1
FORM OF
WARRANT AGREEMENT
This WARRANT AGREEMENT dated as of December ___, 1997, between Xxxxxxx
Industries, Inc., a Maryland corporation (the "Company") with its principal
place of business at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx, 00000
and Savings and Retirement Service, LLC, a Texas Limited Liability Company
("SRS"), with offices at 00000 Xxxxxxxxxx Xxxxx, Xxxxx 000X, Xxxxxxx, Xxxxx
00000, together with any transferee of Warrants or Warrant Shares, the "Warrant
Holders(s)".
WHEREAS, the Company proposes to issue to SRS as consideration for SRS
entering into the Investor Relations Consulting Agreement, which is incorporated
and made a part of herein, common stock purchase warrants (the "Warrants") to
purchase up to 150,000 shares (the "Warrant Shares") of the Company's common
stock, par value $0.001 per share (the "Common Stock"), each Warrant entitling
the holder thereof to purchase one share of Common Stock at a redemption price
of $1.00
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. The Company will issue and
deliver the Warrants to Warrant Holders on the Closing Date referred to in the
Investor Relations Consulting Agreement. The aggregate number of Warrants to be
issued and delivered shall be 150,000 (subject to further limitation as provided
herein). The Warrants shall be exercisable on or after December 20, 1997. The
text of each Warrant shall be substantially as set forth in the Warrant
Certificate. The Warrants shall be executed on behalf of the Company by the
manual or facsimile signature of the present or any future Chairman of the
Board, President, or Vice President of the Company, attested by the manual or
facsimile signature of the present or future Secretary or an Assistant Secretary
of the Company. A Warrant bearing the manual or facsimile signature of
individuals who were at any time the proper officers of the Company shall bind
the Company notwithstanding that such individuals or any of them shall have
ceased to hold such offices prior to the delivery of such Warrant or did not
hold such offices on the date of this Warrant Agreement. The demand and the
piggy-back registration rights set forth in Section 16 hereof may be exercised
at any time during the term of the Warrants.
Warrants shall be dated as of the date of execution thereof by the Company
either upon initial issuance or upon division, exchange, substitution or
transfer.
2. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants as follows:
(i) POWER AND AUTHORITY. The Company has all requisite corporate
power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant
Agreement, to grant, issue, and deliver the Warrants and to
authorize and reserve for issuance and, upon payment from time to
time of the Exercise Price or exercise of Net Share Warrants, to
issue and deliver the shares of Common Stock or other securities
issuable upon exercise of the Warrants. This Warrant Agreement
has been duly executed and delivered by the Company. (ii)
RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK. There have
been reserved for issuance, and the Company shall at all times
keep reserved, out of the authorized and unissued shares of
Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrants,
and such shares, when issued or upon a net exercise in accordance
with the terms of the Warrants and of this Warrant Agreement,
will be legally and validly issued, fully paid and non-
assessable and will be free of any preemptive rights of
shareholders or any restrictions.
(b) The Warrant Holder hereby represents and warrants as follows:
(i) ACCREDITED INVESTOR. The Warrant Holder is an "accredited
investor" within the meaning of Rule 501 under Regulation D
promulgated under the Securities Act, is experienced in
evaluating investments in companies such as the Company, has such
knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of its investment
and has the ability to bear the entire economic risk of its
investment. The Warrant Holder has made its own evaluation of its
investment in the Warrants, based upon such information as is
available to it and without reliance upon the Company or any
other person or entity, and the Warrant Holder agrees that
neither the Company nor any other person or entity has any
obligation to furnish any additional information to the Warrant
Holder except as expressly set forth herein.
3. CONDITIONS PRECEDENT. SRS's obligations hereunder shall be subject to
satisfaction of the following conditions on the Closing Date referred to in the
Investor Relations Consulting Agreement:
(a) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Warrant Agreement and the Warrants and
all other legal matters relating to this Warrant Agreement, the Warrants and the
transactions contemplated hereby shall be satisfactory in all respects to SRS,
in their reasonable judgment, and the Company shall have furnished to SRS all
documents and information that they may reasonably request to enable them to
pass judgment upon such matters.
(b) There shall have been duly tendered to SRS or upon the order of SRS a
certificate or certificates representing the Warrants.
