WARRANT AGREEMENT
This WARRANT AGREEMENT ("Agreement") dated as of _____________, 1996 is by
and between Data Dimensions, Inc., a Delaware corporation (the "Company"), and
Cruttenden Xxxx Incorporated ("Cruttenden" or the "Representative").
WHEREAS, the Representative has agreed pursuant to the Underwriting
Agreement dated _____________, 1996 (the "Underwriting Agreement") to act as
the representative of the several underwriters in connection with the
proposed public offering by the Company and certain selling stockholders of
up to 1,150,000 shares in the aggregate of Common Stock, including 150,000 of
such shares covered by an over-allotment option (the "Public Offering"); and
WHEREAS, pursuant to Section 6(p) of the Underwriting Agreement, the
Company has agreed to issue warrants to the Representative (the "Warrants") to
purchase, at a price of $0.001 per warrant, up to an aggregate of 100,000 shares
(hereinafter, and as the number thereof may be adjusted hereto, the "Warrant
Shares"), of the Company's Common Stock, $0.001 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 Representative, Warrants to purchase 100,000 Warrant Shares on
the Closing Date referred to in the Underwriting Agreement in consideration
for, and as part of the Representative's compensation in connection with, the
Representative 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 Vice President
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.
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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
75,000 shares shall be registered initially in the name of "Cruttenden Xxxx
Incorporated," or in such other denominations as Cruttenden 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 __________, 1997, the Warrants will not
be sold, transferred, assigned or hypothecated except to bona fide officers and
partners of the Representative who agree in writing to be bound by the terms
hereof, and after ____________, 1997, the Warrants will not be sold,
transferred, assigned or hypothecated except to the foregoing persons and
employees of the Representative 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 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
______________, 1997 (the "Initiation Date") until 6:00 p.m., Pacific time, on
______________, 2001 (the "Expiration Date") at a purchase price of $_____,
subject to adjustment (the "Warrant Price").
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
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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, 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 Representative
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
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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 may in its discretion 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 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:
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(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 determined by the Board of Directors of the Company, whose
determination shall be conclusive) 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 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 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.
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(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 closing
price for each day shall be the last such reported sales price regular way or,
in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if not listed or admitted to trading, the
average of the closing bid and asked prices of the Common Stock in the over-the
counter market as reported by 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.
(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 paragraphs (a)
through (f), inclusive, above, and the provisions of Sections 5, 11.2 and 11.3,
with respect to the Warrant Shares, shall apply on like terms to such other
securities.
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(h) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges, if any thereof shall not have been exercised,
the Warrant Price and the number of shares of Common Stock purchasable upon the
exercise of each Warrant shall, upon such expiration, be readjusted and shall
thereafter be such as it would have been had it been originally adjusted (or had
the original adjustment not been required, as the case may be) as if (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 accounts 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. Such certificate shall be conclusive evidence of the correctness of such
adjustment.
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 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
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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 Representative
represents and warrants to the Company that it 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:
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
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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 Representative 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 Representative 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 Representative 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
has 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 adversely affect or otherwise 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 SB-2 (File No.
333-841) (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 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
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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 seven (7) 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 Piggy-back Shares (or
the portion thereof so designated by such managing underwriter) for such period,
not to exceed 120 days, as the managing underwriter shall request provided that
no such
10
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 Piggy-back 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 qualify 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 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
12
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
13
(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:
CRUTTENDEN XXXX INCORPORATED
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxx
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 Representative 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 Representative 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. SUCCESSORS. 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
14
successors and assigns hereunder. Assignments by the Holders of their rights
hereunder shall be made in accordance with Section 4 hereof.
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:
DATA DIMENSIONS, INC.
Attest:
By:
------------------------- ---------------------------
-------
Name:
Title:
15
EXHIBIT A
[Form of Warrant Certificate]
EXERCISABLE ON OR BEFORE __________, 2001
No. 100,000 Warrants
Warrant Certificate
DATA DIMENSIONS, INC.
This Warrant Certificate certifies that Cruttenden Xxxx Incorporated,
or registered assigns, is the registered holder of Warrants expiring
___________, 2001 (the "Warrants") to purchase Common Stock, $0.001 par value
per share (the "Common Stock"), of Data Dimensions, 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 ____________, 1997 through and
until 6:00 p.m., Pacific time, on _____________, 2001, one fully paid and
nonassessable share of Common Stock (a "Warrant Share") at the initial exercise
price (the "Exercise Price") of $_____, payable in lawful money of the United
States of America upon surrender of this Warrant Certificate and payment of the
Exercise 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 Exercise 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
_____________, 2001, and to the extent not exercised by such time such Warrants
shall become void.
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, DATA DIMENSIONS, 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: _____________, 1996
DATA DIMENSIONS, INC.
By:
--------------------------
-------
Title:
--------------------------
By:
------- --------------------------
Title:
--------------------------
2
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring ____________, 2001 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 _____________, 1996 (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 _______________,
2001. 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 Exercise 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 Exercise 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
Warrant, 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.
1
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.
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.
2
[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 Data
Dimensions, 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:
3
