Exhibit 1.2
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NETRADIO CORPORATION
AND
XXXXXX XXXXXX XXXXXXXX & CO., INC.
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WARRANT AGREEMENT
Dated as of September __, 0000
XXXXXXX AGREEMENT, dated as of September __, 1999, between NETRADIO
CORPORATION, a Minnesota corporation (the "Company"), and XXXXXX XXXXXX
XXXXXXXX & CO., INC., a Delaware corporation ("GKM").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to GKM warrants (each, a
"Warrant") to purchase up to an aggregate of 125,000 shares of Common Stock
(as defined in Section 8.3 hereof);
WHEREAS, pursuant to that certain Underwriting Agreement (the
"Underwriting Agreement"), dated as of the date hereof, among GKM and The
Advest Group, Inc. (the "Representatives"), as representatives of the several
Underwriters (as such term is defined in the Underwriting Agreement), Navarre
Corporation, a Minnesota corporation, and the Company, the Representatives
and the other Underwriters have agreed to purchase 4,000,000 shares of common
stock, no par value per share, of the Company, at a public offering price of
$_____ per share in connection with the Company's proposed public offering
(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 GKM in consideration for, and as part of GKM's
compensation in connection with its service as financial advisor to the Company.
NOW, THEREFORE, in consideration of the premises, the payment by GKM to
the Company of an aggregate of one hundred dollars ($100.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT. GKM is hereby granted the right to purchase, at any time
from September ___, 2000 until 4:30 p.m., Chicago time, on __________, 2004
(the "Exercise Period"), up to an aggregate of 125,000 shares of Common Stock
(the "Shares") at an initial exercise price (subject to adjustment as
provided in Section 8 hereof) of $__________ [120% OF THE INITIAL PUBLIC
OFFERING PRICE PER SHARE] per share of Common Stock subject to the terms and
conditions of this Agreement. Except as set forth herein, the Shares issuable
upon exercise of the Warrants are in all respects identical to the shares of
Common Stock being purchased by the Underwriters for resale to the public
pursuant to the terms and provisions of the Underwriting Agreement.
2. WARRANT CERTIFICATES. The warrant certificate(s) (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall
be in the form set forth on Exhibit A, attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions and other
variations as required or permitted by this Agreement.
3. EXERCISE OF WARRANTS.
3.1 METHOD OF EXERCISE. The Warrants initially are exercisable at
an aggregate initial exercise price per share of Common Stock set forth in
Section 6 hereof (subject to adjustment as provided in Section 8 hereof)
payable by wire or certified or official bank check in New York Clearing
House funds. Upon surrender of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Purchase
Price (as hereinafter defined) for the shares of Common Stock purchased at
the Company's principal offices in Minnesota (presently located at Riverplace
Exposition Hall, 00 Xxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx
55414) 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. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder thereof, in whole or
in part for all or part of the shares of Common Stock represented thereby
(but not as to fractional shares of the Common Stock underlying the Warrant).
In the case of the purchase of less than all the shares of Common Stock
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 purchasable thereunder.
3.2 EXERCISE BY SURRENDER OF WARRANTS. 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 whole or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1
in exchange for the number of shares of Common Stock equal to (x) the number
of shares as to which such Warrants are being exercised MULTIPLIED BY (y) a
fraction, the numerator of which is the Market Price (as defined below) of
the Common Stock less the Exercise Price and the denominator of which is such
Market Price. The term "Market Price" as used herein shall mean, with respect
to shares of Common Stock, the average of the closing prices of such sale on
all recognized securities exchanges on which the Common Stock may at the time
be listed, or, if there has been no sale on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day the Common Stock is not listed, the
average of the representative bid and asked prices quoted in the Nasdaq Stock
Market as of 4:00 p.m., New York time, or, if on any day the Common Stock is
not quoted in the Nasdaq Stock Market, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged on a weighted basis over a
period of twenty-one (21) days consisting of the day as of which "Market
Price" is being determined and the twenty (20) consecutive trading days prior
to such day. Solely for the purposes of this paragraph, Market Price shall be
calculated either (i) on the date which the form of election attached hereto
is deemed to have been sent to the Company pursuant to Section 13 hereof
("Notice Date") or (ii) as the average of the Market Prices for each of the
five (5) consecutive trading days preceding the Notice Date, whichever of (i)
or (ii) is greater.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of a Warrant, the
issuance of certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrant, shall be made forthwith (and in
any event within three (3) 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 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
(and/or other securities, property or rights issuable upon the exercise of
the Warrants) shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
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, and that the Warrants will not be sold, offered for
sale, transferred, assigned or hypothecated for a period of one (1) year from
the date of this Agreement other than to officers, employees or partners of
GKM, in which case, such officers, employees or partners shall be entitled to
receive a replacement Warrant Certificate in accordance with Section 9 hereof
upon presentment of a properly executed Form of Assignment (in the form
included on Exhibit A attached hereto).