4. REGISTRATION. The Warrants shall be numbered and shall be registered on
the books of the Company (the "Warrant Register") as they are issued. The
Warrants shall be registered initially in such names and such denominations as
SRS has specified to the Company.
5. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction upon
transfer set forth in this Warrant Agreement, each Warrant certificate may be
exchanged at the option of the Warrant Holder thereof for another certificate or
certificates of different denominations entitling the Warrant Holder thereof to
purchase upon surrender to the Company or its duly authorized agent a like
aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitle such Warrant Holder to purchase. Any Warrant Holder
desiring to exchange a Warrant certificate or certificates shall make such
request in writing delivered to the Company, and shall surrender, properly
endorsed, the certificate or certificates to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new Warrant
certificate or certificates, as the case may be, as so requested. Any Warrant
issued upon exchange, transfer or partial exercise of the Warrants shall be the
valid obligation of the Company, evidencing the same generic rights and entitled
to the same generic benefits under this Warrant Agreement as the Warrants
surrendered for such exchange, transfer or exercise.
6. TRANSFER OF WARRANTS. Subject to the provisions of Section 14 hereof,
the Warrants shall be transferable only on the Warrant Register upon delivery to
the Company of the Warrant certificate or certificates duly endorsed by the
Warrant Holder or by his duly authorized attorney-in-fact or legal
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney- in-fact, the
original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited with the Company in its discretion. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto.
7. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Each Warrant entitles the Warrant Holder thereof to purchase one share
of Common Stock during the time period and subject to the conditions set forth
in the respective Warrant Certificates at an exercise price of [$1.00] per
share, subject to adjustment in accordance with Section 12 hereof (the "Exercise
Price"). Each Warrant terminates on the fifth anniversary of the date on which
such Warrant becomes exercisable in accordance with its terms (the "Expiration
Date").
(b) The Exercise Price and the number of shares issuable upon exercise of
Warrants are subject to adjustment upon the occurrence of certain events,
pursuant to the provisions of Section 12 of this Warrant Agreement. Subject to
the provisions of this Warrant Agreement, each Warrant Holder shall have the
right, which may be exercised as expressed in such Warrants, to purchase from
the Company (and the Company shall issue and sell to such Warrant Holder) the
number of fully paid and nonassessable shares of Common Stock specified in such
Warrants, upon surrender to the Company, or its duly authorized agent, of such
Warrants, with the purchase form on the reverse thereof duly filled in and
signed and upon a net exercise pursuant to this subsection of this Warrant
Agreement, for the number of shares in respect of which such Warrants are then
exercised. The Warrant Holder may make an exercise of Warrants for "Net Warrant
Shares." The number of Net Warrant Shares will be determined as described by the
following formula: Net Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the number of
Warrant Shares issuable upon exercise of the Warrants or portion of Warrants in
question. "MP" is the Market Price of the Common Stock on the last trading day
preceding the date of the request to exercise the Warrants. "Market Price" shall
mean the then current market price per share of Common Stock, as determined in
paragraph 12.1(e). "EP" shall mean the Exercise Price. Subject to paragraph 7(c)
hereof, upon such surrender of Warrants and upon a net exercise as aforesaid,
the Company at its expense shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Warrant Holder and in
such name or names as the Warrant Holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased upon the
exercise of such Warrants in respect of any fraction of a share of such stock
otherwise issuable upon such surrender. Such certificate or certificates shall
be deemed to have been issued, and any person so designated to be named therein
shall be deemed to have become a holder of record of such shares, as of the date
of the surrender of such Warrants and receipt of shares by net exercise as
aforesaid. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Warrant Holders thereof, either in full or
from time to time in part and, in the event that any Warrant is exercised in
respect of less than all of the shares purchasable on such exercise at any time
prior to the Expiration Date, a new certificate evidencing the remaining Warrant
or Warrants will be issued.
(c) So long as the Company satisfies the continued listing requirements of
the American Stock Exchange Market or another National Securities Exchange, the
exercise rights set forth above shall be limited so that upon the exercise of
the Warrants, the Warrant Holder's aggregate ownership of the Company will be
less than 20% of the shares of Common Stock outstanding on the date of issuance
of the Warrants; provided that such limitation shall cease and this Section 7(c)
shall become null and void upon the approval of the issuance of the Warrants by
the shareholders of the Company, the American Stock Exchange or the National
Association of Securities Dealers, Inc. or upon such other event as shall allow
the conversion or exercise or both, as appropriate, without violating the
applicable requirements of the American Stock Exchange.
8. COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants that if
any share of Common Stock required to be reserved for purposes of exercise or
conversion of Warrants require, under any federal or state law or applicable
governing rule or regulation of any national securities exchange, registration
with or approval of any governmental authority, or listing on any such national
securities exchange, before such shares may be issued upon exercise, the Company
will use its commercially reasonable efforts to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be.
9. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if
any, attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants and any securities issued pursuant to Section 12 hereof; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue or delivery of
any Warrants or certificates for Warrant Shares and any securities issued
pursuant to Section 12 hereof in a name other than that of the Warrant Holder of
such Warrants.
10. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant lost, stolen, or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest.
11. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF WARRANTS.
The Company shall at all times reserve, out of the authorized and unissued
shares of Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrants, and the transfer
agent for the Common Stock ("Transfer Agent") and every subsequent transfer
agent for any shares of the Company's capital stock issuable upon the exercise
of any of the rights of purchase aforesaid are hereby irrevocably authorized and
directed at all times until the Expiration Date to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company will keep a copy of this Warrant Agreement on file with the Transfer
Agent and with every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Company will supply the Transfer Agent and any such
subsequent transfer agent with duly executed stock certificates for such purpose
and will itself provide or otherwise make available any cash which may be
issuable as provided by Section 13 of this Warrant Agreement. The Company will
furnish to the Transfer Agent and any such subsequent transfer agent a copy of
all notices of adjustments, and certificates related thereto, transmitted to
each Warrant Holder pursuant to Section 12.3 hereof. All warrants surrendered in
the exercise of the rights thereby evidenced shall be canceled, and such
canceled Warrants shall constitute sufficient evidence of the number of shares
of stock which have been issued upon the exercise of such Warrants (subject to
adjustment as herein provided). No shares of stock shall be subject to
reservation in respect of the Warrants subsequent to the Expiration Date except
to the extent necessary to comply with the terms of this Warrant Agreement.
12. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The number
and kind of securities purchasable upon the exercise of each Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as hereafter defined.
12.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares issuable upon
the exercise of each Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) In case the Company shall (i) pay a dividend to holders of Common
Stock in shares of Common Stock or make a distribution to holders
of Common Stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a larger number of shares
of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv)
issue by reclassification of its shares of Common Stock other
securities of the Company (including any such reclassification in
connection with a consolidation or merger in which the Company is
the surviving corporation), the number of Warrant Shares
purchasable upon exercise of each Warrant immediately prior
thereto shall be adjusted so that the Warrant Holder shall be
entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have
been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately
prior to the happening of such event or any record date with
respect thereto regardless of whether the Warrants are
exercisable at the time of the happening of such event or at the
time of any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately
after the effective date of such event retroactive to the record
date, if any, for such event.
(b) In case the Company shall issue rights, options, or warrants to
holders of its outstanding Common Stock, without any charge to
such holders, entitling them to subscribe for shares of Common
Stock at a price per share which is lower at the record date
mentioned below than the Exercise Price, then (i) the Exercise in
effect immediately prior to such issuance shall immediately be
reduced to the price that is equivalent to such consideration
received by the Company upon such issuance and (ii) the number of
Warrant Shares thereafter purchasable upon the exercise of each
Warrant shall be increased in direct proportion to the increase
in the number of shares of Common Stock outstanding on a fully
diluted basis immediately prior to such issuance; provided that
if such shares of Common Stock, options or other convertible
securities are issued for consideration per share less than the
Exercise Price at the date of such issue or sale, the number of
shares of Common Stock that immediately prior to such issuance
the Warrant Holder shall have been entitled to purchase pursuant
to this Warrant shall be increased to the greater of (i) that
number of shares of Common Stock that immediately prior to such
issuance the Warrant Holder shall have been entitled to purchase
pursuant to this Warrant multiplied by a fraction, the numerator
of which is the Exercise Price and the denominator of which is
such consideration per share, and (ii) the number of shares of
Common Stock otherwise calculated under this Section 12.1. Such
adjustment shall be made whenever such rights, options, or
warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such rights, options, or warrants; provided that this
Section 12.1(b) shall expire and be of no force and effect on or
after December 20, 1998.
