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AUDIO BOOK CLUB, INC.
AND
L. H. FRIEND, WEINRESS,
XXXXXXXX & XXXXXXX, INC.
REPRESENTATIVES'
WARRANT AGREEMENT
Dated as of _____ __, 1997
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REPRESENTATIVES' WARRANT AGREEMENT dated as of , 1997,
between AUDIO BOOK CLUB,INC., a Florida corporation (the "Company"), and L. H.
FRIEND WEINRESS, XXXXXXXX & XXXXXXX, INC. and its assignees or designees (each
hereinafter referred to variously as a "Holder" or "L. H. Friend").
W I T N E S S E T H :
WHEREAS, the L. H. Friend has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") between the Company, and
L. H. Friend and Xxxxx Securities Corporation (together, the "Representatives"),
to act as one of the representatives of the several underwriters listed therein
(the "Underwriters") in connection with the Company's proposed public offering
of 2,000,000 shares of common stock of the Company, no par value, (the "Common
Stock"), at a public offering price of $_____ per share (the "Public Offering").
WHEREAS, pursuant to the Underwriting Agreement, the Company
proposes to issue warrants to the Representatives to purchase up to an aggregate
of 200,000 shares of Common Stock (the "Representatives' Warrants").
WHEREAS, the Representatives' Warrants to be issued pursuant
to this Agreement will be issued on the Closing Date (as such term is defined in
the Underwriting Agreement) by the Company to the Representatives in
consideration for, and as part of the Underwriters' compensation in connection
with, the Representatives acting as the representatives pursuant to the
Underwriting Agreement.
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NOW, THEREFORE, in consideration of the premises, the payment
by the Representatives to the Company of an aggregate of Twenty-seven Dollars
($27.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant. L. H. Friend is hereby collectively granted the
right to purchase, at any time from _____ __, 1998 until 5:30 p.m., New York
time, on _____ __, 2002 (5 years from the Effective Date of the registration
statement and any supplement thereto, on Form SB-2, No. _________), at which
time the Representatives' Warrants expire, up to an aggregate _______ shares of
Common Stock (subject to adjustment as provided in Section 8 hereof), at an
initial exercise price (subject to adjustment as provided in Section 11 hereof)
of $___ (165% of the public offering price) (the "Exercise Price").
2. Representatives' Warrant Certificates. The Representatives'
Warrant certificates (the "Warrant Certificates") delivered and to be delivered
pursuant to this Agreement shall be in the form set forth in Exhibit A, attached
hereto and made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this Agreement.
3. Registration of Warrant. The Representatives' Warrants
shall be numbered and shall be registered on the books of the Company when
issued.
4. Exercise of Representatives' Warrant.
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4.1 Method of Exercise. The Representatives' Warrants
initially are exercisable at the Exercise Price (subject to adjustment as
provided in Section 11 hereof) per Representatives' Warrant set forth in Section
8 hereof payable by certified or official bank check in New York Clearing House
funds. Upon surrender of a Representatives' Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price for the shares of Common Stock purchased at the Company's
principal offices in Florida (presently located at 0000 Xxxxxxxxx Xxxx. X.X.,
Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000) the registered holder of a
Representatives' Warrant Certificate ("Holder" or "Holders") shall be entitled
to receive a certificate or certificates for the shares of Common Stock so
purchased. The purchase rights represented by each Representatives' Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or in
part (but not as to fractional shares of Common Stock underlying the
Representatives' Warrants). In the case of the purchase of less than all of the
shares of Common Stock purchasable under any Representatives' Warrant
Certificate, the Company shall cancel said Representatives' Warrant Certificate
upon the surrender thereof and shall execute and deliver a new Representatives'
Warrant Certificate of like tenor for the balance of the shares of Common stock
purchasable thereunder.
4.2 Exercise by Surrender of Representatives' Warrant. In
addition to the method of payment set forth in Section 4.1 and in lieu of any
cash payment required thereunder, the Holder(s) of the Representatives' Warrants
shall have the right at any time and from time to time to exercise the
Representatives' Warrants in full or in part by surrendering the Warrant
Certificate in the manner specified in Section 4.1 in exchange for the number of
shares of Common Stock equal to the product of (x) the number of shares of
Common Stock as to which
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the Representatives' Warrants are being exercised, multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined in Section 9.3 (e)
hereof) of the shares of Common Stock minus the Exercise Price of the shares of
Common Stock and the denominator of which is the Market Price per share of
Common Stock. Solely for the purposes of this Section 4.2, Market Price shall be
calculated either (i) on the date on which the form of election attached hereto
is deemed to have been sent to the Company pursuant to Section 15 hereof
("Notice Date") or (ii) as the average of the Market Price for each of the five
trading days immediately preceding the Notice Date, whichever of (i) or (ii)
results in a greater Market Price.
5. Issuance of Certificates. Upon the exercise of the
Representatives' Warrant, the issuance of certificates for shares of Common
Stock, properties or rights underlying such Representatives' Warrant shall be
made forthwith (and in any event within five (5) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax,
other than income taxes, which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Sections 7
and 9 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
The Representatives' Warrant Certificates and the certificates
representing the
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shares of Common Stock or other securities, property or rights issued upon
exercise of the Representatives' Warrant shall be executed on behalf of the
Company by the manual or facsimile signature of the then present President or
any Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the then present Secretary
or any Assistant Secretary of the Company. Representatives' Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer.
6. Transfer of Representatives' Warrant. The Representatives'
Warrant shall be transferable only on the books of the Company maintained at its
principal office, where its principal office may then be located, upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration transfer, the Company shall execute
and deliver the new Representatives' Warrant to the person entitled thereto.
7. Restriction On Transfer of Representatives' Warrant. The
Holder of a Representatives' Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Representatives' Warrant is being acquired as an
investment and not with a view to the distribution thereof, and that the
Representatives' Warrant may not be sold, transferred, assigned, hypothecated or
otherwise disposed of, in whole or in part, for the term of the Representatives'
Warrant, except to officers or partners of the Underwriters, or by operation of
law.
8. Exercise Price and Number of Securities. Except as
otherwise provided in
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Section 10 hereof, each Representatives' Warrant is exercisable to purchase one
share of Common Stock at an initial exercise price equal to the Exercise Price.
The Exercise Price and the number of shares of Common Stock for which the
Representatives' Warrant may be exercised shall be the price and the number of
shares of Common Stock which shall result from time to time from any and all
adjustments in accordance with the provisions of Section 11 hereof.
9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each
Representatives' Warrant Certificate and each certificate representing shares of
Common Stock and any of the other securities issuable upon exercise of the
Representatives' Warrant (collectively, the "Warrant Shares") shall bear the
following legend unless (i) such Representatives' Warrant or Warrant Shares are
distributed to the public or sold to the underwriters for distribution to the
public pursuant to Section 9 hereof or otherwise pursuant to a registration
statement filed under the Securities Act of 1933, as amended (the "Act"), or
(ii) the Company has received an opinion of counsel, in form and substance
reasonably satisfactory to counsel for the Company, that such legend is
unnecessary for any such certificate:
THE REPRESENTATIVES' WARRANT REPRESENTED BY
THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
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SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESEN-
TATIVES' WARRANT REPRESENTED BY THE CERTIFICATE
IS RESTRICTED IN ACCORDANCE WITH THE
REPRESENTATIVES' WARRANT AGREEMENT REFERRED TO
HEREIN.
9.2 Piggyback Registration. If, at any time commencing after
the effective date of the Registration Statement and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the Act
(other than in connection with a merger or pursuant to Form S-4 or Form S-8 or
successor form thereto) it will give written notice by registered mail, at least
thirty (30) days prior to the filing of each such registration statement, to the
Holders of the Warrant Shares of its intention to do so. If any of the Holders
of the Warrant Shares notify the Company within twenty (20) days after mailing
of any such notice of its or their desire to include any such securities in such
proposed registration statement, the Company shall afford such Holders of the
Warrant Shares the opportunity to have any such Warrant Shares registered under
such registration statement. In the event that the managing underwriter for said
offering advises the Company in writing that in its opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without causing a diminution in the offering
price or otherwise adversely affecting the offering, the Company will include in
such registration (a) first, the securities the Company proposes to sell, (b)
second, the securities held by the entities that made the demand for
registration, (c) third, the Warrant Shares requested to be included in such
registration which in the opinion of such underwriter can be sold, pro rata
among the Holders of Warrant Shares on the basis of the
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number of Representatives' Warrant Shares requested to be registered by such
Holders, and (d) fourth, other securities requested to be included in such
registration.
Notwithstanding the provisions of this Section 9.2, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 9.2 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement or to withdraw the same after the
filing but prior to the effective date thereof.
9.3 Demand Registration.
(a) At any time commencing one (1) year after the effective
date of the Registration Statement and expiring five (5) years from the
effective date of the Registration Statement, the Holders of the
Representatives' Warrants and/or Warrant Shares representing a "Majority" (as
hereinafter defined) of the Representatives' Warrants and/or Warrant Shares
shall have the right (which right is in addition to the registration rights
under Section 9.2 hereof), exercisable by written notice to the Company, to have
the Company prepare and file with the Securities and Exchange Commission (the
"Commission"), on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Holders, in order to comply with the
provisions of the Act, so as to permit a public offering and sale by such
Holders and any other Holders of the Representatives' Warrant and/or Warrant
Shares who notify the Company within fifteen (15) days after the Company mails
notice of such request pursuant to Section 9.3(b) hereof (collectively, the
"Requesting Holders") of their respective Warrant Shares for the earlier
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of (i) six (6) consecutive months or (ii) until the sale of all of the Warrant
Shares requested to be registered by the Requesting Holders.
(b) The Company covenants and agrees to give written notice
of any registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Representatives' Warrants and/or Warrant Shares
to all other registered Holders of the Representatives' Warrants and the Warrant
Shares within ten (10) days from the date of the receipt of any such
registration request.
(c) In addition to the registration rights under Section
9.2 and subsection (a) of this Section 9.3, at any time commencing one (1) year
after the effective date of the Registration Statement and expiring five (5)
years from the effective date of the Registration Statement, the Holders of a
Majority of the Representatives' Warrants and/or Warrant Shares shall have the
right on one occasion, exercisable by written request to the Company, to have
the Company prepare and file with the Commission a registration statement so as
to permit a public offering and sale by such Holders of their respective Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the sale
of all of the Warrant Shares requested to be registered by such Holders;
provided, however, that the provisions of Section 9.4(b) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request. If the
Holders have exercised their rights under Section 9.3(a) then the Holders may
not exercise their rights under Section 9.3(c) for a period of six (6) months
following the effective date of any registration statement filed pursuant to
Section 9.3(a).
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(d) Notwithstanding anything to the contrary contained
herein, if the Company shall not have filed a registration statement for the
Warrant Shares within the time period specified in Section 9.4(a) hereof
pursuant to the written notice specified in Section 9.3(a) of the Holders of a
Majority of the Representatives' Warrants and/or Warrant Shares, the Company, at
its option, may repurchase (i) any and all Warrant Shares at the higher of the
Market Price (as defined in Section 9.3(e)) per share of Common Stock on (x) the
date of the notice sent pursuant to Section 9.3(a) or (y) the expiration of the
period specified in Section 9.4(a) and (ii) any and all Representatives' Warrant
at such Market Price less the Exercise Price of such Representatives' Warrant.
Such repurchase shall be in immediately available funds and shall close within
two (2) days after the later of (i) the expiration of the period specified in
Section 9.4(a) or (ii) the delivery of the written notice of election specified
in this Section 9.3(d).
(e) Definition of Market Price. As used herein, the phrase
"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average closing
sale price as furnished by the American Stock Exchange ("Amex") or similar
organization if Amex is no longer reporting such information, or if the Common
Stock is not quoted on Amex, as determined in good faith by resolution of the
Board of Directors of the Company, based on the best information available to
it.
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9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Sections 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within ninety (90) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions, and
excluding roadshow expenses if the only shares to be registered in such
Registration Statement are Warrant Shares), fees and expenses in connection with
all registration statements filed pursuant to Sections 9.2 and 9.3(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. The Holder(s) will pay all costs, fees and
expenses (including those of the Company) in connection with the registration
statement filed pursuant to Section 9.3(c).
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
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(d) The Company shall indemnify the Holder(s) of the
Warrant Shares to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section 15 of
the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement but only to the same extent and with the same effect as the provisions
pursuant to which the Company has agreed to indemnify each of the Underwriters
contained in Section 7 of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Shares to be sold pursuant
to a registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 7 of the
Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
(f) Nothing contained in this Agreement shall be construed
as requiring
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the Holder(s) to exercise their Representatives' Warrant prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Shares to be included in any registration
statement filed pursuant to Section 9.3 hereof, or permit any other registration
statement to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 9.3 hereof (other than registration
statements filed prior to an exercise of registration rights by a Holder of
Representatives Warrants and/or Warrant Shares pursuant to Section 9.2 hereof),
without the prior written consent of L. H. Friend Securities Corporation or as
otherwise required by the terms of any existing registration rights granted
prior to the date of this Agreement by the Company to the holders of any of the
Company's securities.
(h) The Company shall furnish to each Holder participating
in the offering and to each underwriter, if any, a signed counterpart, addressed
to such Holder or underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement), and (ii) a "cold comfort"
letter dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the
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prospectus included therein) and, in the case of such accountants' letter, with
respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall enter into an underwriting agreement
with the managing underwriters (in the case of registration rights exercised
pursuant to Section 9.3 hereof, selected for such underwriting by Holders
holding a Majority of the Warrant Shares requested to be included in such
underwriting, which may be the Representative). Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their Warrant
Shares and may, at their option, require that any or all the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such Holders. Such
Holders shall not
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be required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders and their
intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in
reference to the Representatives' Warrants or Warrant Shares shall mean in
excess of fifty percent (50%) of the then outstanding Representatives' Warrants
or Warrant Shares that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
10. Obligations of Holders. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to Section 9
hereof that each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus
relating to the Warrant Shares covered by a registration statement is required
to be delivered under the Act, of the happening of any event with respect to
such selling Holder as a result of which the
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prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
11. Adjustments to Exercise Price and Number of Securities.
The Exercise Price in effect at any time and the number and kind of securities
purchased upon the exercise of the Representatives' Warrant shall be subject to
adjustment from time to time only upon the happening of the following events:
11.1 Stock Dividend, Subdivision and Combination. In case
the Company shall (i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a greater number of
shares, or (iii) combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above shall
occur.
11.2 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 11,
the number of Warrant Shares issuable upon the exercise at the adjusted Exercise
Price of each Representatives' Warrant shall
16
be adjusted to the nearest number of whole shares of Common Stock by multiplying
a number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of the
Representatives' Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
11.3 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Articles of Incorporation of the Company as amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
11.4 Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company into, another corporation (other
than a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the Holder of each Representatives' Warrant
then outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Representatives' Warrant) to receive, upon exercise of such
Representatives' Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock for which such Representatives' Warrant
might have been exercised immediately prior to such consolidation, merger, sale
or transfer. Such supplemental warrant agreement shall provide for adjustments
17
which shall be identical to the adjustments provided in Section 11. The above
provision of this subsection shall similarly apply to successive consolidations
or mergers.
11.5 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Representatives'
Warrant or the Warrant Shares;
(b) Upon the issuance or sale of Common Stock (or any
other security convertible, exercisable, or exchangeable into shares of Common
Stock) upon the direct or indirect conversion, exercise, or exchange of any
options, rights, warrants, or other securities or indebtedness of the Company
outstanding as of the date of this Agreement or granted pursuant to any stock
option plan of the Company in existence as of the date of this Agreement,
pursuant to the terms thereof; or
(c) If the amount of said adjustment shall be less
than two cents ($.02) per share, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents ($.02) per Representatives' Warrant.
11.6 Exchange and Replacement of Representatives' Warrant
Certificates. Each Representatives' Warrant Certificate is exchangeable, without
expense, upon the surrender thereof by the registered Holder at the principal
executive office of the Company for a new
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Representatives' Warrant Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
Representatives' Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Representatives' Warrant, if mutilated,
the Company will make and deliver a new Warrant Certificate of like tenor, in
lieu thereof.
12. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Representatives' Warrant, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
13. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the
Representatives' Warrant, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
Every transfer agent ("Transfer Agent") for the Common Stock and other
securities of the Company issuable upon the exercise of the Representatives'
Warrant will be irrevocably
19
authorized and directed at all times to reserve such number of authorized shares
of Common Stock and other securities as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with every Transfer Agent for
the Common Stock and other securities of the Company issuable upon the exercise
of the Representatives' Warrant. The Company will supply every such Transfer
Agent with duly executed stock and other certificates, as appropriate, for such
purpose. The Company covenants and agrees that, upon exercise of the
Representatives' Warrant and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Representatives' Warrant shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon the exercise of the Representatives' Warrant to be
listed (subject to official notice of issuance) on all securities exchanges on
which the Common Stock issued to the public in connection herewith may then be
listed and/or quoted on Amex.
14. Notices to Representatives' Warrant Holders. Nothing
contained in this Agreement shall be construed as conferring upon the Holders
the right to vote or to consent or to receive notice as a stockholder in respect
of any meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Representatives' Warrants
and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable
20
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then in any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
21
15. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or certified mail,
return receipt requested:
(a) if to the registered Holder of the Representatives'
Warrant, to the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section
4 hereof or to such other address as the Company may designate by notice to the
Holders.
16. Supplements; Amendments; Entire Agreement. This Agreement
(including the Underwriting Agreement to the extent portions thereof are
referred to herein) contains the entire understanding between the parties hereto
with respect to the subject matter hereof and may not be modified or amended
except by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought. The Company and the Representatives may
from time to time supplement or amend this Agreement without the approval of any
holders of Representatives' Warrant Certificates (other than the Representative)
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Representatives may deem necessary or desirable and
which the Company and the Representatives deem shall not adversely affect the
interests of the Holders of Representatives' Warrant Certificates.
17. Successors. All of the covenants and provisions of this
Agreement shall be
22
binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
18. Survival of Representations and Warranties. All statements
in any schedule, exhibit or certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf of
the parties to this Agreement, all representations, warranties and agreements
made by the parties to this Agreement or pursuant hereto shall survive.
19. Governing Law. This Agreement and each Representatives'
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
20. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Representatives and any
23
other registered Holder(s) of the Representatives' Warrant Certificates or
Warrant Shares any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and the Underwriters and any other Holder(s) of the Representatives'
Warrant Certificates or Warrant Shares.
23. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one and
the same instrument.
IN WITNESS OF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
ATTEST: AUDIO BOOK CLUB, INC.
_______________________________ By:_____________________________________________
Name:
Title:
L. H. FRIEND, WEINRESS, XXXXXXXX & XXXXXXX, INC.
By:_____________________________________________
Name:
Title:
24
EXHIBIT A
[FORM OF REPRESENTATIVES' WARRANT CERTIFICATE]
THE REPRESENTATIVES' WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVES' WARRANT
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, ____ ___, 2002
Representatives' Warrant No.
__________ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered
assigns, is the registered holder of Warrants to purchase initially, at any time
from ____ ___, 1998 until 5:30 p.m., New York time on ____ ___, 2002
("Expiration Date"), up to shares of fully-paid and non-assessable common stock,
no par value ("Common Stock") of Audio Book Club, Inc., a Florida corporation
(the "Company") at the initial exercise price, subject to adjustment in certain
events, of $_____ per share (the "Exercise Price") upon surrender of this
Representatives' Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Representatives' Warrant Agreement dated as of _____ ___, 1997 among
the Company and L. H. Friend Securities Corporation (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration
EXH. A-2
1
Date, at which time all Representatives' Warrant evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Representatives' Warrant evidenced by this Warrant
Certificate are part of a duly authorized issue of Representatives' Warrant
issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Representatives' Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the
Representatives' Warrant; provided, however, that the failure of the Company to
issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Representatives' Warrant shall be issued to the
transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided herein and in the Warrant Agreement, without any charge
except for any tax or other governmental charge imposed in connection with such
transfer.
Upon the exercise of less than all of the Representatives'
Warrant evidenced by this Certificate, the Company shall forthwith issue to the
holder hereof a new Warrant Certificate representing such numbered unexercised
Representatives' Warrant.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any holder thereof
to any of the rights
EXH. A-2
2
of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ____ ___, 1997.
ATTEST: AUDIO BOOK CLUB, INC.
_______________________________ By:_____________________________________________
Name:
Title:
EXH. A-3
3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.11]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase Shares of Common
Stock and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House Funds to the order of
Audio Book Club, Inc. (the "Company") in the amount of $_____, all in accordance
with the terms of Section 3.1 of the Representatives' Warrant Agreement dated as
of ____ __, 1997 among the Company and L. H. Friend Weiness, Xxxxxxxx & Xxxxxxx,
Inc. The undersigned requests that a certificate for such securities be
registered in the name of___________________________________________ , whose
address is________________________________ and that such certificate be
delivered to_________________________________ , whose address is
_________________________________, and if said number of shares shall not be all
the shares purchasable hereunder, that a new Warrant Certificate for the balance
of the shares purchasable under the within Warrant Certificate be registered in
the name of the undesigned warrant holder or his assignee as below indicated and
delivered to the address stated below.
Dated:_____________________
Signature:____________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
Address:______________________________________________
______________________________________________
______________________________________________________
(Insert Social Security or Other Identifying Number of
Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-4
4
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________ here sells, assigns and transfers unto
[NAME OF TRANSFEREE] this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and
appoint___________________________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:_____________________
Signature:____________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
Address:______________________________________________
______________________________________________
______________________________________________________
(Insert Social Security or Other Identifying Number of
Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-5
5
