consent or to receive notice as a shareholder in respect of any meetings
of shareholders for the election of Directors or any other matter, or as having
any rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants 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
-17-
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 to the Holder(s) at least fifteen (15) days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the shareholders entitled to receive such
dividend, distribution, additional shares, convertible or exchangeable
securities, options, rights, warrants 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 additional shares or any
convertible or exchangeable securities, options, rights, warrants or
subscription rights, or any proposed dissolution, liquidation, winding up or
sale.
-18-
13. 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 mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder(s) of the Warrants, to
the address of such Holder(s) as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 3.1 hereof or to such other address as the Company may designate by
-------
notice to the Holder(s).
14. Supplements and Amendments. The Company and the Representative
--------------------------
may from time to time supplement or amend this Agreement without the approval of
any Holder of a Warrant Certificate (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 provisions 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 Holder(s) of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement
----------
shall be binding upon and inure to the benefit of the Company, the Holder(s) and
their respective successors, assigns and representatives.
16. Termination. This Agreement shall terminate at the close of
-----------
business on May 9, 2003. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
-------
business on May 9, 2009.
-19-
17. Governing Law: Submission to Jurisdiction. This Agreement and
-----------------------------------------
each 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 the State of New York without giving effect to
the rules of such State governing the conflicts of laws.
The Company, the Representative and the Holder(s) hereby agree that
any action, proceeding or claim arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submit to such jurisdiction, which jurisdiction shall be exclusive.
The Company, the Representative and the Holder(s) hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum. Any process or
summons to be served upon any of the Company, the Representative and the
Holder(s) (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to the address set forth in
Section 14 hereof. Such mailing shall be deemed personal service and shall be
-------
legal and binding upon the party so served in any action, proceeding or claim.
The Company, the Representative and the Holder(s) agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
18. Entire Agreement Modification. This Agreement (including the
-----------------------------
Underwriting Agreement to the extent portions thereof are referred to herein)
contain the entire understanding between the parties hereto with respect to the
subject matter hereof and
-20-
may not be modified or amended except by a writing duly signed by the party
against whom enforcement of the modification or amendment is sought.
19. 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.
20. Captions. The caption headings of the Sections of this Agreement
--------
are for convenience of reference only and are not intended to be, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or entity other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company and the Representative and any other Holder(s) of the Warrant
Certificates or Warrant Securities.
-21-
22. 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.
IN WITNESS OF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] TECHNOLOGY SERVICE GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President and
Chief Executive Officer
Attest:
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxx, Secretary
BROOKEHILL EQUITIES, INC.
By: /s/ Xxxxxxxx Xxxxx
----------------------------
Name: Xxxxxxxx Xxxxx
Title: President
-22-
EXHIBIT A
(FORM OF WARRANT CERTIFICATE)
THE WARRANTS REPRESENTED BY TIES CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("THE ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION 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 ON OR BEFORE
5:30 P.M., NEW YORK TIME, MAY 9, 2001
No. W-__
This Warrant Certificate certifies that ____________ or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from May 10, 1997 until 5:30 p.m. New York time on May 9, 2001 ("Expiration
Date"), up to ________ fully-paid and non-assessable shares of common stock,
$.01 par value per share (the "Common Stock") of Technology Service Group, Inc.,
a Delaware corporation (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of $10.80 per share of
Common Stock, upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, or by surrender of this
Warrant Certificate in lieu of cash payment, but subject to the conditions set
forth herein and in the warrant agreement dated as of May 10, 1996, by and
between the Company and Brookehill Equities, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House Funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, 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 Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon shall, 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 Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; 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 the right to
purchase a like number of shares of Common Stock shall be issued to the
transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided herein and in the Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with such
transfer.
Upon the purchase of less than all of the shares of Common Stock
purchasable pursuant to this Warrant Certificate, the Company shall forthwith
issue to the holder hereof a new Warrant Certificate representing the right to
purchase the remaining Securities.
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.
A-2
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 Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ________________________, 1996
TECHNOLOGY SERVICE GROUP, INC.
[SEAL] By:
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President and
Chief Executive Officer
Attest:
--------------------------------
Xxxxxxx X. Xxxxxxxx, Secretary
A-3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _________ shares of Common
Stock:
____________ and herewith tenders in payment for such shares of Common
Stock a certified or official bank check payable in New York Clearing House
Funds to the order of Technology Service Group, 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 name of
holder as specified on the face of the Warrant
Certificate.)
-------------------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder(s))
A-4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by his Warrant Certificate, to purchase ______ shares of Common
Stock.
CHECK APPROPRIATE BOX
in accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of May 10, 1996 between Technology Service Group, Inc. and
Brookehill Equities, Inc. The undersigned requests that certificates for such
shares of Common Stock 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 name of
holder as specified on the face of the Warrant
Certificate.)
-------------------------------------------------------
(Insert Social Security or Other Identifying Number of
Holder)
A-5
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _______________here 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 the within-
named Company, with full power of substitution.
Dated: Signature
------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
---------------------------------------------------------------------
(Insert Social Security or Other Identifying Number of Holder(s))
A-6