(c) In case the Company shall distribute to holders of its shares of
Common Stock evidences of its indebtedness or assets (including
cash dividends or other cash distributions) or rights, options,
or warrants, or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock
(excluding those referred to in paragraph (b) above), then in
each case the number of Warrant Shares thereafter purchasable
upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of each Warrant by a fraction, of which the
numerator shall be the then current market price per share of
Common Stock (as determined in accordance with paragraph (e)
below) on the date of such distribution, and of which the
denominator shall be the then current market price per share of
Common Stock, less the then fair value (as determined in good
faith by the Board of Directors of the Company) of the portion of
the assets or evidences of indebtedness so distributed or of such
subscription rights, options, or warrants, or of such convertible
or exchangeable securities applicable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution.
In the event of distribution by the Company to holders of its shares
of Common Stock of stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of
an adjustment in the number of Warrant Shares purchasable upon
the exercise of each Warrant, the Warrant Holder, upon the
exercise thereof at any time after such distribution, shall be
entitled to receive from the Company, such subsidiary, or both,
as the Company shall determine, the stock or other securities to
which such Warrant Holder would have been entitled if such
Warrant Holder had exercised such Warrant immediately prior
thereto regardless of whether the Warrants are exercisable at
such time, all subject to further adjustment as provided in this
subsection 12.1; provided, however, that no adjustment in respect
of dividends or interest on such stock or other securities shall
be made during the term of a Warrant or upon the exercise of a
Warrant; provided further that this Section 12.1(c) shall expire
and be of no force and effect on or after December 20, 1998.
(d) In case the Company shall sell and issue shares of Common Stock
(other than pursuant to rights, options, warrants, or convertible
securities initially issued before the date of this Agreement) or
rights, options, warrants, or convertible securities containing
the right to subscribe for or purchase shares of Common Stock
(excluding shares, rights, options, warrants, or convertible
securities issued in any of the transactions described in
paragraphs (a), (b) or (c) above) at a price per share of Common
Stock (determined, in the case of such rights, options, warrants
or convertible securities, by dividing (w) the total of the
amount received or receivable by the Company (determined as
provided below) in consideration of the sale and issuance of such
rights, options, warrants, or convertible securities, by (x) the
total number of shares of Common Stock covered by such rights,
options, warrants, or convertible securities) lower than the
Exercise Price in effect immediately prior to such sale and
issuance, then (i) the Exercise in effect immediately prior to
such issuance shall immediately be reduced to the price that is
equivalent to such consideration received by the Company upon
such issuance and (ii) the number of Warrant Shares thereafter
purchasable upon the exercise of the Warrants shall be increased
in direct proportion to the increase in the number of shares of
Common Stock outstanding on a fully diluted basis immediately
prior to such issuance; provided that if such shares of Common
Stock, options or other convertible securities (other than
Excluded Stock) are issued for consideration per share less than
the Exercise Price at the date of such issue or sale, the number
of shares of Common Stock that immediately prior to such issuance
the Warrant Holder shall have been entitled to purchase pursuant
to this Warrant shall be increased to the greater of (i) that
number of shares of Common Stock that immediately prior to such
issuance the Warrant Holder shall have been entitled to purchase
pursuant to this Warrant multiplied by a fraction, the numerator
of which is the Exercise Price and the denominator of which is
such consideration per share, and (ii) the number of shares of
Common Stock otherwise calculated under this Section 12.1. Such
adjustment shall be made successively whenever such an issuance
is made; provided that this Section 12.1(d) shall expire and be
of no force and effect on or after December 20, 1998. For the
purposes of such adjustments, the consideration received or
receivable by the Company for rights, options, warrants, or
convertible securities shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or
convertible securities, plus the consideration or premiums stated
in such rights, options, warrants, or convertible securities to
be paid for the shares of Common Stock covered thereby. In case
the Company shall sell and issue shares of Common Stock, or
rights, options, warrants, or convertible securities containing
the right to subscribe for or purchase shares of Common Stock,
for a consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the "price
per share of Common Stock" and the "consideration received or
receivable by the Company" for purposes of the first sentence of
this paragraph (d), the Board of Directors shall determine, in
its discretion, the fair value of said property.
(e) For the purpose of any computation under paragraphs (b), (c), and
(d) of this Section, the current market price per share of Common
Stock at any date shall be the average of the daily closing
prices of the Company's Common Stock, for five consecutive
trading days ending one trading day before the date of such
computation. The closing price for each day shall be the last
such reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on
the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if not listed
or admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market as
reported by NASDAQ or any comparable system. In the absence of
one or more such quotations, the Board of Directors of the
Company shall determine the current market price, in good faith,
on the basis of such quotations as it considers appropriate.
Notwithstanding the foregoing, for the purpose of any calculation
under paragraph (d) above (A) with respect to any issuance of
options under the Company's employee or director compensation
stock option plans as in effect or as adopted by the Board of
Directors of the Company on the date hereof, the term "current
market price", in such instances, shall mean the fair market
price on the date of the issuance of any such option determined
in accordance with the Company's employee compensation stock
option plans as in effect or adopted by the Board of Directors of
the Company on the date hereof; and (B) with respect to any
issuances of Common Stock (or rights, options, warrants, or
convertible securities containing the right to subscribe for or
purchase shares of Common Stock) in connection with bona fide
corporate transactions (other than issuances in such transactions
for cash or similar consideration), the term "fair market price"
shall mean the fair market price per share as determined in
arm's-length negotiations by the Company and such other parties
(other than affiliates or subsidiaries of the Company) to such
transactions as reflected in the definitive documentation with
respect thereto, unless such determination is not reasonably
related to the closing market price on the date of such
determination.
(f) In any case in which this Section 12.1 shall require that any
adjustment in the number of Warrant Shares be made effective as
of immediately after a record date for a specified event, the
Company may elect to defer until the occurrence of the event the
issuing to the holder of any Warrant exercised after that record
date the shares of Common Stock and other securities of the
Company, if any, issuable upon the exercise of any Warrant over
and above the shares of Common Stock and other securities of the
Company, if any, issuable upon the exercise of any Warrant prior
to such adjustment; provided, however, that the Company shall
deliver to such Warrant Holder a due xxxx or other appropriate
instrument evidencing the holder's right to receive such
additional shares or securities upon the occurrence of the event
requiring such adjustment.
(g) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the
number of Warrant Shares purchasable upon the exercise of each
Warrant; provided, however, that any adjustments which by reason
of this paragraph (g) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(h) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as herein provided, the
Warrant Price payable upon the exercise of each Warrant shall be
adjusted by multiplying such Warrant Price immediately prior to
such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of
such Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant Shares purchasable
immediately.
(i) No adjustment in the number of Warrant Shares purchasable upon
the exercise of each Warrant need be made under paragraphs (b),
(c) and (d) if the Company issues or distributes to each Warrant
Holder the rights, options, warrants, or convertible or
exchangeable securities, or evidences of indebtedness or assets
referred to in those paragraphs which each Warrant Holder would
have been entitled to receive had the Warrants been exercised
prior to the happening of such event or the record date with
respect thereto regardless of whether the Warrants are
exercisable at the time of the happening of such event or at the
time of any record date with respect thereto. No adjustment need
be made for a change in the par value of the Warrant Shares.
(j) For the purpose of this Section 12.1, the terms "shares of Common
Stock" shall mean (i) the class of stock designated as the Common
Stock of the Company at the date of this Agreement, or (ii) any
other class of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in
par value, or from par value to no par value, or from no par
value to par value. In the event that at any time, as a result of
an adjustment made pursuant to paragraph (a) above, the Warrant
Holders shall become entitled to purchase any securities of the
Company other than shares of Common Stock, thereafter the number
of such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in paragraphs (a) through
(i), inclusive, above, and the provisions of Section 7 and
Section 12.2 through 12.5, inclusive, with respect to the Warrant
Shares, shall apply on like terms to any such other securities.
(k) Upon the expiration of any rights, options, warrants, or
conversion or exchange privileges, if any thereof shall not have
been exercised, the Warrant Price and the number of shares of
Common Stock purchasable upon the exercise of each warrant shall,
upon such expiration, be readjusted and shall thereafter be such
as it would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as if
(A) the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise
of such rights, options, warrants, or conversion or exchange
rights and (B) such shares of Common Stock, if any, were issued
or sold for the consideration actually received by the Company
upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant
of all such rights, options, warrants, or conversion or exchange
rights whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Warrant
Price or decreasing the number of Warrant Shares by an amount in
excess of the amount of the adjustment initially made with
respect to the issuance, sale or grant of such rights, options,
warrants, or conversion or exchange rights.
(l) In addition to the adjustments set forth above, the Exercise
Price shall be immediately reduced and the number of Warrant
Shares shall be immediately increased, in each case, on a pari
passu basis with the conversion, exercise, or strike price of any
other derivative securities of the Company whether now
outstanding or hereafter issued.
12.2. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may, at its option,
at any time during the term of the Warrants, reduce the then current Exercise
Price to any amount determined appropriate by the Board of Directors of the
Company.
12.3. NOTICE OF ADJUSTMENT. When the number of Warrant Shares purchasable
upon the exercise of each Warrant or the Exercise Price of such Warrant Shares
is adjusted, as herein provided, the Company shall promptly mail by first class,
postage prepaid, to each Warrant Holder notice of such adjustment or adjustments
and a certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants employed
by the Company) setting forth the number of Warrant Shares purchasable upon the
exercise of each Warrant and the Exercise Price of such Warrant Shares after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate, absent manifest error, shall be conclusive evidence of the
correctness of such adjustment.
12.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC. In
case of any consolidation of the Company with or merger of the Company into
another person or in case of any sale, transfer, or lease to another person of
all of or substantially all the assets of the Company, the Company or such
successor or purchaser, as the case may be, shall execute with each Warrant
Holder an agreement that each Warrant Holder shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities and property which the Warrant Holder would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale,
transfer, or lease had such Warrant been exercised immediately prior to such
action regardless of whether the Warrants are exercisable at the time of such
action. Such agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
12. The provisions of this Section 12.4 shall similarly apply to successive
consolidations, mergers, sales, transfers, or leases.
12.5. STATEMENT ON WARRANTS. Even though Warrants heretofore or hereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrants initially issuable pursuant to this Warrant
Agreement, the parties understand and agree that such Warrants will represent
rights consistent with any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants.
13. FRACTIONAL INTERESTS. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Warrant
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 13,
be issuable on the exercise of any Warrant (or specified portion, thereof), the
Company shall pay an amount in cash equal to the closing price for one share of
the Common Stock on the trading day immediately preceding the date the Warrant
is presented for exercise, multiplied by such fraction.
14. REGISTRATION UNDER THE SECURITIES ACT OF 1933. SRS represents and
warrants to the Company that it will not dispose of the Warrant or Warrant
Shares except pursuant to (i) an effective registration statement, or (ii) an
applicable exemption from registration under the Securities Act of 1933 (the
"Act"). In connection with any sale by SRS pursuant to clause (ii) of the
preceding sentence, it shall furnish to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that such exemption from
registration is available in connection with such sale.
15. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to a
stop-transfer order and the certificate or certificates therefor shall bear the
following legend by which each Warrant Holder shall be bound:
"THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY OTHER STATE. THE WARRANTS
REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
TRANSFERRED, EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, OR (II) AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT. ANY SALE PURSUANT TO CLAUSE (II) OF THE PRECEDING SENTENCE MUST
BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
TO THE EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION
WITH SUCH SALE."
The Warrant Shares or other securities issued upon exercise of the Warrants
shall, unless issued pursuant to an effective registration statement, be subject
to a stop-transfer order and the certificate or certificates evidencing any such
Warrant Shares or securities shall bear the following legend by which the
Warrant Holder thereof shall be bound:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO
(I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (II) AN
APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. ANY SALE
PURSUANT TO CLAUSE (II) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE."
16. REGISTRATION RIGHTS. The Warrant Shares shall have the right to be
registered in the Company's immediately subsequent registration statement filed
on Form SB-2 or other appropriate form pursuant to the Securities Act of 1933.
Such right shall be exercised by each such Warrant Holder by providing written
notice to the Company within twenty business days of receiving notification from
the Company of its intention to file a registration statement as described
hereinabove.
17. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing contained
in this Warrant Agreement or in any of the Warrants shall be construed as
conferring upon the Warrant Holders or their transferees the right to vote or to
receive dividends or to consent or to receive notice as stockholders in respect
of any meeting of stockholders for the election of directors of the Company or
any other matter, or any rights whatsoever as stockholders of the Company. If,
however, at any time prior to the expiration of the Warrants and prior to their
exercise, any of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities upon
its shares of Common Stock or make any distribution (other than a cash
dividend) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common Stock
any additional shares of Common Stock or securities convertible into
or exchangeable for shares of Common Stock or any right to subscribe
to or purchase any thereof; or
(c) a dissolution, liquidation, or winding up of the Company (other than
in connection with a consolidation, merger, sale, transfer, or lease
or 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 notice in writing of such event to the Warrant
Holders as provided in Section 20 hereof, with such notice to be
completed at least 15 days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription
rights, or for the determination of stockholders entitled to vote on
such proposed dissolution, liquidation or winding up. Such notice
shall specify such record date or the date of closing the transfer
books, as the case may be. Failure to provide or receive such notice
or any defect therein or in the mailing thereof shall not affect the
validity of any action taken in connection with such dividend,
distribution, or subscription rights, or such proposed dissolution,
liquidation ,or winding up.
18. EXPENSES. Each party shall be responsible for its own costs and
expenses incurred in connection with the preparation, review, negotiation,
execution, and delivery of this Warrant Agreement and all other related
documents.
19. RIGHT TO INFORMATION. The Company, in accordance with Section 16(c)
above, will provide to all Warrant Holders and to all holders of Warrant Shares,
on a timely basis, copies of all documents and reports delivered to its
shareholders.
20. NOTICES. Any notice pursuant to this Warrant Agreement to be given or
made by the holder of any Warrant or Warrant Shares to or on the Company shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:
Xxxxxxx Industries, Inc. 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx
00000; Attention: General Counsel
SRS, LLC. 00000 Xxxxxxxxxx Xxxxx, Xxxxx 000X, Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Notices or demands authorized by this Warrant Agreement to be given or made
to or on the Warrant Holder of any Warrant or Warrant Shares shall be
sufficiently given or made (except as otherwise provided in this Warrant
Agreement) if sent by registered mail, return receipt requested, postage
prepaid, addressed to such Warrant Holder at the address of such Warrant Holder
as shown on the Warrant Register or the Common Stock Register, as the case may
be.
21. GOVERNING LAW. THIS WARRANT AGREEMENT, THE WARRANTS AND ALL RELATED
DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF WASHINGTON, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. ANY DISPUTE HEREUNDER OR UNDER
THE WARRANTS OR RELATED DOCUMENTS SHALL BE DETERMINED EXCLUSIVELY IN ACCORDANCE
WITH SECTION 8.7 OF THE NOTE PURCHASE AGREEMENT.
22. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Holders may
from time to time supplement or amend this Warrant Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Holder may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interests of the Warrant Holders. Any amendment to this
Warrant Agreement may be effected with the consent of Warrant Holders of at
least a majority of the total then outstanding Warrants (for this purpose
Warrant Shares shall be deemed to be Warrants in the proportion that Warrant
Shares are then issuable upon the exercise of Warrants); provided that any
amendment which shall have the effect of materially adversely affecting the
interests of any Warrant Holder shall not be effective with respect to such
Warrant Holder if such Warrant Holder shall not have consented thereto.
23. SURVIVAL OF COVENANTS. All covenants and agreements made herein shall
survive the execution and delivery of this Warrant Agreement and the Warrants
and shall remain in force and effect until the Expiration Date of all Warrants.
24. SUCCESSORS. All representations and warranties of the Company and all
covenants and agreements of this Warrant Agreement by or for the benefit of the
Company or the Warrant Holders shall bind and inure to the benefit of their
respective successors and assigns hereunder.
25. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant Agreement
shall be construed to give to any person or corporation other than the Company
and the Warrant Holders, any legal or equitable right, remedy, or claim under
this Warrant Agreement, but this Warrant Agreement shall be for the sole and
exclusive benefit of the Company and the holders of the Warrants and Warrant
Shares.
26. CAPTIONS. The captions of the sections and subsections of this Warrant
Agreement have been inserted for convenience and shall have no substantive
effect.
27. COUNTERPARTS. This Warrant Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed on the day, month and year first above written.
Xxxxxxx Industries, Inc. Savings & Retirement Services, LLC
----------------------------- ----------------------------------
Name: Xxxxxx Xxxxxxxx Name:
Title: President, CEO Title:
