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EXHIBIT - 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated December 18, 1998 (the "Agreement"), by and
between M-Wave, Inc., a Delaware corporation (the "Company"), and First Chicago
Equity Corporation, an Illinois corporation ("FCEC").
A. FCEC owns 694,464 shares of the common stock, $.01 par value per
share (the "Common Stock"), of the Company; and
B. FCEC desires to sell to the Company, and the Company desires to
repurchase from FCEC, 694,464 shares of Common Stock upon the terms and subject
to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following
terms have the respective meanings set forth below:
"AFFILIATE" of a party means any person or entity controlling, controlled
by, or under common control with, such party. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person or entity, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person or entity, whether through the ownership of voting securities, by
agreement or otherwise.
"BENEFICIALLY OWNED" shall have the meaning provided in Rule 13d-3 under
the Exchange Act.
"BOARD" means the Board of Directors of the Company.
"COMMISSION" means the Securities and Exchange Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STANDSTILL PERIOD" means the period commencing on the date hereof and
terminating on the date that is eighteen months thereafter.
Section 2. Sale and Repurchase; Closing.
2.01 Sale and Repurchase. On the terms of this Agreement, at the Closing
(as defined in Section 2.02 hereof), FCEC shall sell to the Company, and the
Company shall repurchase
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from FCEC, 694,464 shares of Common Stock. At the Closing, FCEC shall deliver
to the Company, against payment therefor in accordance with Section 2.03 hereof,
one or more stock certificates duly endorsed in blank representing the 694,464
shares of Common Stock being sold by FCEC hereunder.
2.02 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall be held on the date hereof, at the offices of
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, 0000 Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 at
8:00 a.m., Chicago time, or such other date, time and place as may be agreed by
the parties. The date upon which the Closing occurs is hereinafter referred to
as the "Closing Date."
2.03 Consideration. As payment in full for the 694,464 shares of Common
Stock being repurchased by the Company from FCEC hereunder, the Company shall:
(a) deliver to FCEC at the Closing $694,464 by wire transfer in
immediately available funds to an account of FCEC (designated in writing
by FCEC to the Company prior to the Closing); and
(b) issue to FCEC at the Closing a warrant to purchase 694,464 shares
of Common Stock in the form of Exhibit A attached to this Agreement (the
"Warrant").
Section 3. Representations and Warranties of the Company.
(a) Organization. The Company is duly organized and validly existing
under the laws of the State of Delaware.
(b) Authority and Authorization. The Company has the requisite power and
authority to enter into this Agreement and the Warrant and to carry out its
obligations hereunder and thereunder. The execution, delivery and performance
of this Agreement and the Warrant by the Company has been duly and validly
authorized and no other proceedings on its part are necessary to authorize this
Agreement or the Warrant or the transactions contemplated hereby or thereby.
This Agreement and the Warrant has been duly executed and delivered by the
Company and is (assuming the due authorization, execution and delivery by FCEC)
a valid and binding agreement of the Company enforceable against the Company in
accordance with its terms except as may be limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors generally and except as
may be limited by the availability of equitable remedies and except as rights of
indemnity or contribution may be limited by federal or state securities or other
laws or the public policy underlying such laws. The shares of Common Stock
issuable upon exercise of the Warrant in accordance with its terms have been
duly authorized by all necessary corporate action on the part of the Company,
and such shares of Common Stock have been validly reserved for issuance, and
upon issuance upon such exercise will be validly issued and outstanding, fully
paid and nonassessable, and free and clear of any liens and preemptive or
similar rights.
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(c) Non-Contravention. The execution, delivery and performance of this
Agreement and the Warrant by the Company and the consummation of any of the
transactions contemplated hereby or thereby by the Company will not (a) conflict
with or result in a breach of any of the terms and provisions of, or constitute
a default (or an event which with notice or lapse of time, or both, would
constitute a default), under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company pursuant
to any agreement, instrument, franchise, license or permit to which the Company
is a party or by which any of its properties or assets may be bound, or (b)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
applicable to the Company or any of its properties or assets, other than such
breaches, defaults or violations that would not impair the ability of the
Company to consummate the transactions contemplated by this Agreement or the
Warrant. The execution, delivery and performance of this Agreement and the
Warrant by the Company and the consummation of the transactions contemplated
hereby and thereby by the Company do not and will not violate or conflict with
any provision of the organizational documents of the Company, as currently in
effect.
(d) No Consents. No consent, authorization or approval of, or filing
with, any person or any U.S. or foreign federal, state or local governmental
department, commission, board, agency or instrumentality is required to be made
or obtained by the Company in connection with their execution and performance of
this Agreement or the Warrant, except for such consents, authorizations,
approvals or filings, the absence of which would not prevent, impair, hinder or
delay the consummation of the transactions contemplated by this Agreement or the
Warrant.
Section 4. Representations and Warranties of FCEC.
(a) Organization. FCEC is duly organized and validly existing under the
laws of the State of Illinois.
(b) Authority and Authorization. FCEC has the requisite power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by FCEC
has been duly and validly authorized and no other proceedings on its part are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement has been duly executed and delivered by FCEC and is (assuming the
due authorization, execution and delivery by the Company) a valid and binding
agreement of FCEC enforceable against FCEC in accordance with its terms except
as may be limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally and except as may be limited by the
availability of equitable remedies and except as rights of indemnity or
contribution may be limited by federal or state securities or other laws or the
public policy underlying such laws.
(c) Non-Contravention. The execution, delivery and performance of this
Agreement by FCEC and the consummation of any of the transactions contemplated
hereby by FCEC will not (a) conflict with or result in a breach of any of the
terms and provisions of, or constitute a default (or an event which with notice
or lapse of time, or both, would constitute a default),
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under or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of FCEC pursuant to any agreement, instrument,
franchise, license or permit to which FCEC is a party or by which any of its
properties or assets may be bound or (b) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body applicable to FCEC or any of its
properties or assets, other than such breaches, defaults or violations that
would not impair the ability of FCEC to consummate the transactions contemplated
by this Agreement. The execution, delivery and performance of this Agreement by
FCEC and the consummation of the transactions contemplated hereby by FCEC do not
and will not violate or conflict with any provision of the organizational
documents of FCEC, as currently in effect.
(d) No Consents. No consent, authorization or approval of, or filing
with, any person or any U.S. or foreign federal, state or local governmental
department, commission, board, agency or instrumentality is required to be made
or obtained by FCEC in connection with its execution and performance of this
Agreement, except for such consents, authorizations, approvals or filings, the
absence of which would not prevent, impair, hinder or delay the consummation of
the transactions contemplated by this Agreement.
(e) Experience of FCEC; Acquisition for Investment. FCEC is an
accredited investor as defined in Regulation D under the Securities Act. FCEC's
financial condition and investments is such that it is in a position to hold the
Warrant and the shares of Common Stock issuable upon exercise of the Warrant for
an indefinite period, bear the economic risks of the investment and to withstand
the complete loss of the investment. FCEC has extensive knowledge and
experience in financial and business matters and has the capability to evaluate
the merits and risks of an investment in the Warrant and the shares of Common
Stock issuable upon exercise of the Warrant. FCEC represents that it is
acquiring the Warrant solely for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof,
and that it has no present intention or plan to effect any distribution of the
Warrant or of the Common Stock issuable upon exercise of the Warrant. FCEC
understands that the Warrant and the shares of Common Stock issuable upon
exercise of the Warrant will not be registered under the Securities Act by
reason of specific exemptions therefrom which depend upon, among other things,
the bona fide nature of FCEC's investment intent and the accuracy of FCEC's
representations as expressed herein.
Section 5. Additional Agreements.
5.01 Resignation. Simultaneously with the execution of this Agreement,
each of Messrs. Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxx has executed and delivered
an irrevocable resignation of his position as a director of the Company
effective upon the Closing.
5.02 Standstill. During the Standstill Period, neither FCEC nor its
Affiliates shall, directly or indirectly, (a) acquire offer to acquire
Beneficial Ownership of any Common Stock or interest therein except pursuant to
exercise of the Warrant, (b) solicit, initiate or participate in any
"solicitation" of "proxies" or become a "participant" in any "election contest"
(as such
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terms are defined or used in Regulation 14A under the Exchange Act, but (x)
disregarding clause (iv) of Rule 14a-1(1)(2) and (y) including any exempt
solicitation pursuant to Rule 14a-2(b)(1) or Rule 14a-2(b)(2)); call, or in any
way participate in a call for, any special meeting of stockholders of the
Company (or take any action with respect to acting by written consent of the
Company's stockholders); request, or take any action to obtain or retain any
list of holders of any securities of the Company; or initiate or propose any
stockholder proposal or participate in the making of, or solicit stockholders
for the approval of, any stockholder proposal; (c) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of Exchange
Act) with respect to any Common Stock (or any securities the ownership of which
would make the owner thereof a Beneficial Owner of Common Stock ); (d) seek
Board representation or the removal of any directors of the Company or a change
in the composition or size of the Board; (e) take any action, or disclose any
intent, purpose, plan or proposal, with respect to this Agreement, the Company
or its Affiliates or the Board, management, policies, affairs, securities or
assets of the Company or its Affiliates that seeks to influence or control the
management, Board or policies of the Company, or otherwise is inconsistent with
this Agreement, including any action, intent, purpose, plan or proposal that is
conditioned on, or would require the Company or any of its Affiliates to make
any public disclosure relating to, any such action, intent, purpose, plan,
proposal or condition; (f) request any waiver, modification, termination or
amendment of this paragraph or any relinquishment by the Company of any rights
with respect thereto; or (g) assist, advise, encourage or act in concert with
any person with respect to, or seek to do, any of the foregoing. Without
limiting the generality of the foregoing, FCEC hereby withdraws its notice to
the Company dated November 17, 1998 of proposed director nominees and will
promptly amend its Schedule 13D to reflect such withdrawal and the terms of this
Agreement.
Section 6. Indemnification.
6.01 Company Indemnification. The Company agrees to indemnify and hold
harmless FCEC, each person who controls FCEC within the meaning of Section 15 of
the Securities Act and/or Section 20 of the Exchange Act, its Affiliates and
each of its officers, directors, employees, representatives and agents (the
"FCEC Indemnitees"), to the fullest extent lawful, from and against any and all
actions, suits, claims, proceedings, costs, losses, liabilities, damages,
judgments, amounts paid in settlement in accordance with Section 6.02 and
reasonable expenses (including, without limitation, reasonable attorneys' fees
and disbursements) (hereinafter collectively referred to as a "Loss" or
"Losses"), that may be incurred by or asserted or awarded against any FCEC
Indemnitee in each case arising out of or in connection with or relating to any
investigation, litigation, or proceeding arising out of this Agreement or the
transactions contemplated hereby.
6.02 Indemnification Procedure. A FCEC Indemnitee shall give written
notice to the Company of any claim with respect to which it seeks
indemnification promptly after the discovery by such parties of any matters
giving rise to a claim for indemnification pursuant to Section 6.01; provided
that the failure of any FCEC Indemnitee to give notice as provided herein shall
not relieve the Company of its obligations under this Section 6 except to the
extent that the
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Company is actually prejudiced by such failure to give notice. In case any such
action, proceeding or claim is brought against any FCEC Indemnitee, the Company
shall be entitled to participate in and, unless in the reasonable good faith
judgment of the FCEC Indemnitees a conflict of interest between them and the
Company exists in respect of such action, proceeding or claim, to assume the
defense thereof, and after notice from the Company to the FCEC Indemnitees of
its election so to assume the defense thereof, the Company shall not be liable
to such FCEC Indemnitees for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof. In any event, (i) unless
and until the Company elects in writing to assume and does so assume the defense
of any such claim, proceeding or action, the FCEC Indemnitees' reasonable costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be Losses subject to indemnification hereunder
in accordance with the provisions hereof and (ii) the FCEC Indemnitees shall in
no event be entitled to the reasonable costs and expenses of more than one
counsel for all of the FCEC Indemnitees. If the Company elects to defend any
such action or claim, then the FCEC Indemnitees shall be entitled to participate
in such defense with counsel of their choice at their sole cost and expense
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company, (ii) the Company shall have failed to assume the defense
or employ counsel or (iii) the named parties to any such action include both the
Company and FCEC and FCEC shall have been advised by such counsel that there may
be one or more legal defenses available to it which are different from or
additional to those available to the Company. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its
written consent; provided, however, that such consent shall not unreasonably
withheld. The Company shall not, without the prior written consent of FCEC,
effect any settlement of any pending or threatened proceeding in respect of
which FCEC is or could have been a party and indemnity could have been sought
hereunder by FCEC unless such settlement includes an unconditioned release of
FCEC from all liability or claims that are the subject matter of such
proceeding.
Section 7. Miscellaneous.
7.01 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed by the applicable party hereto in accordance with the
specific terms of this Agreement or were otherwise breached. Each of the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement by the other and to enforce specifically the terms
and provisions hereof in addition to any other remedy to which such party is
entitled at law or in equity, and each party waives the posting of any bond or
security in connection with any proceeding related thereto.
7.02 Expenses. Except as may otherwise be provided herein, no party
hereto shall be responsible for the payment of any other party's expenses
incurred in connection with this Agreement.
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7.03 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and its
respective successors and permitted assigns, and it is not the intention of the
parties to confer third party beneficiary rights upon any other person or
entity.
7.04 Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by each of the Company and FCEC.
7.05 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned, in whole or in part, by any of the
parties without the prior written consent of the other party.
7.06 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to FCEC, to
First Chicago Equity Corporation
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
(b) if to the Company, to
M-Wave, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxx, President
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with a copy to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx, Esq.
7.07 Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware, without regard to the
conflict of law principles thereof. All actions and proceedings arising out of
or relating to this Agreement shall be heard and determined in any state or
Federal court sitting in Delaware. Each of the parties hereto (i) consents to
submit such party to the personal jurisdiction of any Federal court located in
the State of Delaware or any Delaware state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that such party will not bring any action relating to this Agreement or
the transactions contemplated hereby in any court other than a Federal court
sitting in the State of Delaware or a Delaware state court.
7.08 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original. This
Agreement shall become effective when one counterpart signature page has been
signed by each party hereto and delivered, in each case, to the other party.
7.09 Effect of Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.10 Further Assurances. Each of the parties hereto agrees to execute and
deliver all such further documents, certificates and instruments, and take all
such further reasonable action as may be necessary or reasonably appropriate, in
order to consummate the transactions contemplated hereby.
7.11 Severability. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unforceable, the same shall not affect any other provision of this Agreement.
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IN WITNESS WHEREOF, the undersigned, being duly authorized, have set forth
their signatures.
M-WAVE, INC. FIRST CHICAGO EQUITY CORPORATION
By:_________________________________ By:_______________________________
Its:________________________________ Its:______________________________
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER STATE SECURITIES
LAWS. THESE SECURITIES MAY ONLY BE RESOLD OR OTHERWISE TRANSFERRED IN
ACCORDANCE WITH CERTAIN RESTRICTIONS SET FORTH HEREIN AND ONLY IF THESE
SECURITIES ARE REGISTERED OR SUCH RESALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS.
WARRANT
TO PURCHASE
694,464 SHARES OF
COMMON STOCK ($.01 PAR VALUE)
OF
M-WAVE, INC.
DATED: December 18, 1998
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This certifies that, for value received, First Chicago Equity Corporation,
an Illinois corporation ("FCEC"), or its permitted assigns (each, a "Holder"),
is entitled to purchase, subject to the terms and provisions of this Warrant,
from M-Wave, Inc., a corporation duly organized and existing under the laws of
the State of Delaware (the "Company"), at any time on or after the date hereof
and on or before the Expiration Date (as defined below), 694,464 (the "Warrant
Number") fully paid and nonassessable shares of Common Stock, $.01 par value
(the "Common Stock"), of the Company. The Warrant Number and the Exercise Price
(as defined below) are subject to adjustment from time to time as set forth in
Section 7. This Warrant is the Warrant referred to in Section 2.03 of the Stock
Purchase Agreement, dated as of December 18, 1998 (the "Stock Purchase
Agreement"), by and between the Company and FCEC.
SECTION 1. DEFINITIONS. Except as otherwise specified herein, defined
terms herein, which may be identified by the capitalization of the first letter
of each principal word thereof, have the meanings assigned to them in the Stock
Purchase Agreement.
As used herein, the term "Expiration Date" means, with respect to all or a
portion of this Warrant, as the case may be, the fifth anniversary of the date
hereof.
SECTION 2. EXERCISE OF WARRANT. Subject to the provisions hereof, on or
before the Expiration Date and after the Company has delivered to the Holder an
Extraordinary Transaction Notice (as defined in Section 8 hereof), the Holder
may exercise this Warrant in whole or in part only if it delivers (i) this
Warrant, (ii) an executed Purchase Form in the form attached hereto as Exhibit
A, and (iii) payment of the Exercise Price (as defined below) for the number of
shares of Common Stock specified in the Purchase Form payable in United States
dollars by certified bank check or wire transfer of immediately available funds
to an account designated by the Company for this purpose (the earliest date by
which the Holder has delivered all of the items specified in clause (i), (ii)
and (iii) above shall be considered the date of exercise for purposes of this
Warrant); provided, however, that if the Extraordinary Transaction Notice
relates to an Extraordinary Transaction (as defined in Section 8 hereof) of the
type set forth in clause (i) or (iv) of Section 8(b) hereof, the Holder must
exercise this Warrant prior to the Extraordinary Transaction Date (as defined in
Section 8 hereof). The exercise of this Warrant by the Holder shall in any
event be subject to the condition that the Company consummates the Extraordinary
Transaction described in the Extraordinary Transaction Notice. The Company shall
issue certificate(s) for the shares of Common Stock issuable upon exercise. If
the Company does not engage in the Extraordinary Transaction within thirty-five
business days after it delivers an Extraordinary Transaction Notice, the Company
shall immediately return this Warrant, the Purchase Form and the payment of the
Exercise Price to the Holder and all of the provisions of this Warrant shall
continue in full force and effect.
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The exercise price per share of Common Stock (the "Exercise Price") subject
to this Warrant is equal to:
Date of Exercise Exercise Price
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Before First Anniversary
of date hereof $1.00
From the First Anniversary until the
day preceding the Second Anniversary
of date hereof $1.05
From the Second Anniversary until the
day preceding the Third Anniversary
of date hereof $1.10
From the Third Anniversary until the
day preceding the Fourth Anniversary
of date hereof $1.15
From the Fourth Anniversary until the
day preceding the Fifth Anniversary
of date hereof $1.20
Notwithstanding the foregoing, in the event that the Company engages in an
Extraordinary Transaction of the type described in clause (i) or (iv) of Section
8(b) hereof, then in lieu of paying the Exercise Price per share of Common Stock
in accordance with Section 2 hereof, the Holder may elect (the "Section 2
Election") on the Purchase Form to receive the securities or other property
deliverable per share of Common Stock in connection with the Extraordinary
Transaction at the same time the holders of Common Stock receive such securities
or other property; provided that the value of such securities or other property
to be received by the Holder shall be first reduced by the Exercise Price per
share. For purposes of the Section 2 Election, the value of the securities or
other property deliverable per share of Common Stock in connection with an
Extraordinary Transaction shall be determined in good faith by the Board of
Directors.
All shares of Common Stock issued upon exercise of this Warrant shall be
duly authorized and validly issued, fully paid and nonassessable.
SECTION 3. RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER. The
Company hereby agrees that there shall be reserved for issuance and delivery
upon exercise of this Warrant, free from preemptive rights, the number of shares
of authorized but unissued shares of Common Stock, or other stock or securities
deliverable
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pursuant to Section 7, as shall be required for issuance or delivery upon
exercise of this Warrant.
SECTION 4. FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock upon exercise of this Warrant.
SECTION 5. LOSS OF WARRANT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date.
SECTION 6. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company.
SECTION 7. ANTIDILUTION PROVISIONS. The Exercise Price and the Warrant
Number shall be subject to adjustment from time to time as provided in this
Section 7.
(a) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exercise Price in effect
immediately prior to the opening of business on the next business day following
the day upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case the outstanding shares of Common Stock shall
each be combined into a smaller number of shares of Common Stock, the Exercise
Price in effect immediately prior to the opening of business on the next
business day following the day upon which such combination becomes effective
shall be proportionately increased.
(b) In case the Company shall issue or sell shares of Common Stock or
issue rights, options or warrants to any person entitling them to purchase
shares of Common Stock at a price per share less than the then current market
price per share of the Common Stock (as determined pursuant to subsection (e)
below) on the date of such sale or issuance, the Exercise Price in effect
immediately following such date shall be adjusted to a price, computed to the
nearest cent, so that the same shall equal the price determined by multiplying:
(i) such Exercise Price by a fraction, of which
(ii) the numerator shall be (A) the number of shares of Common Stock
outstanding on such date plus (B) the number of shares which the aggregate
offering price of the total number of shares so offered for purchase would
purchase at such current market price, and of which
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(iii) the denominator shall be (A) the number of shares of Common
Stock outstanding on such date plus (B) the number of additional shares of
Common Stock which are so sold or offered for purchase.
(c) The provisions of Section 7(b) shall not apply to any issuance or
sale of Common Stock or any rights, options or warrants to purchase Common
Stock: (i) pursuant to any employee or director incentive or benefit plan or
arrangement, including any employment, severance or consulting agreement,
whether presently existing or to be established in the future; or (ii) pursuant
to any firmly underwritten public offering of the Common Stock.
(d) Whenever there shall be any change in the Exercise Price under this
Section 7, then there shall be an adjustment (to the nearest thousandth of a
share) in the Warrant Number, which adjustment shall become effective at the
time such change in the Exercise Price becomes effective and shall be made by
multiplying the Warrant Number in effect immediately before such change in the
Exercise Price by a fraction, the numerator of which is the Exercise Price
immediately before such change and the denominator of which is the Exercise
Price immediately after such change.
(e) The current market price per share of Common Stock on any date shall
be deemed to be the average of the last sale prices of the Common Stock for the
five consecutive trading days before the date of such sale or issuance. If the
Common Stock is not traded on a national securities exchange or quoted on an
inter-dealer quotation system, the current market price shall be determined in
good faith by the Board of Directors.
SECTION 8. EXTRAORDINARY TRANSACTIONS.
(a) In case at any time prior to the Expiration Date the Company shall
publicly announce its intention to enter into an Extraordinary Transaction (as
defined herein), then the Company shall give written notice to the Holder at the
same time as, or as soon as practicable after, such event is first communicated
to holders of Common Stock, of the date on which such Extraordinary Transaction,
is expected to take place. The Company shall also give at least fifteen
business days prior written notice (the "Extraordinary Transaction Notice") to
the Holder of the date (the "Extraordinary Transaction Date") as of which an
Extraordinary Transaction is expected to become effective (e.g., the date of
filing of a certificate of merger or certificate of dissolution) for purposes of
determining the holders of the Common Stock which shall be entitled to
securities or other property deliverable in connection with the Extraordinary
Transaction. The Company agrees that it will not make the Extraordinary
Transaction of the type set forth in clause (i) or (iv) of Section 8(b) hereof
effective prior to the Extraordinary Transaction Date.
(b) For purposes of this Warrant, "Extraordinary Transaction" shall mean
any of the following involving the Company or any of its material subsidiaries:
(i) any merger, consolidation, share exchange, recapitalization, business
combination or other similar
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transaction, which in each case is effected in such a way that the holders of
shares of Common Stock are entitled to receive stock, securities or assets with
respect to or in exchange for shares of Common Stock; (ii) any sale, lease,
exchange, transfer or other disposition of 60% or more of the assets of the
Company and its subsidiaries, taken as a whole, in a single transaction or
series of transactions, (iii) any tender offer or exchange offer for 50% or more
of the outstanding shares of capital stock of the Company; (iv) any voluntary or
involuntary dissolution, liquidation or other winding up of the Company or any
of its material subsidiaries; (v) any "person" or "group" (as such term is used
in Section 13(d)(3) and 14(d) of the Exchange Act) (other Xxxxxx X. Xxxxx solely
by virtue of any voting agreements he may have with FCEC and its Affiliates)
becomes, directly or indirectly, the "beneficial owner" (as defined in Rule
13(d)(3) and 13(d)(5) under the Exchange Act) of more than 50% of the combined
voting power of the then outstanding securities of the Company entitled to vote
generally in the election of directors of the Company ("Voting Power"); or (vi)
the sale by the Company of shares of common stock or other capital stock (or
securities convertible into common stock or other capital stock) that represent
greater than 25% of the outstanding Voting Power before such issuance.
(c) Upon consummation of any Extraordinary Transaction of the type set
forth in clause (i) or (iv) of Section 8(b) hereof, and without any action on
the part of the Holders, this Warrant shall be automatically cancelled with
respect to any remaining shares of Common Stock for which the Holder has not
properly exercised in accordance with Section 2 hereof.
SECTION 9. DIVIDENDS. In the event the Board of Directors of the Company
shall determine to pay any cash or non-cash dividends or distributions on the
Common Stock (other than distributions as to which the provisions of Section
8(a) above shall apply), the Holder shall be entitled to receive cash and
non-cash dividends or distributions in an amount and of kind equal to the
dividends or distributions that would have been payable to such Holder if this
Warrant held by such Holder had been exercised immediately prior to the record
date for the determination of the holders of Common Stock entitled to each such
dividend or distribution.
SECTION 10. ASSIGNMENTS OR TRANSFERS. This Warrant may not be transferred
or assigned except to an Affiliate of FCEC. Any such transfer or assignment is
subject to applicable state and federal securities laws.
SECTION 11. NOTICES. All notices, claims, requests, deliveries and other
communications under this Warrant to the Company and the Holder shall be
provided in the manner, and to the addresses of the Company and the Holder, set
forth in the Stock Purchase Agreement.
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SECTION 12. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
M-WAVE, INC.
By:______________________________
Its:_____________________________
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PURCHASE FORM
Subject to and in accordance with Section 2 of this Warrant, the
undersigned hereby elects to exercise this Warrant to purchase _____ shares of
Common Stock, $.01 par value, of M-Wave, Inc. and hereby (i) makes payment of an
aggregate Exercise Price for such shares of $_________ or (ii) makes a Section 2
Election with respect to the payment of such Exercise Price.
Dated: ______________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ________________________________________________________________________
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