EXHIBIT 4.3
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SONIC FOUNDRY, INC.
AND
XXXXX & COMPANY, INC.
AND
SECURITY CAPITAL TRADING CORP.
REPRESENTATIVES'
WARRANT AGREEMENT
Dated as of _________, 1998
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REPRESENTATIVES' WARRANT AGREEMENT dated as of _________, 1998 between
SONIC FOUNDRY, INC., a Maryland corporation (the "Company"), and XXXXX &
COMPANY, INC. and SECURITY CAPITAL TRADING CORP. (hereinafter referred to
variously as the "Holder" or "Holders" or the "Representatives").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company proposes to issue to the Representatives warrants
("Warrants") to purchase up to an aggregate 200,000 shares of Common Stock,
$0.01 par value, of the Company and/or 100,000 redeemable Common Stock purchase
warrants of the Company ("Redeemable Warrants"), each Redeemable Warrant to
purchase one additional share of Common Stock; and
WHEREAS, the Representatives have agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Company and the several Underwriters listed therein to act as the
Representatives in connection with the Company's proposed public offering of up
to 2,000,000 shares of Common Stock and 100,000 Redeemable Warrants (the "Public
Warrants") at a public offering price of $______ per share of Common Stock and
$_____ per Redeemable Warrant (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representatives in consideration for, and as
part of the Representatives' compensation in connection with, the
Representatives acting as the Representatives pursuant to the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representatives to the Company of an aggregate twenty dollars ($20.00), the
agreements herein set
forth and other good and valuable consideration, hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Representatives (or its designees) are hereby granted
the right to purchase, at any time from _____________, 1999 [six months after
date of this Agreement], until 5:30 P.M., New York time, on ___________, 2003
[five years after date of this Agreement], up to an aggregate of 200,000 shares
of Common Stock and/or 100,000 Redeemable Warrants at an initial exercise price
(subject to adjustment as provided in Section 8 hereof) of $_____ per share of
Common Stock [120% of initial public offering price per share of Common Stock],
and $______ per Redeemable Warrant [120% of initial public offering price per
Redeemable Warrant], subject to the terms and conditions of this Agreement. One
Redeemable Warrant is exercisable to purchase one additional share of Common
Stock at an initial exercise price of $______ [150% of initial public offering
price per share of the Common Stock] from ________, 1999 [one year after date of
this Agreement] until 5:30 p.m. New York time on ________, 2003[5 years after
date of this Agreement], at which time the Redeemable Warrants shall expire.
Except as set forth herein, the shares of Common Stock and the Redeemable
Warrants issuable upon exercise of the Warrants are in all respects identical to
the shares of Common Stock and the Public Warrants being purchased by the
Underwriters for resale to the public pursuant to the terms and provisions of
the Underwriting Agreement. The shares of Common Stock and the Redeemable
Warrants issuable upon exercise of the Warrants are sometimes hereinafter
referred to collectively as the "Securities."
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
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3. Exercise of Warrant.
(S)3.1 Method of Exercise. The Warrants initially are exercisable at
an aggregate initial exercise price (subject to adjustment as provided in
Section 8 hereof) per share of Common Stock and per Redeemable Warrant set forth
in Section 6 hereof payable by certified or official bank check in New York
Clearing House funds, subject to adjustment as provided in Section 8 hereof.
Upon surrender of a Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the shares of Common Stock and/or the Redeemable
Warrants purchased at the Company's principal executive offices in New York
(presently located at 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 53703) the
registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common Stock
so purchased and a certificate or certificates for the Redeemable Warrants so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock and Redeemable Warrants underlying the
Warrants). In the event the Company redeems all of the Public Warrants (other
than the Redeemable Warrants underlying the Warrants), then the Warrants may
only be exercised if such exercise is accompanied by the simultaneous exercise
of the Redeemable Warrant(s) underlying the Warrants being so exercised.
Warrants may be exercised to purchase all or part of the shares of Common Stock
together with an equal or unequal number of the Redeemable Warrants represented
thereby. In the case of the purchase of less than all the shares of Common
Stock and/or the Redeemable Warrants purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock and Redeemable Warrants purchasable
thereunder.
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(S)3.2 Exercise by Surrender of Warrant. In addition to the method
of payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in full or in part by surrendering
the Warrant Certificate in the manner specified in Section 3.1 hereof. The
number of shares of Common Stock to be issued pursuant to this Section 3.2 shall
be equal to the difference between (a) the number of shares of Common Stock in
respect of which the Warrants are exercised and (b) a fraction, the numerator of
which shall be the number of shares of Common Stock in respect of which the
Warrants are exercised multiplied by the Exercise Price and the denominator of
which shall be the Market Price (as defined in Section 3.3 hereof) of the shares
of Common Stock. The number of Redeemable Warrants to be issued pursuant to this
Section 3.2 shall be equal to the difference between (a) the number of
Redeemable Warrants in respect of which the Warrants are exercised and (b) a
fraction, the numerator of which shall be the number of Redeemable Warrants in
respect of which the Warrants are exercised multiplied by the Exercise Price and
the denominator of which shall be the Market Price (as defined in Section 3.3
hereof) of the Redeemable Warrants. Solely for the purposes of this paragraph,
Market Price shall be calculated either (i) on the date on which the form of
election attached hereto is deemed to have been sent to the Company pursuant to
Section 14 hereof ("Notice Date") or (ii) as the average of the Market Prices
for each of the five trading days preceding the Notice Date, whichever of (i) or
(ii) is greater.
(S)3.3 Definition of Market Price. As used herein, the phrase "Market
Price" at any date shall be deemed to be (i) when referring to the Common Stock,
the last reported sale price, or, in case no such reported sale takes place on
such day, the average of the last reported sale prices for the last three (3)
trading days, in either case as officially reported by the principal securities
exchange on which the Common Stock is listed or admitted to trading or by the
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Nasdaq SmallCap Market ("Nasdaq SmallCap") or by the National Association of
Securities Dealers Automated Quotation System ("Nasdaq"), or, if the Common
Stock is not listed or admitted to trading on any national securities exchange
or quoted by Nasdaq, the average closing bid price as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the Common
Stock is not quoted on Nasdaq, as determined in good faith (using customary
valuation methods) by resolution of the members of the Board of Directors of the
Company, based on the best information available to it or (ii) when referring to
a Redeemable Warrant, the last reported sales price, or, in the case no such
reported sale takes place on such day, the average of the last reported sale
prices for the last three (3) trading days, in either case as officially
reported by the principal securities exchange on which the Redeemable Warrants
are listed or admitted to trading or by Nasdaq, or, if the Redeemable Warrants
are not listed or admitted to trading on any national securities exchange or
quoted by Nasdaq, the average closing bid price as furnished by the NASD through
Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or if the Redeemable Warrants are not quoted on Nasdaq or are no
longer outstanding, the Market Price of a Redeemable Warrant shall equal the
difference between the Market Price of the Common Stock and the Exercise Price
of the Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock and Redeemable Warrants
and/or other securities, properties or rights underlying such Warrants and, upon
the exercise of the Redeemable Warrants, the issuance of certificates for shares
of Common Stock and/or other securities, properties or rights underlying such
Redeemable Warrants shall be made forthwith (and in any event within five (5)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such
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certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder, and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock and the Redeemable Warrants underlying the Warrants and the
shares of Common Stock underlying the Redeemable Warrants (and/or other
securities, property or rights issuable upon the exercise of the Warrants or the
Redeemable Warrants) shall be executed on behalf of the Company by the manual or
facsimile signature of the then Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company. Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer. Certificates representing the
shares of Common Stock and Redeemable Warrants, and the shares of Common Stock
underlying each Redeemable Warrant (and/or other securities, property or rights
issuable upon exercise of the Warrants) shall be dated as of the Notice Date
(regardless of when executed or delivered) and dividend bearing securities so
issued shall accrue dividends from the Notice Date.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold,
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transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one (1) year from the date hereof, except to officers of
the Representatives.
6. Exercise Price.
(S)6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $_____ per share of Common Stock [120% of the initial public offering price
of the Common Stock] and $______ per Redeemable Warrant [120% of the initial
public offering price of the Redeemable Warrants]. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Section 8 hereof. Any transfer of a Warrant shall constitute an automatic
transfer and assignment of the registration rights set forth in Section 7 hereof
with respect to the Securities or other securities, properties or rights
underlying the Warrants.
(S)6.2 Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context or unless otherwise specified.
7. Registration Rights.
(S)7.1 Registration Under the Securities Act of 1933. The Warrants,
the shares of Common Stock and Redeemable Warrants, or other securities issuable
upon exercise of the Warrants, and the shares of Common Stock or other
securities issuable upon exercise of the Redeemable Warrants (collectively, the
"Warrant Securities") have been registered under the Securities Act of 1933, as
amended (the "Act") pursuant to the Company's Registration Statement on Form
SB-2 (Registration No. 333-_______) (the "Registration Statement"). All of the
Representatives and warranties of the Company contained in the Underwriting
Agreement relating to the Registration Statement, the Preliminary Prospectus and
Prospectus (as such terms
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are defined in the Underwriting Agreement) and made as of the dates provided
therein, are incorporated by reference herein. The Company agrees and covenants
promptly to file post-effective amendments to such Registration Statement as may
be necessary in order to maintain its effectiveness and otherwise to take such
action as may be necessary to maintain the effectiveness of the Registration
Statement as long as any Warrants are outstanding. In the event that, for any
reason, whatsoever, the Company shall fail to maintain the effectiveness of the
Registration Statement, the certificates representing the Warrant Securities
shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable,
Rule 144 under the Act (or any similar rule under such Act relating to
the disposition of securities), or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act is
available.
(S)7.2 Piggyback Registration. If, at any time commencing after the
date hereof and expiring seven (7) years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form X-0,
Xxxx X-0 or a comparable registration statement) it will give written notice by
registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Representatives and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Representatives or other Holders of the Warrants and/or Warrant Securities
notify the Company within twenty (20) business days after receipt of any such
notice of its or their desire to include any such securities in such proposed
registration statement, the Company shall afford the Representatives and such
Holders of the Warrants and/or Warrant Securities the opportunity to have any
such Warrant Securities registered under such registration statement.
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Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
(S)7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring five
(5) years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants) shall have the right (which right is in
addition to the registration rights under Section 7.2 hereof), exercisable by
written notice to the Company, to have the Company prepare and file with the
Securities and Exchange Commission (the "Commission"), on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Representatives and Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale of their respective Warrant
Securities for six (6) consecutive months by such Holders and any other Holders
of the Warrants and/or Warrant Securities who notify the Company within ten (10)
days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Securities
within the time period
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specified in Section 7.4(a) hereof pursuant to the written notice specified in
Section 7.3(a) of a Majority of the Holders of the Warrants and/or Warrant
Securities, the Company may, at its option, upon the written notice of election
of a Majority of the Holders of the Warrants and/or Warrant Securities
requesting such registration, repurchase (i) any and all Warrant Securities of
such Holders at the higher of the Market Price per share of Common Stock and per
Redeemable Warrant, determined as of (x) the date of the notice sent pursuant to
Section 7.3(a) or (y) the expiration of the period specified in Section 7.4(a)
and (ii) any and all Warrants of such Holders at such Market Price less the
Exercise Price of such Warrant. Such repurchase shall be in immediately
available funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in Section 7.4(a) or (ii) the delivery of the
written notice of election specified in this Section 7.3(c).
(S)7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor, shall use
its best efforts to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Securities such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses.
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(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the
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Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof, or permit any other registration statement
to be or remain effective during the effectiveness of a registration statement
filed pursuant to Section 7.3 hereof (other than (i) shelf registrations
effective prior thereto and (ii) registrations on Form S-4 or S-8), without the
prior written consent of the Holders of the Warrants and Warrant Securities
representing a Majority of such securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement) relating to the due incorporation of
the Company, the validity of the shares being issued, the due execution and
delivery of the underwriting agreement and Rule 10b-5, and (ii) a "cold comfort"
letter dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, with respect to events subsequent to the date
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of such financial statements, as are customarily covered in accountants' letters
delivered to underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
to the managing underwriters, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all memoranda relating
to discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
or underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested pursuant to Section 7.3(a) to be
included in such underwriting, which may be the Representatives. Such agreement
shall be satisfactory in form and substance to the Company, each Holder and such
managing underwriter(s), and shall contain such representations, warranties and
covenants by the Company and such other terms as are
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customarily contained in agreements of that type used by the managing
underwriter(s). The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Securities whether pursuant to
Section 7.2 or Section 7.3(a) and may, at their option, require that any or all
of the representations, warranties and covenants of the Company to or for the
benefit of such underwriter(s) shall also be made to and for the benefit of such
Holders. Such Holders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriter(s) except as
they may relate to such Holders and their intended methods of distribution.
(l) For purposes of this Agreement, the term "Majority" in reference
to the Holders of Warrants or Warrant Securities, shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Securities that (i)
are not held by the Company, an affiliate, officer, creditor, employee or agent
thereof or any of their respective affiliates, members of their family, persons
acting as nominees or in conjunction therewith and (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
8. Adjustments to Exercise Price and Number of Securities.
(S)8.1 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
(S)8.2 Stock Dividends and Distributions. In case the Company shall
pay a dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately
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decreased. An adjustment made pursuant to this Section 8.2 shall be made as of
the record date for the subject stock dividend or distribution.
(S)8.3 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted exercise price of
each Warrant shall be adjusted to the nearest full amount by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
(S)8.4 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
(S)8.5 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of securities of the Company for which such Warrant might have been
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exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
subsection shall similarly apply to successive consolidations or mergers.
(S)8.6 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than two cents (24) per Warrant Security, provided, however, that
in such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents (24) per Warrant Security.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or Redeemable Warrants upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of
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fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of shares of Common Stock or Redeemable Warrants or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants and the
Redeemable Warrants, such number of shares of Common Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Exercise Price therefor, all shares of Common Stock, Redeemable Warrants and
other securities issuable upon such exercise shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
stockholder. The Company further covenants and agrees that upon exercise of the
Redeemable Warrants underlying the Warrants and payment of the respective
Redeemable Warrant exercise price therefor, all shares of Common Stock and other
securities issuable upon such exercises shall be duly and validly issued, fully
paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants shall be outstanding, the Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants and Redeemable Warrants and all Redeemable Warrants
underlying the Warrants to be listed (subject to official notice of issuance) on
all securities exchanges on which the Common Stock or the Public Warrants issued
to the public in connection herewith may then be listed and/or quoted on Nasdaq
SmallCap or Nasdaq.
12. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any
17
time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings or capital surplus (in accordance with applicable
law), as indicated by the accounting treatment of such dividend or
distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least thirty (30) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
18
13. Redeemable Warrants. The form of the certificate representing
Redeemable Warrants (and the form of election to purchase shares of Common
Stock upon the exercise of Redeemable Warrants and the form of assignment
printed on the reverse thereof) shall be substantially as set forth in Exhibit
"A" to the Warrant Agreement dated as of the date hereof by and between the
Company and Continental Stock Transfer and Trust Company (the "Redeemable
Warrant Agreement"). Each Redeemable Warrant issuable upon exercise of the
Warrants shall evidence the right to initially purchase a fully paid and
non-assessable share of Common Stock at an initial purchase price of $____ per
share [150% of the initial public offering price per share of Common Stock] from
_________, 1999 [one year after date of Prospectus] until 5:30 p.m. New York
time on _________, 2003 [five years after date of Prospectus] at which time the
Redeemable Warrants, unless the exercise period has been extended, shall expire.
The exercise price of the Redeemable Warrants and the number of shares of Common
Stock issuable upon the exercise of the Redeemable Warrants are subject to
adjustment, whether or not the Warrants have been exercised and the Redeemable
Warrants have been issued, in the manner and upon the occurrence of the events
set forth in Section 8 of the Redeemable Warrant Agreement, which is hereby
incorporated herein by reference and made a part hereof as if set forth in its
entirety herein. Subject to the provisions of this Agreement and upon issuance
of the Redeemable Warrants underlying the Warrants, each registered holder of
such Redeemable Warrant shall have the right to purchase from the Company (and
the Company shall issue to such registered holders) up to the number of fully
paid and non-assessable shares of Common Stock (subject to adjustment as
provided herein and in the Redeemable Warrant Agreement), free and clear of all
preemptive rights of stockholders, provided that such registered holder complies
with the terms governing exercise of the Redeemable Warrant set forth in the
Redeemable Warrant Agreement, and pays the applicable exercise price, determined
in
19
accordance with the terms of the Redeemable Warrant Agreement. Upon exercise
of the Redeemable Warrants, the Company shall forthwith issue to the registered
holder of any such Redeemable Warrant in his name or in such name as may be
directed by him, certificates for the number of shares of Common Stock so
purchased. Except as otherwise provided in this Agreement, the Redeemable
Warrants underlying the Warrants shall be governed in all respects by the terms
of the Redeemable Warrant Agreement. The Redeemable Warrants shall be
transferable in the manner provided in the Redeemable Warrant Agreement, and
upon any such transfer, a new Redeemable Warrant Certificate shall be issued
promptly to the transferee. The Company covenants to, and agrees with, the
Holder(s) that without the prior written consent of the Holder(s), which will
not be unreasonably withheld, the Redeemable Warrant Agreement will not be
modified, amended, canceled, altered or superseded, and that the Company will
send to each Holder, irrespective of whether or not the Warrants have been
exercised, any and all notices required by the Redeemable Warrant Agreement to
be sent to holders of Redeemable Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address
of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
15. Supplements and Amendments. The Company and the Representatives
may from time to time supplement or amend this Agreement without the approval of
any Holders of
20
Warrant Certificates (other than the Representatives) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Representatives may deem necessary or desirable and which the Company
and the Representatives deem shall not adversely affect the interests of the
Holders of Warrant Certificates.
16. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the close of
business on __________, 2005. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on _________, 2011.
18. Governing Law; Submission to Jurisdiction. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Representatives and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representatives and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the
Representatives and the Holders (at the option of the party bringing such
action, proceeding or claim) may be served by
21
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
14 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim. The
Company, the Representatives and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefore.
19. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement and the Redeemable Warrant Agreement to the extent
portions thereof are referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and may not
be modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representatives and any other registered Holder(s) of the Warrant Certificates
or Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole benefit of the Company and
the Representatives and any other registered Holders of Warrant Certificates or
Warrant Securities.
22
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
SONIC FOUNDRY, INC.
By:____________________________________
Name:
Title:
Attest:
_________________________________
Secretary
XXXXX & COMPANY, INC.
By:____________________________________
Name:
Title:
SECURITY CAPITAL TRADING CORP.
By:____________________________________
Name:
Title:
24
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, ___________, 2003
No. W- Warrants to Purchase
____ shares of Common
Stock and/or _____ Redeemable
Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________, or registered
assigns, is the registered holder of _____________ Warrants to purchase
initially, at any time from _________, 1999 until 5:30 p.m. New York time on
__________, 2003 ("Expiration Date"), up to __________ fully-paid and non-
assessable shares of common stock, $0.01 par value ("Common Stock"), of SONIC
FOUNDRY, INC., a Maryland corporation (the "Company"), and ___ Redeemable
Warrants of the Company (one Redeemable Warrant entitling the owner to purchase
one fully-paid and non-assessable share of Common Stock) at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $_____
per share of Common Stock and $_____ per Redeemable Warrant upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
warrant agreement dated as of _________, 1998 between the Company and XXXXX &
COMPANY, INC. and SECURITY CAPITAL TRADING CORP. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company or by
surrender of this Warrant Certificate.
A-1
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-2
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of _____________, 1998
SONIC FOUNDRY, INC.
By:____________________________________
Name:
Title:
A-3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[_] _____________ shares of Common Stock;
[_] _____________ Redeemable Warrants;
[_] _____________ shares of Common Stock together with an equal
number of Redeemable Warrants; or
[_] _____________ shares of Common Stock together with
_____________ Redeemable Warrants.
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of Sonic Foundry,
Inc. in the amount of $_______________________, all in accordance with the terms
of Section 3.1 of the Representatives' Warrant Agreement dated as of _________,
1998 between Sonic Foundry, Inc. and Xxxxx & Company, Inc. and Security Capital
Trading Corp. The undersigned requests that a certificate for such securities
be registered in the name of _________________________________ whose address is
______________________________________ and that such Certificate be delivered to
______________________________________ whose address is _______________________.
Dated:
Signature ______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
A-4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
[_] _____________ shares of Common Stock;
[_] _____________ Redeemable Warrants;
[_] _____________ shares of Common Stock together with an equal
number of Redeemable Warrants; or
[_] _____________ shares of Common Stock together with
_____________ Redeemable Warrants.
and herewith tenders in payment for such securities ________ Warrants all in
accordance with the terms of Section 3.2 of the Representatives' Warrant
Agreement dated as of ________, 1998 between Sonic Foundry, Inc. and Xxxxx &
Company, Inc. and Security Capital Trading Corp. The undersigned requests that
a certificate for such securities be registered in the name of
__________________ whose address is ____________________ and that such
Certificate be delivered to ___________________________________ whose address is
___________________.
Dated:
Signature ______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
A-5
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:_________________ Signature:______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
________________________________________
Insert Social Security or Other
Identifying Number of Assignee)
A-6
