WARRANT AGREEMENT
This WARRANT AGREEMENT ("Agreement") dated as of November ___, 1997 is by
and between among International Airline Support Group, Inc., a Delaware
corporation (the "Company"), and Cruttenden Xxxx Incorporated and Xxxxx &
Xxxxxxxxxxxx, Inc. ( the "Representatives").
WHEREAS, the Representatives have agreed pursuant to the Underwriting
Agreement dated December ___, 1997 (the "Underwriting Agreement") to act as the
representative of the several underwriters in connection with the proposed
public offering by the Company of up to 2,012,500 shares in the aggregate of
Common Stock, 262,500 of such shares covered by an over-allotment option (the
"Public Offering"); and
WHEREAS, pursuant to Section 5(n) of the Underwriting Agreement, the
Company has agreed to issue warrants to the Representatives (the "Warrants") to
purchase, at a price of $0.001 per warrant, up to an aggregate of 175,000 shares
(hereinafter, and as the number thereof may be adjusted hereto, the "Warrant
Shares"), of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), each Warrant initially entitling the holder thereof to purchase one
share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein and in the Underwriting Agreement set forth and for other good and
valuable consideration, the parties hereto agree as follows:
1. Issuance of Warrants: Form of Warrant. The Company will issue and
deliver to the Representatives, Warrants to purchase 175,000 Warrant Shares on
the Closing Date referred to in the Underwriting Agreement in consideration for,
and as part of the Representatives' compensation in connection with, the
Representatives acting as the representative of the several underwriters for the
Public Offering pursuant to the Underwriting Agreement. The text of the Warrants
and of the form of election to purchase shares shall be substantially as set
forth in Exhibit A attached hereto. 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 Chief Executive Officer of the Company,
under its corporate seal, affixed or in facsimile, attested by the manual or
facsimile signature of the Secretary or an Assistant Secretary of the Company.
Warrants bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrants or did not hold such
offices on the date of this Agreement. 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. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company (the "Warrant Register") as they are issued. The
Company shall be entitled to treat the registered holder of any Warrant on the
Warrant Register (the "Holder") as the owner in fact therefor for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or are to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. Warrants to purchase 175,000 shares shall be registered initially in the
names of "Cruttenden Xxxx Incorporated" or "Xxxxx & Xxxxxxxxxxxx, Inc." or in
such other denominations as the Representatives may request in writing to the
Company.
3. Exchange of Warrant Certificates. Subject to any restriction upon
transfer set forth in this Agreement, each Warrant certificate may be exchanged
for another certificate or certificates entitling the Holder thereof to purchase
a like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitled such Holder to purchase. Any 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.
4. Transfer of Warrants. Until December ___, 1998, the Warrants will not
be sold, transferred, assigned or hypothecated except to bona fide officers and
partners of the Representatives who agree in writing to be bound by the terms
hereof. The Warrants shall be transferable only on the Warrant Register upon
delivery thereof duly endorsed by the Holder or by the Holder's duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
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.
5. Term of Warrants; Exercise of Warrants.
5.1(a) Each Warrant entitles the registered owner thereof to
purchase one share of Common Stock at any time from 10:00 a.m.,
Pacific time, on December ___, 1998 (the "Initiation Date") until 6:00
p.m., Pacific time, on December ___, 2002 (the "Expiration Date") at a
purchase price of [$_____], subject to adjustment (the "Warrant
Price"). Notwithstanding the foregoing, if at 6:00 p.m., Pacific time
on the Expiration Date, any Holder or Holders of the Warrants have not
exercised their Warrants and the Closing Price (as defined below) for
the Common Stock on the Expiration Date is greater than the Warrant
Price, then each such unexercised Warrant shall be automatically
converted into a number of shares of Common Stock of the Company equal
to: (A) the number of shares of Common Stock then issuable upon
exercise of a Warrant multiplied by (B) a fraction (1) the numerator
of which is the difference between the Closing Price for the Common
Stock on the Expiration Date and the Warrant Price and (2) the
denominator of which is the Closing Price for the Warrant Stock on the
Expiration Date.
(b) Upon written request of any Holder, and in lieu of payment
for the Warrant Shares by check in accordance with Section 5.1(a)
hereof, any Holder may exercise the Warrants (or any portion thereof
held by such Holder) for and receive the number of Warrant Shares
equal to a fraction, the numerator of which equals (i) the difference
between the Warrant Price per share and the average of the Closing
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Price of the Common Stock for the ten (10) trading days preceding the
date of exercise (the "Current Market Price"), multiplied by (ii) the
number of Warrant Shares to be purchased; the denominator of which
equals the Current Market Price. This provision shall apply solely in
the event a public trading market exists with respect to the Common
Stock. The rights granted to each Holder in this Section 5(b) are
exercisable at any time after the Initiation Date and up to the
Expiration Date at the sole election of each Holder. The provisions
of Section 5.1(a) will apply as of the Expiration Date.
5.2 The Warrant Price and the number of Warrant Shares issuable upon
exercise of Warrants are subject to adjustment upon the occurrence of
certain events, pursuant to the provisions of Section 11 of this Agreement.
Subject to the provisions of this Agreement, each Holder of Warrants 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
Holder of Warrants) the number of fully paid and nonassessable Warrant
Shares specified in such Warrants, upon surrender to the Company, or its
duly authorized agent, of such Warrants, with the form of election to
purchase on the reverse thereof duly filled in and signed, and upon payment
to the Company of the Warrant Price, as adjusted in accordance with the
provisions of Section 11 of this Agreement, for the number of Warrant
Shares in respect of which such Warrants are then exercised. Payment of
such Warrant Price shall be made in cash or by certified or official bank
check, or a combination thereof. No adjustment shall be made for any
dividends on any Warrant Shares of stock issuable upon exercise of a
Warrant.
5.3 Upon such surrender of Warrants, and payment of the Warrant Price
as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Holder of such
Warrants and in such name or names as such registered Holder may designate,
a certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of such Warrants, together with cash, as
provided in Section 12 of this Agreement, in respect of any fraction of a
share otherwise issuable upon such surrender and, if the number of Warrants
represented by a Warrant Certificate shall not be exercised in full, a new
Warrant Certificate, executed by the Company for the balance of the number
of whole Warrant Shares represented by the Warrant Certificate.
5.4 If permitted by applicable law, 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 payment of the
Warrant Price as aforesaid. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the registered Holders
thereof, either as an entirety or from time to time for only part of the
shares specified therein.
6. Compliance with Government Regulations. The Company covenants that if
any shares 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 in good faith and as expeditiously as possible endeavor to cause such
shares to be duly registered,
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approved or listed on the relevant national securities exchange, as the case may
be; provided, however, that (except to the extent legally permissible with
respect to Warrants of which the Representatives is the Holder) in no event
shall such shares of Common Stock be issued, and the Company is hereby
authorized to suspend the exercise of all Warrants, for the period during which
such registration, approval or listing is required but not in effect.
7. 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; 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 certificate for Warrant Shares in a name
other than that of the registered Holder of such Warrants.
8. 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 substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest; but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of such Warrant and, if requested, indemnity or bond also
reasonably satisfactory to the Company. An applicant for such substitute
Warrants shall also comply with such other reasonable regulations and pay such
other reasonable charges as the Company may prescribe.
9. Reservation of Warrant Shares. There have been 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 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 required for
such purpose. The Company will keep a copy of this 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 such Transfer Agent with
duly executed stock certificates for such purposes and will itself provide or
otherwise make available any cash which may be issuable as provided in Section
12 of this Agreement. The Company will furnish to such Transfer Agent a copy of
all notices of adjustments, and certificates related thereto, transmitted to
each Holder pursuant to Section 11.2 of this Agreement. All Warrants surrendered
in the exercise of the rights thereby evidenced shall be cancelled.
10. Obtaining Stock Exchange Listings. The Company will from time to time
take all action which may be necessary so that the Warrant Shares, immediately
upon their issuance upon the exercise of Warrants, will be listed on the
principal securities exchanges and markets within the United States of America,
if any, on which other shares of Common Stock are then listed.
11. Adjustment of Warrant Price and Number of Warrant Shares. The number
and kind of securities purchasable upon the exercise of each Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as hereinafter defined. For purposes of this Section
11, "Common Stock" means shares now or hereafter authorized of any class of
common stock of the Company and any other stock of the Company, however
designated, that
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has the right (subject to any prior rights of any class or series of preferred
stock) to participate in any distribution of the assets or earnings of the
Company without limit as to per share amount.
11.1 Mechanical Adjustments. The number of Warrant Shares purchasable
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 in shares of
Common Stock or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding 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 Holder of each Warrant shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which he
would have owned or would have been entitled to receive after the
happening of any of the events described above, had such Warrants been
exercised immediately prior to the happening of such event or 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. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In case the Company shall distribute to all holders of its
shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
surviving corporation) evidences of its indebtedness or assets
(excluding cash dividends or distributions payable out of consolidated
earnings or earned surplus and dividends or distributions referred to
in paragraph (a) above or in the paragraph immediately following this
paragraph) or rights, options or warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock, 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, the numerator of which shall be the then current market
price per share of Common Stock (as defined in paragraph (c) below) on
the date of such distribution, and the denominator of which shall be
the then current market price per share of Common Stock, less the then
fair value (as reasonably determined 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 a distribution by the Company to all holders of
its shares of Common 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 Holder of each Warrant, upon the exercise
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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 Holder
would have been entitled if such Holder had exercised such Warrant
immediately prior thereto, all subject to further adjustment as
provided in this Section 11.1; 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.
(c) For the purpose of any computation under paragraph (b) of
this Section, the current market price per share of Common Stock at
any date shall be the average of the daily Closing Prices for 20
consecutive trading days commencing 30 trading days before the date of
such computation. The selling price for each day (the "Closing Price")
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 the Nasdaq
National Market System or Nasdaq SmallCap System or if not approved
for quotation on the Nasdaq National Market System or Nasdaq SmallCap
System, the average of the closing bid and asked prices as furnished
by two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose.
(d) 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 (d) 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.
(e) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as herein provided, the Warrant
Price payable upon exercise of each Warrant shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by
a fraction, the numerator of which shall be the number of Warrant
Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and the denominator of which shall be the number
of Warrant Shares purchasable immediately thereafter.
(f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of each Warrant need be made under paragraph (b) if
the Company issues or distributes to each Holder of Warrants the
rights, options, warrants or convertible or exchangeable securities,
or evidences of indebtedness or assets referred to in those paragraphs
which each Holder of Warrants 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. No adjustment need be made for a
change in the par value of the Warrant Shares.
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(g) In the event that at any time, as a result of an adjustment
made pursuant to paragraph (a) above, the Holders shall become
entitled to purchase any securities of the Company other than shares
of Common Stock, thereafter the number of such other shares so
purchasable upon exercise of each Warrant and the Warrant Price of
such shares 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 this
Section 11, and the other provisions of this Agreement, with respect
to the Warrant and Warrant Shares, shall apply as nearly equivalent as
practicable on like terms to such other securities.
(h) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges for which an adjustment was made
hereunder, 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 (i) 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 (ii) 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
shares of Common Stock purchasable upon the exercise of each Warrant
by an amount in excess of the amount of the adjustment initially made
in respect to the issuance, sale or grant of such rights, options,
warrants or conversion or exchange rights.
11.2 Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall promptly
mail by first class, postage prepaid, to each 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
Warrant Price of such Warrant Shares after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made.
11.3 No Adjustment for Dividends. Except as provided in Section 11.1,
no adjustments in respect of any dividends shall be made during the term of
a Warrant or upon the exercise of a Warrant.
11.4 Preservation of Purchase Rights Upon Merger, Consolidation etc.
In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale, transfer or lease to
another corporation of all or substantially all the property of the
Company, the Company or such successor or purchasing corporation, as the
case may be, shall execute with each Holder an agreement that each
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Holder shall have the right thereafter upon payment of the Warrant Price in
effect immediately prior to such action to purchase upon exercise of each
Warrant the kind and amount of shares and other securities, cash and
property which he would have owned or would 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; provided,
however, that no adjustment in respect of dividends, interest or other
income on or from such shares or other securities, cash and property shall
be made during the term of a Warrant or upon the exercise of a Warrant.
Such agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 11. The provisions of this Section 11.4 shall similarly apply to
successive consolidations, mergers, sales transfer or leases.
11.5 Statements on Warrants. Irrespective of any adjustments in the
Warrant Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrants theretofore or thereafter 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 Agreement.
12. 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 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 12, 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, as defined in paragraph (c) of Section 11.1, on the trading day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such faction.
13. Registration Under the Securities Act of 1933. The Representatives
represent and warrant to the Company that they will not dispose of the Warrants
or the Warrant Shares except pursuant to (i) an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), including a
post-effective amendment to the Registration Statement, (ii) Rule 144 under the
Act (or any similar rule under the Act relating to the disposition of
securities), or (iii) an opinion of counsel, reasonably satisfactory to counsel
of the Company, that an exemption from such registration is available.
14. Certificate to Bear Legends. The Warrant shall be subject to a
stop-transfer order and the certificate or certificates therefore shall bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
The Warrant Shares or other securities issued upon exercise of the Warrant
shall be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend:
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THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.
15. Registration Rights.
15.1 Demand Registration Rights. The Company covenants and agrees
with the Representatives and any subsequent Holders of the Warrants and/or
Warrants Shares that, on one occasion, within 60 days after receipt of a
written request from the Representatives or from Holders of more than 25%
in interest of the aggregate of Warrants and/or Warrant Shares issued
pursuant to this Agreement that the Representatives or such Holders of the
Warrants and/or Warrant Shares desires and intends to transfer more than
25% in interest of the aggregate number of the Warrants and/or Warrant
Shares under such circumstances that a public offering, within the meaning
of the Act, will be involved, the Company shall, on that one occasion, file
a registration statement (and use its best efforts to cause such
registration statement to become effective under the Act at the Company's
expense) with respect to the offering and sale or other disposition of the
Warrant Shares (the "Offered Warrant Shares"); provided, however, that the
Company shall have no obligation to comply with the foregoing provisions of
this Section 15.1 if in the opinion of counsel to the Company reasonably
acceptable to the Holder or Holders, from whom such written requests have
been received, registration under the Act is not required for the transfer
of the Offered Warrant Shares in the manner proposed by such person or
persons or that a post-effective amendment to an existing registration
statement would be legally sufficient for such transfer (in which latter
event the Company shall promptly file such post-effective amendment (and
use its best efforts to cause such amendment to become effective under the
Act)). Notwithstanding the foregoing, the Company shall not be obligated to
file a registration statement with respect to the Offered Warrant Shares on
more than one occasion.
The Company may defer the preparation and filing of a registration
statement for up to 90 days after the request for registration is made if
the Board of Directors determines in good faith that such registration or
post-effective amendment would materially adversely affect or otherwise
materially interfere with a proposed or pending transaction by the Company,
including without limitation a material financing or a corporate
reorganization, or during any period of time in which the Company is in
possession of material inside information concerning the Company or its
securities, which information the Company determines in good faith is not
ripe for disclosure.
The Company shall not honor any request to register Warrant Shares
pursuant to this Section 15.1 received later than five (5) years from the
effective date of the Company's Registration Statement on Form S-1 (File
No. 333-________) (the "Effective Date"). The Company shall not be required
(i) to maintain the effectiveness of the registration statement beyond the
earlier to occur of 90 days after the effective date of the registration
statement or the date on which all of the Offered Warrant Shares have been
sold (the "Termination Date"); provided, however, that if at the
Termination Date the Offered Warrant Shares are covered by a registration
statement which also covers other securities and which is required to
remain in effect beyond the Termination Date, the Company shall maintain in
effect such
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registration statement as it relates to Offered Warrant Shares for so long
as such registration statement (or any substitute registration statement)
remains or is required to remain in effect for any such other securities,
or (ii) to cause any registration statement with respect to the Warrant
Shares to become effective prior to the Initiation Date. All expenses of
registration pursuant to this Section 15.1 shall be borne by the Company
(excluding underwriting discounts and commissions on Warrant Shares not
sold by the Company).
The Company shall be obligated pursuant to this Section 15.1 to
include in the registration statement Warrant Shares that have not yet been
purchased by a Holder of Warrants so long as such Holder of Warrants
submits an undertaking to the Company that such Holder intends to exercise
Warrants representing the number of Warrant Shares to be included in such
registration statement prior to the consummation of the public offering
with respect to such Warrant Shares. In addition, such Holder of Warrants
is permitted to pay the Company the Warrant Price for such Warrant Shares
upon the consummation of the public offering with respect to such Warrant
Shares.
15.2 Piggy-back Registration Rights. The Company covenants and agrees
with the Holders and any subsequent Holders of the Warrants and/or Warrant
Shares that in the event the Company proposes to file a registration
statement under the Act with respect to any class of security (other than
in connection with an exchange offer, a non-cash offer or a registration
statement on Form S-8 or other unsuitable registration statement form)
which becomes or which the Company believes will become effective at any
time after the Initiation Date then the Company shall in each case give
written notice of such proposed filing to the Holders of Warrants and
Warrant Shares at least 30 days before the proposed filing date and such
notice shall offer to such Holders the opportunity to include in such
registration statement such number of Warrant Shares as they may request,
unless, in the opinion of counsel to the Company reasonably acceptable to
any such holder of Warrants or Warrant Shares who wishes to have Warrant
Shares included in such registration statement, registration under the Act
is not required for the transfer of such Warrants and/or Warrant Shares in
the manner proposed by such Holders. The Company shall not honor any such
request to register any such Warrant Shares if the request is received
later than six (6) years from the Effective Date, and the Company shall not
be required to honor any request (a) to register any such Warrant Shares if
the Company is not notified in writing of any such request pursuant to this
Section 15.2 within at least 20 days after the Company has given notice to
the Holders of the filing, or (b) to register Warrant Shares that represent
in the aggregate fewer than 25% of the aggregate number of Warrant Shares.
The Company shall permit, or shall cause the managing underwriter of a
proposed offering to permit, the Holders of Warrant Shares requested to be
included in the registration (the "Piggy-back Shares ") to include such
Piggy-back Shares in the proposed offering on the same terms and conditions
as applicable to securities of the Company included therein or as
applicable to securities of any person other than the Company and the
Holders of Piggy-back Shares if the securities of any such person are
included therein. Notwithstanding the foregoing, if any such managing
underwriter shall advise the Company in writing that it believes that the
distribution of all or a portion of the Piggy-back Shares requested to be
included in the registration statement concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then
the Holders of such Piggy-back Shares shall delay their offering and sale
of Piggyback Shares (or the portion thereof so designated by such managing
underwriter) for such period, not to exceed 120
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days, as the managing underwriter shall request provided that no such delay
shall be required as to Piggy-back Shares if any securities of the Company
are included in such registration statement for the account of any person
other than the Company and the Holders of Piggy-back Shares. In the event
of such delay, the Company shall file such supplements, post-effective
amendments or separate registration statement, and take any such other
steps as may be necessary to permit such Holders to make their proposed
offering and sale for a period of 90 days immediately following the end of
such period of delay ("Piggy-back Termination Date"); provided, however,
that if at the Piggy-back Termination Date the Piggyback Shares are covered
by a registration statement which is, or required to remain, in effect
beyond the Piggy-back Termination Date, the Company shall maintain in
effect the registration statement as it relates to the Piggy-back Shares
for so long as such registration statement remains or is required to remain
in effect for any of such other securities. All expenses of registration
pursuant to this Section 15.2 shall be borne by the Company, except that
underwriting commissions and expenses attributable to the Piggy-back Shares
and fees and disbursements of counsel (if any) to the Holders requesting
that such Piggy-back Shares be offered will be borne by such Holders.
The Company shall be obligated pursuant to this Section 15.2 to
include in the Piggy-back Offering, Warrant Shares that have not yet been
purchased by a holder of Warrants so long as such Holder of Warrants
submits an undertaking to the Company that such Holder intends to exercise
Warrants representing the number of Warrant Shares to be included in such
Piggy-back Offering prior to the consummation of such Piggy-back Offering.
In addition, such Holder of Warrants is permitted to pay the Company the
Warrant Price for such Warrant Shares upon the consummation of the
Piggy-back Offering.
If the Company decides not to proceed with a Piggy-back Offering, the
Company has no obligation to proceed with the offering of the Piggy-back
Shares, unless the Holders of the Warrants and/or Warrant Shares otherwise
comply with the provisions of Section 15.1 hereof (without regard to the 60
days' written request required thereby). Notwithstanding any of the
foregoing contained in this Section 15.2, the Company's obligation to offer
registration rights to the Piggy-back Shares pursuant to this Section 15.2
shall terminate two (2) years after the Expiration Date.
15.3 In connection with the registration of Warrants Shares in
accordance with Section 15.1 and 15.2 above, the Company agrees to:
(a) Use its best efforts to register or qualify the Warrant
Shares for offer or sale under the state securities or Blue Sky laws
of such states which the Holders of such Warrant Shares shall
designate, until the dates specified in Section 15.1 and 15.2 above in
connection with registration under the Act; provided, however, that in
no event shall the Company be obligated to quality to do business in
any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any
jurisdiction where it is not now so subject or to register or get a
license as a broker or dealer in securities in any jurisdiction where
it is not so registered or licensed or to register or qualify the
Warrant Shares for offer or sale under the state securities or Blue
Sky laws of any state other than the states in which some or all of
the shares offered or sold in the Public Offering were registered or
qualified for offer and sale.
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(b) (i) In the event of any post-effective amendment or
other registration with respect to any Warrant Shares pursuant to
Section 15.1 or 15.2 above, the Company will indemnify and hold
harmless any Holder whose Warrant Shares are being so registered,
and each person, if any, who controls such Holder within the
meaning of the Act, against any losses, claims, damages or
liabilities, joint or several, to which such Holder or such
controlling person may be subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any such
registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and will reimburse each such Holder and each such
controlling person for any legal or other expenses reasonably
incurred by such Holder or such controlling person in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not
be liable in such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged
omission made in any such registration statement, any preliminary
prospectus or final prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in the
preparation thereof. The Company will not be liable to a claimant
to the extent of any misstatement corrected or remedied in any
amended prospectus if the Company timely delivers a copy of such
amended prospectus to such indemnified person and such
indemnified person does not timely furnish such amended
prospectus to such claimant. The Company shall not be required to
indemnify any Holder or controlling person for any payment made
to any claimant in settlement of any suit or claim unless such
payment is approved by the Company.
(ii) Each Holder of Warrants and/or Warrant Shares who
participates in a registration pursuant to Section 15.1 or 15.2
will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed any such
registration statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses,
claims, damages or liabilities to which the Company, or any such
director, officer or controlling person may become subject under
the Act, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue or alleged untrue
-12-
statement of any material fact contained in any such registration
statement, any preliminary prospectus or final prospectus, or any
amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made
in any such registration statement, any preliminary prospectus or
final prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with written information
furnished by such Holder expressly for use in the preparation
thereof; and will reimburse any legal or other expenses
reasonably incurred by the Company, or any such director, officer
or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this
subparagraph (ii) shall not apply to amounts paid to any claimant
in settlement of any suit or claim unless such payment is first
approved by such Holder.
(iii) In order to provide for just and equitable
contribution in any action in which a claim for indemnification
is made pursuant to this clause (b)(iii) of Section 15.3 but is
judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time
to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding
the fact that this clause (b)(iii) of Section 15.3 provides for
indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from
others) in such proportion so that each Holder whose Warrant
Shares are being registered is responsible pro rata for the
portion represented by the public offering price received by such
Holder from the sale of such Holder's Warrant Shares, and the
Company is responsible for the remaining portion; provided,
however, that (i) no Holder shall be required to contribute any
amount in excess of the public offering price received by such
Holder from the sale of such Holder's Warrant Shares and (ii) no
person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. This subsection (b)(iii) shall not be
operative as to any Holder of Warrant Shares to the extent that
the Company has received indemnity under this clause (b)(iii) of
Section 15.3.
16. No Rights as Stockholder; Notices to Holders. Nothing contained in
this Agreement or in any of the Warrants shall be construed as conferring upon
the Holders or their transferee(s) the right to vote or to receive dividends or
to consent to or 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
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(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, sale, transfer or lease 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 (i) give notice in
writing of such event to the Holders, as provided in Section 17 hereof and (ii)
if there are more than 100 Holders, cause notice of such event to be published
once in The Wall Street Journal (national edition), such giving of notice and
publication to be completed at least 20 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
publish, mail or receive such notice or any defect therein or in the publication
or 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.
17. Notices. Any notice pursuant to this Agreement to be given or made by
the registered Holder of any Warrant to or on the Company shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed as
follows:
International Airline Support Group, Inc.
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: President
Notices or demands authorized by this Agreement to be given or made by the
Company to the registered Holder of any Warrant shall be sufficiently given or
made (except as otherwise provided in this Agreement) if sent by first-class
mail, postage prepaid, addressed to such Holder at the address of such Holder as
shown on the Warrant Register.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to
principles of conflicts of laws.
19. Supplements and Amendments. The Company and the Representatives may
from time to time supplement or amend this 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 Representatives 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 Holders. This Agreement may also be
supplemented or amended from time to time by a writing executed by or on behalf
of the Company and all of the Holders.
20. Successor. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder. Assignments by the
Holders of their rights hereunder shall be made in accordance with Section 4
hereof.
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21. Merger or Consolidation of the Company. So long as Warrants remain
outstanding, the Company will not merge or consolidate with or into, or sell,
transfer or lease all or substantially all of its property to, any other
corporation unless the successor or purchasing corporation, as the case may be
(if not the Company), shall expressly assume, by supplemental agreement executed
and delivered to the Holders, the due and punctual performance and observance of
each and every covenant and condition of this Agreement to be performed and
observed by the Company.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders, any legal or equitable right, remedy or claim under this Agreement, but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders of the Warrants and Warrant Shares.
23. Captions. The captions of the sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
24. Counterparts. This Agreement may be executed in any number of
counterparts each of which when 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 Agreement to be
duly executed as of the day, month and year first above written.
CRUTTENDEN XXXX INCORPORATED
Attest:
By: ________________________________
_________________________ Name: ______________________________
Title: _____________________________
XXXXX & XXXXXXXXXXXX, INC.
Attest:
By: ________________________________
_________________________ Name: ______________________________
Title: _____________________________
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
Attest:
By: ________________________________
_________________________ Name: ______________________________
Title: _____________________________
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EXHIBIT A
[Form of Warrant Certificate]
EXERCISABLE ON OR BEFORE DECEMBER ___, 2002
No. 175,000 Warrants
Warrant Certificate
INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
This Warrant Certificate certifies that _____________________, or
registered assigns, is the registered holder of Warrants expiring December ___,
2002 (the "Warrants") to purchase Common Stock, $0.001 par value per share (the
"Common Stock"), of International Airline Support Group, Inc., a Delaware
corporation (the "Company"). Each Warrant entitles the holder upon exercise to
receive from the Company from 10:00 a.m., Pacific time, on December ___, 1998
through and until 6:00 p.m., Pacific time, on December ____, 2002, one fully
paid and nonassessable share of Common Stock (a "Warrant Share") at the initial
exercise price (the "Warrant Price") of [$_____] payable in lawful money of the
United States of America upon surrender of this Warrant Certificate and payment
of the Warrant Price at the office of the Company designated for such purpose,
but only subject to the conditions set forth herein and in the Warrant Agreement
referred to on the reverse hereof. The Warrant Price and number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 6:00 p.m., Pacific time, on December ___,
2002 (the "Expiration Date"). Notwithstanding the foregoing, if at 6:00 p.m.,
Pacific time on the Expiration Date, any Holder or Holders of the Warrants have
not exercised their Warrants and the Closing Price (as defined in the Warrant
Agreement) for the Common Stock on the Expiration Date is greater than the
Warrant Price, then each such unexercised Warrant shall be automatically
converted into a number of shares of Common Stock of the Company equal to: (A)
the number of shares of Common Stock then issuable upon exercise of a Warrant
multiplied by (B) a fraction (1) the numerator of which is the difference
between the Closing Price for the Common Stock on the Expiration Date and the
Warrant Price and (2) the denominator of which is the Closing Price for the
Warrant Stock on the Expiration Date.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Company.
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IN WITNESS WHEREOF, International Airline Support Group, Inc. has caused
this Warrant Certificate to be signed by its President and by its Secretary and
has caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: __________, 1997 INTERNATIONAL AIRLINE SUPPORT GROUP, INC.
Attest:
By: ________________________________
_________________________ Name: ______________________________
Title: _____________________________
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[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring December __, 2002 entitling the holder on
exercise to receive shares of Common Stock, $0.001 par value per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement, dated as of December __, 1997 (the "Warrant Agreement"), duly
executed and delivered by the Company, 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. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
The Warrants may be exercised at any time on or before December ___, 2002.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Warrant Price in cash at the office of the Company designated for such purpose.
In the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the number of shares of Common Stock issuable upon the exercise of each Warrant
shall be adjusted. If the number of shares of Common Stock issuable upon such
exercise is adjusted, the Warrant Agreement provides that the Warrant Price set
forth on the face hereof may, subject to certain conditions, be adjusted. No
fractions of a share of Common Stock will be issued upon the exercise of any
Warrants but the Company will pay the cash value thereof determined as provided
in the Warrant Agreement.
The holders of the Warrants are entitled to certain registration rights
with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
certificate at the office of the Company, a new Warrant certificate or Warrant
certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to other transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
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The Company may deem and treat the registered holder(s) thereof 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, 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.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
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[Form of Election to Purchase]
(To be Executed upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ___________ shares of Common
Stock and herewith tenders payment for such shares to the order of International
Airline Support Group, Inc., in the amount of $___________ in accordance with
the terms hereof. The undersigned requests that a certificate for such shares be
registered in the name of ______________________________________________, whose
address is ___________________________________________________ and that such
shares be delivered to ____________________________ whose address is
____________________________________. If said number of shares is less than all
of the shares of Common Stock purchasable hereunder, the undersigned requests
that a new Warrant certificate representing the remaining balance of such shares
be registered in the name of ______________________________________, whose
address is ___________________________________________, and that such Warrant
certificate be delivered to _______________________, whose address is
_____________________________________________.
Signature:
Date:
Signature Guaranteed:
-20-