6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 8 hereof, the initial exercise price of the Warrants
shall be $__________ [120% OF THE INITIAL PUBLIC OFFERING PRICE] per share of
Common Stock. 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.
6.2 EXERCISE PRICE. The term "Exercise Price" as used herein
shall mean the initial exercise price or the adjusted exercise price,
depending upon the context.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrants,
the Shares and any of the other securities issuable upon exercise of the
Warrants have not been registered
under the Securities Act of 1933, as amended (the "Act"). Upon exercise of
the Warrants, in whole or in part, the certificates representing the Shares
underlying the Warrants and any of the other securities issuable upon
exercise of the Warrants (collectively, the "Warrant Shares") shall bear the
following legend:
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws, and
may not be offered or sold except pursuant to (i) an
effective registration statement under the Act and
registration under applicable state securities laws, (ii)
to the extent applicable, Rule 144 under the Act (or any
similar rule under the Act relating to the disposition of
securities) and any similar exemption under state
securities laws, or (iii) another available exemption
from registration under the Act and applicable state
securities laws.
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 in connection with a
merger or pursuant to Form S-8 or a successor form) it will give written
notice by delivery in person, registered or certified mail (postage prepaid,
return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, at least thirty (30) days prior to the filing
of each such registration statement, to GKM and to all other Holders of the
Warrants and/or the Warrant Shares (the "Registrable Securities") of its
intention to do so. If GKM or other Holders of the Warrants and/or Warrant
Shares notify the Company within twenty (20) 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 GKM and such Holders of the
Warrants and/or Warrant Shares the opportunity to have any such Warrant
Shares registered under such registration statement; PROVIDED HOWEVER, that
if GKM and such Holders shall be the only persons exercising such rights to
have securities registered under such registration statement, then the
Company shall not be obligated to comply with the registration request unless
it receives such notice from Holders (including GKM) of fifty percent (50%)
or more of the Warrants and/or Warrant Shares.
Notwithstanding the foregoing, if, in the case of an underwritten
offering by the Company, the managing underwriter of such offering shall
advise the Company in writing that, in its opinion, the distribution of the
Warrant Shares requested to be included in the registration concurrently with
the securities being registered by the Company would adversely affect the
market price of such securities by the Company, then the offering and sale of
such Warrant Shares shall be delayed for such period, not to exceed ninety
(90) days, as such managing underwriter shall request. In the event of a
delay as provided in the preceding sentence, the Company shall file such
supplements and post-effective amendments, and take any such other steps as
may be necessary, to permit the proposed offering and sale of such Shares for
a period of ninety (90) days immediately following the end of such period of
delay.
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.
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 Shares
representing a Majority (as hereinafter defined) of such securities (assuming
the exercise of the Warrants in full) not previously sold pursuant to this
Section 7 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 GKM
and the Holders, in order to comply with the provisions of the Act, so as to
permit a public offering and sale of their respective Warrant Shares for six
(6) consecutive months by such Holders and any other Holders of the Warrants
and/or Warrant Shares who notify the Company within twenty (20) 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 Shares within
five (5) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2
and subsection (a) of this Section 7.3, at any time commencing after the date
hereof and expiring five (5) years thereafter, any Holder of the Warrants
and/or the Warrant Shares shall have the right, exercisable by written
request to the Company, to have the Company prepare and file with the
Commission, on one occasion, a registration statement so as to permit a
public offering and sale for six (6) consecutive months by any such Holder of
its Warrant Shares; PROVIDED, HOWEVER, that the provisions of Section 7.4(b)
hereof shall not apply to any such registration request and registration and
all costs incident thereto shall be at the expense of the Holder or Holders
making such request.
(d) No right of the Holders under this Section 7.3 shall be
deemed to have been exercised if with respect to such right:
(i) the requisite notice given by Holders pursuant to
this Section 7.3 is withdrawn prior to the date of filing of a
registration statement or if a registration statement filed by the
Company under the Act pursuant to this Section 7.3 is withdrawn
prior to its effective date, in either case, by written notice to
the Company from the Holders of fifty percent (50%) or more of the
Warrants and/or Warrant Shares to be included or which are included
in such registration statement stating that such Holders have
elected not to proceed with
the offering contemplated by such registration statement because
(i) a development in the Company's affairs has occurred or has
become known to such Holders subsequent to the date of the notice
by the Holders to the Company requesting registration of the
Warrant Shares of the filing of such registration statement which,
in the judgment of such Holders or the managing underwriter of the
proposed public offering, adversely affects the market price of
such Warrant Shares or (ii) a registration statement filed by the
Company pursuant to this Section 7.3, in the reasonable opinion of
counsel for such Holders or the managing underwriter of the
proposed public offering, contains an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which made (other
than any such statement or omission relating to such Holders and
based on information supplied or failed to be supplied by such
Holders) and the Company has not, promptly after written notice
thereof, corrected such statement or omission in an amendment filed
to such registration statement pursuant to Section 7.4(m); or
(ii) a registration statement pursuant to this Section
7.3 shall have become effective under the Securities Act and (i)
the underwriters shall not purchase any Warrant Shares because of a
failure of condition contained in the underwriting agreement (other
than a condition to be performed by or within the control of the
Holders) relating to the offering covered by such registration
statement or (ii) less than eighty-five percent (85%) of the
Warrant Shares included therein shall have been sold as a result of
any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court.
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 Shares such number of prospectuses as shall
reasonably be requested.
Notwithstanding the foregoing, the Company shall be entitled
to postpone, for a period of not more than sixty (60) days after receipt of a
request to effect a registration, the filing of any registration statement
otherwise required to be prepared and filed by it pursuant to Section 7.3
hereof if, at any time it receives a request for registration, the Board of
Directors of the Company determines in its reasonable business judgment that
such registration and offering would interfere with any material financing,
acquisition, corporate reorganization or other material transaction or
development involving the Company and
promptly gives the Holders demanding registration written notice of such
determination; PROVIDED that (i) upon such postponement by the Company, the
Company shall be required to file such registration statement as soon as
practicable after the Board of Directors of the Company shall determine, in
its reasonable business judgment, that such registration and offering will
not interfere with the aforesaid material financing, acquisition, corporate
reorganization or other material transaction or development involving the
Company, (ii) the Company may utilize this right once each year; PROVIDED,
HOWEVER, that the Company shall not utilize this right more than one time
unless, prior to utilizing such right, the Company delivers to the Holders an
opinion of counsel to the Company, satisfactory to the Holders, to the effect
that such postponement by the Company is necessary to avoid interference with
a material financing, acquisition, corporate reorganization or other material
transaction or development involving the Company, (iii) the Holders who made
such written request to effect such registration, may, at any time in
writing, withdraw such request for such registration and therefore preserve
the right provided in Section 7.3 hereof for such Holders to again request
such registration, and (iv) the Exercise Period shall automatically be
extended by an additional one hundred and eighty (180) days.
(b) The Company shall pay all costs (including fees and
expenses of one counsel to the Holder(s), but not 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. The Holder(s) will pay all costs, fees
and reasonable expenses in connection with any registration statement filed
pursuant to Section 7.3(c). If the Company shall fail to comply with the
provisions of Section 7.4(a), the Company shall, in addition to any other
equitable or other relief available to the Holder(s), extend the Exercise
Period by such number of days as shall equal the delay caused by the
Company's failure, and be liable for any or all damages as the Holder(s) may
be entitled to as a matter of law.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as the Holder(s) shall designate; PROVIDED that the
Company shall not be obligated to qualify to do business in any such
jurisdiction or to file any general consent to service of process in any
jurisdiction in any action other than one arising out of the offering or the
sale of the Warrant Shares.
(d) Nothing contained in this Agreement shall be construed as
requiring a Holder to exercise the Warrants prior to the initial filing of
any registration statement or the effectiveness thereof.
(e) Except for the shares of Common Stock held by ValueVision
International, Inc. that the Company may be required to register, the Company
shall not permit the inclusion of any securities other than the Warrant
Shares to be included in any registration statement filed pursuant to Section
7.3 hereof, or file any registration statement subsequent to the receipt of
any notice pursuant to Section 7.3 hereof and until one hundred and eighty
(180) days after the effectiveness of a 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; PROVIDED, HOWEVER, that in the event of an underwritten public
offering, the Company shall have the right to permit the inclusion of such
other securities if the managing underwriter of such offering advises the
Company or the Holders in writing that, in its opinion, the inclusion of such
securities other than the Warrant Shares in such registration statement will
not adversely affect the distribution or the offering price of such Warrant
Shares.
(f) In connection with any registration statement filed
pursuant to Section 7.2 hereof, the Company shall furnish to each Holder
participating in any underwritten offering and to each underwriter, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter, dated the effective date of
such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under
the underwriting agreement), signed by the independent public accountants who
have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered
to underwriters in underwritten public offerings of securities.
(g) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within fifteen
(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 twelve (12) consecutive months beginning after the
effective date of the registration statement.
(h) 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 National Association of Securities Dealers,
Inc. ("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.
(i) The Company shall enter into an underwriting agreement
with the managing underwriters selected for such underwriting by Holders
holding a Majority of the Warrant Shares requested to be included in such
underwriting, which may be any of the Underwriters. Such agreement shall be
reasonably satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms
as are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Shares and may, at their
option, require that any or all the representations, warranties and covenants
of the Company to or for the benefit of such underwriters shall also be made
to and for the benefit of such Holders. Such Holders shall not be required to
make any representations or warranties to or agreements with the Company or
the underwriters except as they may relate to such Holders and their intended
methods of distribution.
(j) For purposes of this Agreement, the term "Majority," in
reference to the Holders of the Warrants or Warrant Shares, shall mean in
excess of fifty percent (50%) of the then outstanding Warrants or Warrant
Shares that (i) are not held by the Company, an officer, creditor, employee
or agent thereof or any of their respective affiliates, members of their
family, persons acting as nominees or in conjunction therewith or (ii) have
not been resold to the public pursuant to a registration statement filed with
the Commission under the Act.
(k) The Company shall promptly notify each Holder of the
Warrants and/or Warrant Shares covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered under the
Act, upon the Company's discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made, and at the request of any such Holder promptly prepare
and furnish to such Holder and each underwriter, if any, a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances under which they were made.
7.5 INDEMNIFICATION.
(a) In the event of the filing of any registration statement
with respect to the Shares pursuant to this Section 7, the Company agrees to
indemnify and hold harmless GKM and all other Holders of Warrants and/or the
Warrant Shares and each person, if any, who controls such Holder within the
meaning of the Act (each, an "GKM Indemnified parties"), against any losses,
claims, damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all reasonable attorneys' fees), to which any
GKM Indemnified Party 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 statement or alleged
untrue statement of any material fact contained in any such registration
statement, or any related preliminary prospectus, final prospectus, or
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, provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, preliminary
prospectus, final prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such GKM Indemnified Party specifically for use in the preparation thereof.
This indemnity will be in addition to any liability which the Company may
otherwise have.
(b) GKM and all other Holders of Warrants and/or the Warrant
Shares agree that they will indemnify and hold harmless the Company, each
other person referred to in subparts (1), (2) and (3) of Section 11(a) of the
Act in respect of the registration statement and each person, if any, who
controls the Company within the meaning of the Act (each, a "Company
Indemnified Party"), against any losses, claims, damages or liabilities
(which shall, for all purposes of this Agreement, include but not be limited
to, all costs of defense and investigation and all attorneys' fees) to which
such Company Indemnified Parties 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 statement or
alleged untrue statement of any material fact contained in such registration
statement, or any related preliminary prospectus, final prospectus or
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,
but in each case only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in such
registration statement, preliminary prospectus, final prospectus or amendment
or supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by GKM specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which GKM and all other Holders of the Warrant and/or the Warrant
Shares may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
shall, if a claim with respect thereof is to be made against any indemnifying
party under this Section 7, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise then under this Section 7. In case any such action is brought
against any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso in the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section
7.5(a) or 7.5(b) hereof who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. In no event shall any indemnifying party
be liable in respect of any amounts paid in settlement of any action unless
the indemnifying party shall have approved the terms of such settlement;
provided that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from liability on claims that are the subject
matter of such proceeding.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES.
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 be decreased, in the case of subdivision, or increased,
in the case of combination, in the same proportions as the Common Stock is
subdivided or combined, in each case effective automatically upon, and
simultaneously with, the effectiveness of the subdivision or combination
which gives rise to the adjustment.
8.2 ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Shares issuable upon the exercise of the Warrants 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 Shares
issuable upon exercise of the Warrants immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
8.3 DEFINITION OF COMMON STOCK. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock
designated as Common Stock in the Articles of Incorporation of the Company as
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. In the event that the Company shall after the date
hereof issue securities with greater or superior voting rights than the
shares of Common Stock outstanding as of the date hereof, the Holder, at its
option, may receive upon exercise of the Warrants either shares of Common
Stock or a like number of such securities with greater or superior voting
rights.
8.4 MERGER OR CONSOLIDATION. (a) In case the Company after the
date hereof (i) shall consolidate with or merge into any other person and
shall not be the continuing or surviving corporation of such consolidation or
merger, or (ii) shall permit any other person to consolidate with or merge
into the Company and the Company shall be the continuing or surviving person
but, in connection with such consolidation or merger, the Common Stock shall
be changed into or exchanged for stock or other securities of any other
person or cash or any other property, or (iii) shall transfer all or
substantially all of its properties or assets to any other person, or (iv)
shall effect a capital reorganization or reclassification of the Common Stock
(other than a capital reorganization or reclassification resulting in the
issue of additional shares of Common Stock for which adjustment in the
Exercise Price is provided in Section 8), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Agreement and the Warrants, the
Holders of the Warrants, upon the exercise thereof at any time after the
consummation of such transaction, shall be entitled to receive (at the
aggregate Exercise Price in effect at the time of such consummation for all
Common Stock issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or other securities issuable upon
such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holders would actually have been
entitled as stockholders upon such consummation if such Holders had exercised
the rights represented by the Warrants immediately prior thereto, subject to
adjustments (subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in Section 8; PROVIDED that if a
purchase, tender or exchange offer shall have been made to and accepted by
the holders of more than fifty percent (50%) of the outstanding shares of
Common Stock, and if a Holder of the Warrants so designates in a notice given
to the Company on or before the date immediately preceding the date of the
consummation of such transaction, such Holder of the Warrants shall be
entitled to receive the highest amount of securities, cash or other property
to which such Holder would actually have been entitled as a stockholder if
such Holder of the Warrants had exercised the Warrants prior to the
expiration of such purchase, tender or exchange offer and accepted such
offer, subject to adjustments (from and after the consummation of such
purchase, tender or exchange offer) as nearly equivalent as possible to the
adjustments provided for in Section 8.
8.5 ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained
in the Warrants to the contrary, the Company will not effect any of the
transactions described in clauses (i) through (iv) of Section 8.4 unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of the Warrants as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to, the Holders of the
Warrants, (a) the obligations of the Company under this Agreement and the
Warrants (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and
shall not release the Company from, any continuing obligations of the Company
under this Agreement and the Warrants) and (b) the obligation to deliver to
such Holders such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 8, such Holders may
be entitled to receive, and such person shall have similarly delivered to
such Holders an opinion of counsel for such person, which counsel shall be
reasonably satisfactory to such Holders, stating that this Agreement and the
Warrants shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this Section
8) shall be applicable to the stock, securities, cash or property which such
person may be required to deliver upon any exercise of the Warrants or the
exercise of any rights pursuant hereto.
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the
Company shall at any time prior to the exercise in full of the Warrants
declare a dividend or otherwise distribute to its stockholders any assets,
property, rights, evidences of indebtedness, securities (other than shares of
Common Stock), whether issued by the Company or by another, or any other
thing of value, the Holders of the unexercised portion of the Warrants shall
thereafter be entitled, in addition to the shares of Common Stock or other
securities and property receivable upon the exercise thereof, to receive,
upon the exercise of the Warrants, the same property, assets, rights,
evidences of indebtedness, securities or any other thing of value that they
would have been entitled to receive at the time of such dividend or
distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution,
the Company shall make appropriate reserves to ensure the timely performance
of the provisions of this Section 8.6.
8.7 OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the purchase rights represented by the Warrants shall be diluted, then,
in each such case, the Exercise Price and/or the amount of any Common Stock,
cash, securities or other assets to be delivered upon exercise of the
Warrants shall be adjusted on a weighted-average basis, consistent with
preserving, without dilution, the purchase rights represented by the Warrants.
8.8 NOTICE OF ADJUSTMENT EVENTS. Whenever the Company
contemplates the occurrence of an event which would give rise to adjustments
under this Section 8, the Company shall mail to GKM (or its designee) on
behalf of each Holder, at least thirty (30) days prior to the record date
with respect to such event or, if no record date shall be established, at
least thirty (30) days prior to such event, a notice specifying (i) the
nature of the contemplated event, (ii) the date of which any such record is
to be taken for the purpose of such event, (iii) the date on which such event
is expected to become effective and (iv) the time, if any is to be fixed,
when the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable in
connection with such event.
8.9 NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the
kind of securities or property issuable upon exercise of the Warrants, or
both, shall be adjusted pursuant to this Section 8, the Company shall make a
certificate signed by its President or a Vice President and by its Chief
Financial officer, Secretary or Assistant Secretary, setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment,
the method of which such adjustment was calculated (including a description
of the basis on which the Company made any determination hereunder), and the
Exercise Price and the kind of securities or property issuable upon exercise
of the Warrants after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (by first class mail postage prepaid)
to each Holder promptly after each adjustment.
8.10 PRESERVATION OF RIGHTS. The Company will not, by amendment of
its Articles of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Agreement or the Warrants or the
rights represented thereby, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holders of the
Warrants against dilution or other impairment.
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 Shares in such denominations
as shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any 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
Warrant Certificates, 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 upon the exercise of the Warrants, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
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,
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 and other securities issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable 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
to be
listed on all securities exchanges and/or included in the automated quotation
system of the Nasdaq National Market System (subject to official notice of
issuance) with respect to which the Common Stock issued to the public in
connection herewith may then be so listed and/or quoted.
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
time prior to the expiration of the Warrants and their exercise in full, 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 determining the holders thereof who are
entitled to receive any dividend or other distribution payable; 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 voluntary or involuntary dissolution, liquidation or
winding-up of the Company (other than in connection with a consolidation or
merger) or any capital reorganization, recapitalization or reclassification
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 will mail to each Holder
of the Warrants a notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such dividend, distribution
or right, and the amount and character of such dividend, distribution or
right, and (ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, sale, dissolution,
liquidation or winding-up is to take place and the time, if any such time is
to be fixed, as of which the holders of record of Common Stock shall be
entitled to exchange their shares of Common Stock for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up. Such notice shall be mailed at least thirty (30) days prior to
the date therein specified.
13. NOTICES.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly given or made at the time
delivered by hand if personally delivered; five calendar days after mailing
if sent by registered or certified mail; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and the next business day after
timely delivery to the courier, if sent by overnight air courier guaranteeing
next day delivery (except that a notice of change of address shall not be
deemed to have been
given until actually received by the addressee):
(a) If to the registered Holders of the Warrants, to the address
of such Holders 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.
14. SUPPLEMENTS AND AMENDMENTS. The Company and GKM may from time to
time supplement or amend this Agreement without the approval of any holders
of Warrant Certificates (other than GKM) 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 GKM
may deem necessary or desirable and which the Company and XXX xxxx shall not
adversely affect the interests of the Holders of Warrant Certificates.
15. 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.
16. TERMINATION. This Agreement shall terminate at the close of
business on, 2004, provided, however, that the indemnification provisions in
Section 7 hereof shall survive such termination until such time for filing an
action for which indemnification is provided under Section 7 has expired
under the applicable statute of limitation.
17. 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 Illinois 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.
Any process or summons to be served upon any of the Company, GKM and the
Holders (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 13 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, GKM 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 therefor.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to
the subject matter hereof and may not be modified or amended except by a
writing duly signed by the party against whom enforcement of the modification
or amendment is sought.
19. 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.
20. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended to be, nor should
they be construed as, part of this agreement and shall be given no
substantive effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give any person or corporation other than the Company and GKM
and any other registered Holder(s) of the Warrant Certificates or Warrant
Shares any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole and exclusive benefit of the
Company, GKM and any other registered Holder(s) of the Warrant Certificates
or Warrant Shares.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
NETRADIO CORPORATION
By:
XXXXXX XXXXXX XXXXXXXX & CO., INC.
By:
Its:
