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EXHIBIT 4.3
WARRANT AGREEMENT
Xxx Xxxxxx & Company
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Parallel Petroleum Corporation, a Delaware corporation (the "Company"),
hereby agrees, on the terms and subject to the conditions of this Warrant
Agreement (the "Agreement"), to sell and deliver to Xxx Xxxxxx & Company
("VKCO"), individually and not as Representative of the underwriters referred
to in the "Underwriting Agreement" (defined below), warrants to purchase a
number of shares of the "Common Stock" (defined below) equal to 5% (five
percent) of the aggregate number of shares (including "Option Shares" (defined
in the Underwriting Agreement)) of the Common Stock sold to the underwriters
pursuant to the Underwriting Agreement. VKCO agrees, on the terms and subject
to the conditions of this Agreement, to purchase such warrants from the
Company.
Each of the warrants will be exercisable by the "Holder" thereof
(defined below), as to all or any lesser number of shares of the Common Stock
covered by the Holder's warrants, at the "Exercise Price" per share (defined
below), at any time and from time to time beginning at 9:00 a.m., San Francisco
time, on the day that begins one year after the Closing Time (defined below)
and ending at 5:00 p.m., San Francisco time, on the day that is five years
after the Closing Time. The warrants shall be evidenced by instruments in the
form of Exhibit A hereto (those instruments and all instruments issued after
the date hereof in replacement thereof are referred to below as the
"Warrants").
The purchase price of the Warrants shall be $0.01 (one cent) for each
share of Common Stock purchasable on exercise of the Warrants. The delivery of
the Warrants and payment of the purchase price of the Warrants are to be made
on the "Closing Date" (defined in the Underwriting Agreement) or, to the extent
applicable, on the date the Option Shares are purchased pursuant to the
Underwriting Agreement, at the offices of VKCO at 000 Xxxxxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxxxxxxx, Xxxxxxxxxx, or such other time and place as may be agreed
upon between the Company and VKCO (the date(s) of such purchase of the Warrants
is referred to in this Agreement as the "Closing Time").
1. Definitions. As used in this Agreement, the following terms,
unless the context otherwise clearly requires,
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shall have for all purposes the following respective meanings, and capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Underwriting Agreement:
(a) The term "Common Stock" refers to the Common Stock, par value $.01
per share, of the Company, and all other shares of any class or classes
(however designated) of the common equity of the Company, now or hereafter
authorized, the holders of which by operation of law shall have the right,
without limitation as to amount, either to all or to a part of the balance of
current dividends and liquidating dividends and distributions after the payment
of dividends and distributions on any shares entitled to preference and the
holders of which ordinarily, in the absence of contingency, shall be entitled
to vote for the election of the directors of the Company (even though the right
so to vote has been suspended by the occurrence of such a contingency), other
than those directors of the Company (constituting a portion of the Board of
Directors) who, pursuant to the Certificate of Incorporation or other charter
documents of the Company, are then to be elected by a designated class or
series of the capital stock of the Company.
(b) "Common Stock Outstanding" shall mean the aggregate of all Common
Stock outstanding plus all Common Stock issuable upon exercise of all
outstanding Options and conversion of all outstanding Convertible Securities.
(c) "Convertible Securities" shall mean any indebtedness, shares of
stock or other rights granted by the Company (other than Options) convertible
into or exchangeable for Common Stock.
(d) The term "Exercise Price" refers to the per share purchase price of
the Warrant Shares subject to this Warrant Agreement. The Exercise Price shall
initially be $ per share (120% of the initial per share price to the public
of the shares of Common Stock sold pursuant to the Underwriting Agreement),
subject to adjustment as provided in Section 6 below.
(e) The term "Holder", when used with respect to the Warrants or the
Warrant Shares, means the person registered on the books and records of the
Company as being the holder of record of the Warrants or the Warrant Shares, as
the case may be, and, so long as VKCO holds of record any Warrants or Warrant
Shares, it shall be included in the definition of "Holder," and any action to
be taken or approval to be given by the Holders shall, unless otherwise
provided in this Agreement, require the action by, or approval of, the Holder
or Holders of at least that number of Warrants and Warrant Shares which in the
aggregate shall constitute a majority of all Warrant Shares issued or issuable
under this Agreement.
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(f) "Options" shall mean any warrants, options or, without limitation,
other rights granted by the Company to purchase Common Stock or Convertible
Securities.
(g) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities, whether pursuant to Section 6 below or otherwise.
(h) The term "Prospectus" refers to the prospectus which is part of the
Company's Registration Statement on Form S-2 in the form first filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b)
of the applicable rules and regulations (the "Rules and Regulations") of the
Commission under the Securities Act of 1933, as amended (the "Act").
(i) The term "Registration Statement" refers to the Company's
Registration Statement on Form S-2 (No. 333-______), as amended, when it first
became effective under the Act.
(j) "Representative" means VKCO.
(k) The term "Warrant Shares" refers to the shares of Common Stock (or
Other Securities) issued or issuable upon the exercise, in whole or in part, of
any of the Warrants.
2.1 Representations and Warranties. The Company represents and
warrants to VKCO as follows:
(a) Corporate Action. The Company has all requisite power and
authority, and has taken all necessary action, to enter into and perform all of
its obligations under this Agreement, to issue and deliver the Warrants and to
authorize and reserve for issuance, and upon payment from time to time of the
Exercise Price in accordance with the terms of this Agreement, to issue and
deliver the Warrant Shares; and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except (i) as such enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws or
equitable principles now or hereafter in effect relating to or affecting
creditors' rights generally (collectively, "Equitable Defenses") and (ii)
insofar as the indemnification and contribution provisions hereof may be
limited under federal and state securities laws and the public policies
underlying such laws.
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(b) Outstanding Common Stock. The outstanding shares of Common Stock
have been duly and validly authorized and issued and are fully paid and
non-assessable and free of preemptive rights. The Warrant Shares (i) are duly
authorized by the Company's Certificate of Incorporation, (ii) have been duly
and validly authorized to be issued and adequately reserved by the Board of
Directors of the Company, (iii) will, when issued and delivered to the Holders
pursuant to this Agreement, be duly and validly issued, fully paid and
non-assessable and free and clear of all liens, charges, encumbrances or rights
of others except for those which may be created by the Holder, and (iv) and
have been approved for inclusion, when issued, in the Nasdaq National Market
System ("NASDAQ"). The holders of outstanding shares of capital stock of the
Company are not entitled to any preemptive or similar rights to subscribe for
or purchase Warrant Shares or other shares of capital stock of the Company and,
except as otherwise set forth or incorporated by reference in the Prospectus,
there are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of, any shares of capital stock of the Company.
(c) No Violation. None of the execution or delivery of this Agreement,
the consummation of the transactions contemplated by this Agreement or
compliance with the terms and provisions of this Agreement will (i) conflict
with or constitute a breach of, or a default (or default with notice, the
passage of time or otherwise) under any bond, debenture, note or other evidence
of indebtedness or any indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which any of them is bound or to which any of their respective
property or assets is subject, (ii) result in the imposition of a lien on any
properties of the Company or any of its subsidiaries or an acceleration of
indebtedness of the Company or any of its subsidiaries or (iii) result in a
violation of any law, administrative regulation or order of any court or
governmental agency or authority applicable to the Company or any of its
subsidiaries or to any of their respective properties or assets. No consent,
approval, authorization or other order of any regulatory body, administrative
agency or other governmental body is required for the valid issuance and sale
of the Warrant Shares to the Representatives or the other transactions
contemplated by this Agreement, except for registration under the federal
securities laws and for permits and similar authorizations required under state
blue sky laws or similar laws.
(d) Underwriting Agreement. All representations and warranties made by
the Company in Section 1 of the Underwriting Agreement, dated December __,
1996, by and among the Company and VKCO, as Representative of the several
underwriters named therein (the "Underwriting Agreement"), are and will be at
and as of the Closing Time true and correct and are hereby incorporated by
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reference into this Agreement as if such representations and warranties were
set forth in full herein.
2.2 Representations and Warranties of VKCO. VKCO represents and
warrants to the Company that it has all requisite corporate power and corporate
authority, and has taken all necessary corporate action, to enter into and
perform all of its obligations under this Agreement and that this Agreement has
been duly authorized, executed and delivered by it and constitutes its legal,
valid and binding agreement, enforceable against it in accordance with its
terms, except (i) as such enforceability may be subject to or limited by
Equitable Defenses and (ii) insofar as the indemnification and contribution
provisions hereof may be limited under federal and state securities laws and
the public policies underlying such laws.
3. Compliance with the Act.
(a) Transferability of Warrants. VKCO agrees that the Warrants may not
be transferred, sold, assigned or hypothecated except: (i) to its successors in
a merger or consolidation or other business combination; (ii) to purchasers of
all or substantially all of its assets; (iii) to any officers or partners of
VKCO; (iv) by operation of law; or (v) as permitted below in this Section 3.
VKCO further agrees that the Company shall have no obligation to effect any
transfer of the Warrants during the time period referred to above, unless the
transferee, purchaser, assignee or pledgee, as the case may be, has executed an
agreement obligating the transferee to comply with all terms and conditions of
this Warrant Agreement applicable to the transferor.
(b) Transferability of Warrant Shares.
(i) Except as otherwise provided in this Section 3(b), each
certificate for Warrant Shares initially issued upon the exercise of any
Warrants shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The Shares represented by this certificate are subject to the
conditions specified in a Warrant Agreement, dated December __,
1996, between Parallel Petroleum Corporation and Xxx Xxxxxx &
Company. Except to the extent permitted by the Warrant Agreement,
no transfer, sale, pledge, hypothecation, encumbrance or other
disposition of the shares represented by this certificate shall be
valid or effective until registered under the Securities Act of
1933, as amended (or, if applicable, a successor law thereto) or
the Company has been advised by an opinion of counsel that such
shares will be transferred in a transaction exempt from such
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registration and until any applicable conditions contained in the
Warrant Agreement have been fulfilled. A copy of the Warrant
Agreement is on file at the offices of Parallel Petroleum
Corporation. The holder of this certificate, by acceptance of this
certificate, agrees to be bound by the provisions of the Warrant
Agreement."
(ii) Prior to any transfer, sale, pledge, assignment,
hypothecation or other disposition (each, a "Transfer") of any Warrant Shares,
the Holder of such Warrant Shares shall (a) give three business days prior
written notice (a "Transfer Notice") to the Company of such Holder's intention
to effect such Transfer, generally describing the manner and circumstances of
the proposed Transfer and (b) obtain from counsel to such Holder an opinion
reasonably satisfactory to the Company that the proposed Transfer of such
Warrant Shares may be effected without registration under the Act. Each
certificate evidencing such Warrant Shares issued upon such Transfer shall bear
the restrictive legend set forth in Section 3 (b)(i), unless in the opinion of
counsel to such Holder reasonably satisfactory to the Company that such legend
is not required in order to ensure compliance with the Act.
(iii) Notwithstanding the foregoing provisions of this Section
3(b), the restrictions imposed by subsections (i) and (ii) of this Section upon
the transferability of the Warrant Shares and the legend requirements of Section
3 (b)(i) shall terminate as to any particular Warrant Shares (A) when and so
long as the transfer, sale, pledge, hypothecation, encumbrance or other
disposition thereof, shall have been registered under the Act or (B) when the
Holder or Holders of any Warrants or Warrant Shares has delivered to the Company
the written opinion of counsel to such Holder or Holders, which shall be
reasonably satisfactory to the Company, stating that such legend is not required
in order to ensure compliance with the Act. Whenever the restrictions imposed
by this Section shall terminate as to any Warrant Shares, as provided above, the
Holder thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Warrant Shares not bearing the
restrictive legend set forth in Section 3(b)(i).
(c) Demand Registration. At any time after the day that begins one
year after the Closing Time and on or before the end of the day that is six
years after the Closing Time, upon written, or telegraphic or telephonic notice
followed as soon as practicable by written confirmation thereof, from any
Holder or Holders (the "Requesting Holders") of that number of Warrants and/or
Warrant Shares which in the aggregate shall constitute a majority of all
Warrant Shares issued or issuable under this Agreement (excluding Warrant
Shares which have been previously sold, transferred or otherwise disposed of in
a registered public offering, pursuant to Rule 144 under the Act, as such rule
may be amended from time to time, or pursuant to Regulation S under the
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Act, as such Regulation may be amended from time to time, or which in the
opinion of both counsel to the Company and counsel to the Requesting Holders
may otherwise then be publicly sold without registration under the Act), that
such Holder or Holders request the registration under the Act of any of the
Warrant Shares, the Company shall (i) immediately give notice to the other
Holders and afford them the opportunity to participate in the registration
statement and (ii) as promptly as possible after the receipt of such notice
from the Requesting Holders, but in any event within 45 days of the receipt of
such notice, and solely at its cost and expense, file a registration statement
with respect to the offering and sale or other disposition of the Warrant
Shares with respect to which it shall have received such notice. Such
registration statement may, if the Company satisfies the applicable
requirements, be made on Form S-3. If a registration requested pursuant to
this Section 3(c) is an underwritten registration, the Company and other
holders of securities of the Company may include securities in such
registration without the written consent of the Holders of the Warrant Shares
for which registration has been requested pursuant to this Section 3(c) if, but
only if, the managing underwriters of such registration advise the
participating Holders of Warrant Shares in writing that in their opinion such
inclusion will not materially affect the successful marketing of the Warrant
Shares. The Holders shall not be deemed to have effected a demand registration
pursuant to this Section 3(c) unless and until the registration statement is
declared effective. The Company shall be obligated to file only one
registration statement pursuant to this Section 3(c) which becomes effective,
whether or not the registration statement at the time it becomes effective
covers all or a portion of the Warrant Shares.
(d) Piggyback Registration. If, at any time during the period
commencing on the day that begins one year from the Closing Time and ending at
the end of the day that is six years after the Closing Time, the Company shall
propose to register any shares of Common stock or Other Securities (but
excluding any shares or securities being registered pursuant to Form S-8 or
Form S-4 or any successor form to either of them), the Company shall (i) give
each Holder written notice, or telecopy and telephonic notice followed as soon
as practicable by written confirmation thereof, of such proposed registration
at least 20 business days prior to the filing of such registration statement
and (ii) upon written notice, or telegraphic or telephonic notice followed as
soon as practicable by written confirmation thereof, given to the Company by
any Holder within 15 days after the giving of such written confirmation or
written notice by the Company, the Company shall include or cause to be
included in any such registration statement all or such portion of the Warrant
Shares as such Holder may request; provided, however, that the Company may at
any time withdraw or cease proceeding with any such registration if it shall at
the same time withdraw or cease proceeding with the registration of the Common
Stock or Other Securities originally proposed to be
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registered; and provided, further, that in connection with any registered
public offering involving an underwriting, the managing underwriter may (if in
its reasonable opinion marketing factors so require) limit the number of
securities (including any Warrants or Warrant Shares) included in such offering
(other than securities of the Company). In the event of any such limitation,
the total number of Warrant Shares to be offered for the account of the Holders
participating in the registration shall be reduced pro rata in proportion to
the respective number of shares requested to be included therein to the extent
necessary to reduce the total number of shares proposed to be registered to the
number of shares recommended by the managing underwriter; provided, however,
that if the amount or kind of securities to be offered for the accounts of
Holders shall be reduced in accordance with this sentence, the Company shall
not be permitted to include securities of any persons (other than the Company)
unless the Holders are permitted to participate on a pro rata basis with other
selling securityholders. Notwithstanding the foregoing, the Company shall not
be obligated to include Warrant Shares in more than two registration statements
pursuant to this Agreement.
(e) Company's Obligations in Registration. If any Holder timely elects
to participate in an offering by including Warrant Shares in a registration
statement pursuant to Section 3(c) or (d) above, the Company shall use its best
efforts to effect such registration to permit the sale of Warrant Shares in
accordance with the intended method or methods of disposition thereof and,
without limitation, pursuant thereto the Company shall:
(i) notify the Holders as to the filing of the registration
statement and of all amendments or supplements thereto filed prior to the
effective date thereof;
(ii) use its best efforts to cause any registration statement
filed under the Act pursuant to Section 3(c) or (d) above to become effective at
the earliest possible date after the filing thereof and to comply with all
applicable rules and regulations of the Commission in connection therewith;
provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents which would be
incorporated or deemed to be incorporated by reference in the registration
statement after the initial filing of any registration statement, the Company
will furnish to the Holders, their respective counsel and the underwriters, if
any, to be engaged in connection with the offering and sale by the Company (for
purposes of this Section 3 (e) and Section 3(f), the "Underwriters"), copies of
all such documents proposed to be filed, which documents will be subject to the
review of the Holders, their respective counsel and the Underwriters, and the
Company will not file any registration statement, or amendment thereto, or any
prospectus or any supplement thereto relating in whole or in part to the
Holders'
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Warrant Shares (including such documents incorporated or deemed to be
incorporated by reference) to which the Holders or the Underwriters, if any,
shall reasonably object;
(iii) notify the Holders immediately, and confirm the notice in
writing, (1) when the registration statement or any post-effective amendment
thereto becomes effective, (2) when a prospectus or prospectus supplement or
post-effective amendment has been filed, (3) of any request by the Commission
for amendments, supplements or additional information related to a registration
statement or prospectus or otherwise, (4) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceedings for
that purpose known to the Company, (5) of the receipt by the Company of any
notification with respect to the suspension of qualification of the Warrant
Shares for sale in any jurisdiction or of the initiation, or the threatening, of
any proceedings for that purpose known to the Company, (6) of the receipt of any
comments from the Commission or any state regulatory authority, (7) of the
happening of any event which requires the making of any changes in a
registration statement or the related prospectus or any prospectus supplement so
that such documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (8) of the determination of the
Company that a post-effective amendment to a registration statement would be
necessary or appropriate;
(iv) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the Warrant Shares for sale in any jurisdiction, at the earliest
possible moment;
(v) if reasonably requested by the Underwriters, if any, or the
Holders, immediately incorporate in a prospectus supplement or post-effective
amendment such information as the Holders and the Underwriters, if any, agree
should be included therein relating to the sale and distribution of the Warrant
Shares, including, without limitation, information with respect to the number of
Warrant Shares being sold to such Underwriters, the purchase price being paid
therefor by such Underwriters and with respect to any other terms of the
underwritten offering of the Warrant Shares to be sold in such offering; make
all required filings of such prospectus supplement or post-effective amendment
as soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or amend any registration
statement if reasonably requested by the Holders or any Underwriter of Warrant
Shares covered by such Warrant Shares;
(vi) furnish to each of the Holders whose Warrant Shares have
been included therein, their respective counsel and
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each Underwriter, if any, without charge, at least one manually executed copy
of any registration statement (including all amendments thereto) and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(vii) during the time when a prospectus is required to be
delivered under the Act in connection with the distribution of the Warrant
Shares, comply so far as it is able with all requirements imposed upon it by the
Act, as now and hereafter amended, and by the Rules and Regulations promulgated
by the Commission thereunder, as from time to time in force, so far as necessary
to permit the continuance of sales of or dealings in the Warrant Shares. If at
any time when a prospectus relating to the Warrant Shares is required to be
delivered under the Act any event shall have occurred as a result of which, in
the opinion of counsel for the Company or counsel for the Holders, the
prospectus relating to the Warrant Shares as then amended or supplemented
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, or if it is necessary at any time to amend such prospectus to
comply with the Act, the Company will use its best efforts promptly to prepare
and file with the Commission an appropriate amendment or supplement in form and
substance reasonably satisfactory to the Holders;
(viii) make generally available to its security holders as soon
as practicable, but not later than 15 months following the effective date (and
each other deemed effective date) of such registration statement, an earnings
statement or statements of the Company and any subsidiaries it may then have
covering a period of at least 12 months beginning after the effective date of
the registration statement (but in no event commencing later than 90 days after
such date), which shall satisfy the provisions of Section 11(a) of the Act and
Rule 158 promulgated thereunder;
(ix) prepare and promptly file with the Commission such
amendments and post-effective amendments to each registration statement as may
be necessary to keep such registration statement continuously effective for a
period of nine months; cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be timely filed
pursuant to Rule 424 under the Act; and comply with the provisions of the Act
with respect to the disposition of all Warrant Shares covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition as set forth in such registration statement or
supplement to such prospectus; and in these regards the Company shall not be
deemed to have used its best efforts to keep a registration statement effective
during the applicable period if it unreasonably takes any action that would
result in any Holder
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whose Warrant Shares have been included therein not being able to sell such
Warrant Shares at any time during such period or for more than 30 days, whether
or not consecutive, in such period;
(x) deliver to each of the Holders, their respective counsel
and the Underwriters, if any, without charge, as many copies of the prospectus
or prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request; and the Company
consents to the use of any such prospectus or any amendment or supplement
thereto by the Holders and each of the Underwriters, if any, in connection with
the offering and sale of the Warrant Shares covered by such prospectus or any
amendment or supplement thereto;
(xi) prior to any public offering of Warrant Shares, register
or qualify or cooperate with the Holders, the Underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Warrant Shares for offer and sale under the securities or blue sky laws of such
jurisdictions as the Holders or any Underwriter reasonably requests in writing;
keep each such registration or qualification (or exemption therefrom) effective
during the period the applicable registration statement is required to be kept
effective and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Warrant Shares covered by
the applicable registration statement; provided, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(xii) cooperate with the Holders and the Underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
Warrant Shares to be sold, which certificates shall not bear any restrictive
legends; and enable such Warrant Shares to be in such denominations and
registered in such names as the Underwriters may request at least two business
days prior to any sale of Warrant Shares to the Underwriters;
(xiii) use its best efforts to cause the Warrant Shares covered
by the applicable registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the Holders and the Underwriters, if any, to consummate the disposition of such
Warrant Shares;
(xiv) enter into such agreements in form and substance
reasonably acceptable to the Company and its counsel (including an underwriting
agreement) and take all such other actions in connection therewith as may be
necessary to expedite
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or facilitate the disposition of such Warrant Shares and, in such connection,
whether or not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration: (1) make such representations
and warranties to the Holders with respect to the business of the Company and
any subsidiaries it may then have, the registration statement, the prospectus
(and, if applicable, prospectus supplement) and documents, if any, incorporated
or deemed to be incorporated by reference in the registration statement (and,
if applicable, prospectus supplement), in each case in such form, substance and
scope as are reasonably requested by the Holders and confirm the same if and
when requested; (2) obtain opinions of counsel to the Company and updates
thereof addressed to the Holders with respect to the matters referred to in the
preceding clause (1) in such form, scope and substance as are reasonably
requested by the Holders; (3) in the case of an underwritten offering, enter
into an underwriting agreement in form, scope and substance as is customary in
underwritten offerings and obtain (a) opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Underwriters) addressed to the
Underwriters covering the matters customarily covered in opinions requested by
underwriters in underwritten offerings and such other matters as may be
reasonably requested by the Underwriters and (b) obtain opinions of counsel to
the Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Holders) addressed to the
Holders covering matters reasonably requested by the Holders (whether or not
such matters are different from, or in addition to, the matters described in
subclause (a) of this subsection (xiv)(3); (4) obtain "comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is or is required to be included
in the registration statement), addressed to the Holders and each of the
Underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "comfort" letters to underwriters in
connection with underwritten offerings; (5) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification and
contribution provisions and procedures of Section 3(f) hereof (or such other
indemnification and contribution provisions as shall be acceptable to the
Holders and the Underwriters of such underwritten offering) with respect to all
parties to be indemnified pursuant to said section; and (6) the Company shall
deliver such documents and certificates as may be requested by the Holders and
the Underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (1) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company. Each of the above
shall be done at each closing under
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such underwriting or similar agreement or as and to the extent required
thereunder;
(xv) make available for inspection by a representative of the
Holders or any Underwriter participating in any disposition pursuant to such
registration statement and any attorney or accountant retained by the Holders or
such Underwriter, all financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries and cause the officers,
directors and employees of and independent accountants and attorneys for the
Company and its subsidiaries personally to meet with and to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with any registration of Warrant Shares;
provided, that any records, information or documents that are designated by the
Company in writing as confidential shall be kept confidential by such persons
unless (i) disclosure of such records, information or documents is required by
court or administrative order, (ii) disclosure of such records, information or
document is, in the opinion of counsel to the Holders or to any Underwriter,
required pursuant to the requirements of the Act or (iii) such records,
information or documents are otherwise publicly available;
(xvi) pay all costs and expenses incident to the performance of
the Company's obligations under Sections 3(c) and (d) above and under this
Section 3(e) (collectively "Registration Expenses"), including without
limitation the fees and disbursements of the Company's auditors, legal counsel,
any special legal counsel and of legal counsel (including, if applicable,
counsel to the Underwriters) responsible for qualifying the Warrant Shares under
state securities or blue sky laws, all filing fees and printing expenses, all
expenses in connection with the transfer and delivery of the Warrant Shares all
expenses in connection with the qualification or registration of the Warrant
Shares under applicable state securities or blue sky laws of such states as are
designated by the Holders (or obtaining exemptions from such qualification or
registration under state securities or blue sky laws) and, if applicable, the
fee of the National Association of Securities Dealers, Inc. in connection with
its review; provided, that in no event shall Registration Expenses include any
underwriting discounts, commissions or fees or the fees of counsel retained by
the Holders or, except with respect to such state securities blue sky matters,
Underwriters in connection with the sale of Warrant Shares pursuant to Section
3(c) or 3(d) above; and
(xvii) in connection with the filing of a registration
statement pursuant to Section 3(c) or (d) above, use its best efforts to obtain
indemnification of the Holders by the Underwriter to the same extent said
Underwriter provides indemnification to the Company.
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As used in this Section 3(e), the term "Holders" refers only to those
Holders who have timely elected to sell Warrants Shares in an offering.
(f) Indemnification.
(i) The Company shall indemnify and hold harmless VKCO, the
Holders and any underwriter (as defined in the Act) for VKCO and the Holders,
and each person, if any, who respectively controls (within the meaning of
Section 15 of the Act) VKCO or any of the Holders or such underwriter against
any losses, claims, damages, liabilities (or actions in respect thereof) and
expenses whatsoever (including, but not limited to, any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which VKCO, the Holders or such underwriter or such controlling
person becomes subject, under the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or other federal or state statute, law or
regulation, at common law or otherwise, specifically including but not limited
to losses, claims, damages or liabilities (or actions in respect thereof) or
expenses related to negligence on the part of any such indemnified party,
insofar as any such loss, claim, damage, liability or expense (or actions in
respect thereof) (1) arises out of or is based upon any breach of any
representation, warranty or covenant of the Company in this Agreement or upon
any untrue statement or alleged untrue statement of any material fact contained
in (A) Section 2 of this Agreement, (B) any registration statement covering the
Warrant Shares as originally filed or in any amendment thereof, in the
prospectus contained therein or in an amendment or supplement thereto or (C) in
any application or other document, or any amendment or supplement thereto (in
this Section collectively called "application") executed by or on behalf of the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify or register the Warrant
Shares under the securities or blue sky laws thereof (or to obtain exemptions
from such qualifications or registration requirements) or filed with the
Commission or any securities association or securities exchange, or (2) arises
out of or is based upon the omission or alleged omission to state in any of the
documents described in subclauses (1)(A), (B) or (C) above, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and agrees to reimburse each such indemnified person, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigation or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be obligated to indemnify in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon, and in conformity
with, written information furnished to the Company by the indemnified person
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specifically for use therein. The Company will not, without the prior written
consent of VKCO, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not VKCO is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes, without payment by VKCO, an unconditional release of all
indemnified parties from all liability arising out of such claim, action, suit
or proceeding, satisfactory in form and substance to VKCO.
(ii) Any Holder that includes all or a part of such Holder's
Warrant Shares in a registration statement pursuant to Sections 3 (c) or (d)
above agrees to indemnify and hold harmless the Company and each of its
directors and officers who have signed any such registration statement, any
other Holder of Warrant Shares included in such registration statement and any
underwriter (as defined in the Act) for the Company or the Holders of Warrant
Shares, and each person, if any, who controls (within the meaning of Section 15
of the Act) the Company or such underwriter to the same extent as the indemnity
by the Company in Section 3(f)(i), but only with respect to any untrue statement
or alleged untrue statement or omission or alleged omission, if any, made in
such registration statement, or any amendment or supplement thereto, or in any
application in reliance upon, and in conformity with, written information
furnished by the indemnifying Holder to the Company or such controlling person
expressly for use in the registration statement, or any amendment or supplement
thereto, or any such application, as the case may be. If any action shall be
brought in respect of which indemnity may be sought against any of the Holders,
such Holder(s) shall have the rights and duties given to the indemnifying party,
and the persons so indemnified shall have the rights and duties given to the
indemnified party, by the provisions of Section 3(f)(iii) below;
(iii) If any action is brought against a person in respect of
which indemnity may be sought hereunder against an indemnifying party, such
person shall promptly notify the indemnifying party in writing of the
institution of such action (but the failure to so notify shall not affect the
indemnification and other rights provided for herein except to the extent, if
any, that the indemnifying party is prejudiced by the failure to so give or
timely give such notice) and the indemnifying party shall assume the defense of
the action, including the employment of counsel satisfactory to the indemnified
person and payment as incurred of all fees and expenses related thereto. The
indemnified person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified person unless (1) the employment of such counsel and the payment of
fees and expenses thereof shall have been authorized in writing by the
indemnifying party in connection with the defense of the action, (2) the
indemnifying party shall
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have failed promptly after notice by such indemnified person to assume the
defense of such action or proceeding and to employ counsel satisfactory to the
indemnified person in any such action or proceeding or (3) the named parties to
any such action or proceeding (including any impleaded parties) include both
such indemnified person and the indemnifying party, and such indemnified person
shall have been advised by counsel that there may be legal defenses or rights
available to such indemnified person which are different from or additional to
those available to the indemnifying party (in which case, if such indemnified
person notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such indemnified person. Anything in this
paragraph to the contrary notwithstanding, the indemnifying party shall not be
liable for any settlement of any claim or action effected without its written
consent. The indemnity agreements contained in this Section shall remain in
full force and effect regardless of any investigation made by or on behalf of
any indemnified person and shall survive any termination of this Agreement.
The indemnifying party agrees promptly to notify the indemnified party of the
commencement of any litigation or proceedings against the indemnifying party or
any of its officers or directors in connection with any registration statement
referred to in Section 3(c) or (d) above.
(iv) If the indemnification provided for in items (i), (ii) and
(iii) of this Section 3(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, the indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity
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to correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
subparagraph (iii) of this Section 3(f), any legal or other fees or expenses
incurred by such party in connection with any investigation or proceeding. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this subparagraph (iv) of this Section 3(f) were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable and other considerations referred to in this
paragraph. If the full amount of the contribution specified in this
subparagraph (iv) of this Section 3(f) is not permitted by law, then such
indemnified person shall be entitled to contribution from the indemnifying
party to the full extent permitted by law. Notwithstanding the provisions of
this Section 3(f)(iv), no Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Warrant Shares of
such Holder were sold to the public exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue
statement or omission. No party found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any party who was not found guilty of such fraudulent
misrepresentation.
(v) Whenever any indemnifying or contributing party is
requested by the indemnified party or the party entitled to contribution to make
a payment pursuant to the forgoing provisions of this Section 3(f), such payment
will be made within five business days after the request and, if not so paid,
the amount due will thereafter bear interest at ten percent per annum,
compounded annually (but not in excess of the maximum amount permitted by law).
4. Exercise of Warrants.
(a) Exercise of Warrants. The Warrants may be exercised from time to
time and in full or in part by the Holder thereof by surrender of the Warrants,
with the Election to Purchase attached thereto duly executed by such Holder, to
the Company at its offices at 000 Xxxxx Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other office or agency as the
Company may from time to time designate in writing to each Holder, accompanied
by payment, in cash or by cashier's check payable to the order of the Company or
as provided in Section 4(c), in the amount obtained by multiplying the number of
Warrant Shares designated by the Holder in the Election to Purchase by the
Exercise Price per share. Exercise of any Warrant shall constitute an
acknowledgment by the purchasing Holder that it will not dispose of the Warrant
Shares acquired upon such exercise except in compliance with Section 3(b) hereof
and the Act. Upon any partial exercise of the Warrants, the Company at its
expense will forthwith issue and
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deliver to the purchasing Holder a new Warrant, in the name of such Holder and
for the number of Warrant Shares equal to the number of shares called for by
the surrendered Warrant (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such Warrant Shares (after
giving effect to such adjustment) purchased by the Holder pursuant to such
exercise.
(b) Company to Reaffirm Obligations. On the date of any exercise of any
Warrants (except that if, on that date, the stock transfer books of the Company
are closed, in which case on the next succeeding date on which such stock
transfer books are open) the Holder exercising the same shall be deemed to have
become, and thereafter shall be considered, a holder of record of the shares of
Common Stock purchased upon such exercise for all purposes. Holders of Warrants
shall have no rights of share ownership until they exercise their Warrants. The
Company will, at the time of any exercise of any Warrant, upon the request of
the Holder thereof, acknowledge in writing its continuing obligation to afford
to that Holder any rights (including without limitation any right to
registration of the Warrant Shares issued upon such exercise) to which the
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Agreement; provided, however, that if the Holder of a Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford those rights to the Holder.
(c) Net Exercise of Warrants. Notwithstanding anything to the contrary
contained in this Section 4, any Holder may elect to exercise any Warrant in
whole or in part by receiving shares of Common Stock equal to the value
(determined below) of the Warrant (or any part hereof), upon surrender of the
Warrant (or any part thereof) at the office or agency described in Section 4(a)
above, together with notice of such election, specifying the part of the Warrant
so surrendered, in which event the Company shall issue and deliver to the Holder
a number of shares of Common Stock determined using the following formula:
X = (Y) (A-B)
---------
A
where
X = the number of shares of Common Stock to be issued
to the Holder;
Y = the number of shares of Common Stock purchasable
under the Warrant, or portion of the Warrant, surrendered;
A = the Current Market Price per share of the Common Stock,
determined pursuant to Section 6(d) of this Agreement; and
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B = the then current Exercise Price per share of Common Stock.
5. Delivery of Stock Certificates, etc., on Exercise: No Fractional
Shares.
(a) Stock Certificates, Etc. As soon as practicable after the exercise
of any Warrants and in any event within five business days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the purchasing
Holder a certificate or certificates for the number of fully paid and
nonassessable Warrant Shares to which such Holder shall be entitled upon such
exercise, together with any Other Securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 6 of this Agreement or otherwise.
(b) No Fractional Shares. The Company will not issue a fractional share
of Common Stock upon exercise of a Warrant. Rather, if a fractional share would
otherwise be issued, the Company will instead issue a number of whole shares
equal to the next lowest number of whole shares and shall pay to the exercising
Holder an amount in cash equal to amount obtained by multiplying (x) the
fractional shares not issued by (y) the Current Market Price (as defined in
Section 6(d)) per share of the Common Stock on the last trading day prior to the
exercise date.
6. Anti-dilution Provisions. The Warrants are subject to the following
additional terms and conditions:
(a) Adjustment for Change in Capital Stock. If, after the date of this
Agreement, the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its capital stock (including Common Stock);
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of
its capital stock or Other Securities (including without
limitation any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
entity);
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then the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination or reclassification shall be
adjusted so that the Exercise Price shall be equal to the price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction, the numerator of which shall be (x) the total number of outstanding
shares of Common Stock of the Company immediately prior to such event and the
denominator of which shall be (y) the total number of outstanding shares of
Common Stock of the Company immediately after such event and, as so adjusted or
readjusted, the Exercise Price shall remain in effect until a further
adjustment or readjustment is required by this Section 6(b).
Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to this Section 6(a), the Warrant Shares shall simultaneously
be adjusted by multiplying the number of Warrant Shares issuable upon exercise
of each Warrant immediately prior to such event by the Exercise Price in effect
on the date thereof and dividing the product so obtained by the Exercise Price
as adjusted.
These adjustments referred to in the preceding paragraph shall become
effective on (x) in the case of a dividend or distribution, the earlier of the
record date thereof or the distribution date thereof and (y) in the case of a
subdivision, combination or reclassification, the earlier of the record date
thereof or the effective date thereof.
(b) Adjustments For Other Distributions. If, after the date of this
Agreement, the holders of Common Stock generally shall have received or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive (i) securities other than capital stock,
(ii) evidences of its indebtedness, (iii) assets (including cash dividends or
distributions), (iv) rights, options, warrants or convertible or exchangeable
securities (other than Convertible Securities or Options) containing the right
to subscribe for or purchase securities of the Company, then and in each such
case the Holder of each Warrant, upon the exercise thereof as provided in
Section 4 above, shall be entitled to receive, in addition to the Warrant Shares
otherwise receivable on such exercise, the amount of securities, indebtedness,
assets (including cash in the case referred to in subdivision (iii) of this
Section 6(b)) and such rights, options, warrants or convertible or exchangeable
securities which such Holder would hold on the date of such exercise if on the
date of this Agreement such Holder had been the holder of record of the number
of shares of Common Stock called for by the Warrants held by such Holder and had
thereafter, during the period from the date of this Agreement to and including
the date of such exercise, retained such shares, giving effect to all
adjustments called for during such period by this Section 6.
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(c) Adjustments For Sale or Other Issuance of Common Stock.
(i) If at any time prior to the exercise of the Warrants in
full, the Company shall issue or sell any Common Stock without
consideration or for consideration per share less than the Current Market Price
per share (as defined in Section 6(d)) on the date of such issuance or sale, the
Exercise Price shall be adjusted so that the Exercise Price shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
to the date of such sale or issuance (which date in the event of distribution to
shareholders shall be deemed to be the record date set by the Company to
determine shareholders entitled to participate in such distribution) by a
fraction, the numerator of which shall be (i) the number of shares of Common
Stock outstanding on the date of such sale or issuance, plus (ii) the number of
additional shares of Common Stock which the aggregate consideration received by
the Company upon such issuance or sale would purchase at such Current Market
Price per share of the Common Stock and the denominator of which shall be (i)
the number of shares of Common Stock outstanding on the date of such issuance or
sale, plus (ii) the number of additional shares of Common Stock offered for
purchase. Any adjustments required by this Section 6(c) shall be made
immediately after such issuance or sale or record date, as the case may be. Such
adjustments shall be made successively whenever the event shall occur.
(ii) For the purpose of making any adjustment in the Exercise
Price, or number of shares of Common Stock purchasable upon exercise of the
Warrants, as provided above and in Section 6(c)(vii) below, the consideration
received by the Company for any issue or sale of securities shall:
(A) To the extent it consists of cash, be computed as the
gross amount of cash received by the Company before deduction of any
underwriting or similar commissions, compensation, discounts or concessions paid
or allowed by the Company in connection with such issue or sale and before
deduction of any other expenses payable in connection therewith.
(B) In case of the issuance (otherwise than upon
conversion or exchange of Convertible Securities) or sale of additional Common
Stock, Options or Convertible Securities for a consideration other than cash or
a consideration a part of which is other than cash, then for purposes of this
Section 6(c) the fair value of such consideration as determined by the Board of
Directors of the Company in the good faith exercise of its business judgment,
regardless of the accounting treatment thereof, shall be deemed to be the value
of the consideration other than cash received by the Company for such
securities.
(iii) Options and Convertible Securities. If the Company in
any manner issues or grants any Options or any
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Convertible Securities -- but only to the extent (i) such Options are
exercisable at less than the Current Market Price at the date of issue of such
Options or (ii) the amount paid for such Convertible Securities per share plus
any additional amount payable per share upon conversion thereof is less than
the Current Market Price per share at the date of issue of the Convertible
Securities -- the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable shall (as of the date of
issue or grant of such Options or, in the case of the issue or sale of
Convertible Securities other than where the same are issuable upon the exercise
of Options, as of the date of such issue or sale) be deemed to be issued and to
be outstanding for the purpose of this Section 6(c) and to have been issued for
the sum of the amount (if any) paid for such Options or Convertible Securities
and the amount (if any) payable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities at the time such
Convertible Securities first become convertible or exchangeable; provided that,
subject to the other provisions of this Section 6(c), no further adjustment of
the Exercise Price shall be made upon the actual issuance of any such Common
Stock or Convertible Securities or upon the conversion or exchange of any such
Convertible Securities.
(iv) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Option referred to in Section 6(c)(iii), or
the rate or price at which any Convertible Securities referred to in Section
6(c)(iii) are convertible into or exchangeable for shares of Common Stock, shall
change at any time (other than under or by reason of conventional provisions
designed to protect against dilution), the Exercise Price in effect at the time
of such event shall forthwith be readjusted -- but only to the extent such
change does not result in either the per share Option exercise price or the
amount per share payable for such Convertible Securities plus the amount payable
per share on the conversion of such Convertible Securities to be greater than
the lesser of the Current Market Price per share at the time such Options or
Convertible Securities were issued, as referred to in Section 6(c)(iii), or the
Current Market Price at the effective date of such change -- to the Exercise
Price that would have been in effect at such time had such Options or
Convertible Securities then still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. If the purchase price provided for in
any such Option, or the additional consideration (if any) payable upon the
conversion or exchange of any such Convertible Securities, or the rate or price
at which any such Convertible Securities are convertible into or exchangeable
for shares of Common Stock shall be changed at any time under or by reason of
conventional provisions designed to protect against dilution, then in case of,
but only to the extent
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of, the delivery of shares of Common Stock upon the exercise of any such Option
or upon conversion or exchange of any such Convertible Security, the Exercise
Price then in effect hereunder shall, upon issuance of such shares of Common
Stock, be adjusted -- but only to the extent such change does not result in
either the per share Option exercise price or the amount per share payable for
such Convertible Securities plus the amount payable per share on the conversion
of such Convertible Securities to be greater than the Current Market Price per
share at the time such Options or Convertible Securities were issued, as
referred to in Section 6(c)(iii) -- to such amount as would have obtained had
such Option or Convertible Security never been issued and had adjustments been
made based only upon the issuance of the shares of Common Stock for the
consideration actually received for such Option or Convertible Security and
such Common Stock.
(v) Expiration of Option or Conversion Rights. In the event of
the termination or expiration of any right to purchase Common Stock under any
Option or of any right to convert or exchange Convertible Securities, the
Exercise Price shall, upon such termination, be changed to the Exercise Price
that would have been in effect at the time of such expiration had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration, never been issued, and the shares of Common Stock issuable
thereunder shall no longer be deemed to be Common Stock Outstanding. As used in
this Section 6.3(c)(v), the word "Expiration" includes a termination, without
payment of consideration by the Company, of a right to purchase, convert or
exchange.
(vi) Excluded Events. Notwithstanding anything in this Section
6 to the contrary, the Exercise Price shall not be adjusted by virtue of (i) the
Warrants or the existence or exercise of any options of the Company outstanding
on the date hereof and disclosed in the Prospectus or (ii) the issuance or sale
of, or the grant of Options to purchase, Common Stock to employees, directors,
or officers of the Company or its subsidiaries, if any, in each case who do not
beneficially own more than five percent of the Common Stock (assuming for this
purpose that all Options then held by the person, including new options then
being granted, but no other Option or Convertible Securities, have then been
exercised in full), or are not the children of such a five percent or greater
shareholder or the spouses of such children, pursuant to stock option plans
currently existing, or hereafter approved by the Board of Directors of the
Company, at a price which is less than the Current Market Price at the time of
such issuance or sale (all as determined in accordance with this Section 6(c)).
(vii) Adjustment in Number of Warrant Shares. Whenever the
Exercise Price payable upon exercise of a Warrant is adjusted pursuant to this
Section 6(c), the Warrant Shares issuable on exercise of the Warrant shall
simultaneously be adjusted by multiplying the number of the Warrant Shares
issuable
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upon exercise of the Warrant immediately prior to such event by the Exercise
Price in effect on the date thereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(d) Current Market Price. For the purpose of any computation under
Section 6, the "Current Market Price" per share of Common Stock at any date
shall be the average of the daily closing prices for the 15 consecutive trading
days commencing 20 trading days before such date. The closing price for each
day shall be the last reported sale price, regular way or, in case no such
reported sale takes place on such day, the average of the closing bid and asked
prices, regular way, for such day, in either case on the principal national
securities exchange on which the shares are listed or admitted to trading, or if
they are not listed or admitted to trading on any national securities exchange,
but are traded in the NASDAQ, or if the shares are otherwise securities for
which transaction reports are required to be made on a real-time basis pursuant
to an effective transaction reporting plan under Rule 11a3-1 of the Rules of the
Commission under the Exchange Act, the last reported sales price or, if they are
not listed or admitted to trade, and if last sale data is not then available
from NASDAQ, but are traded in the over-the-counter market, the average of the
representative closing bid and asked quotations for the Common Stock on NASDAQ
or any comparable system, or if the Common Stock is not listed on NASDAQ or a
comparable system, the average of the closing bid and asked prices as furnished
by two members of the National Association of Securities Dealers, Inc. selected
from time to time by the independent members of the Board of Directors of the
Company for that purpose.
(e) Minimum Adjustment. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Warrant Shares
purchasable upon the exercise of each Warrant. No adjustment in the Exercise
Price payable hereunder shall be required unless such adjustment would require
an increase or decrease in the Exercise Price of at least $.01 per share. Any
adjustments that by reason of this Section 6(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
and, notwithstanding the foregoing, all adjustments so carried forward shall be
made at the time of, and in connection with, each exercise of any of the
Warrants. All calculations shall be made to the nearest one-thousandth of a
share, or cent, as the case may be.
(f) Other Securities. If at any time, as a result of an adjustment made
pursuant to this Section 6, the Holders shall become entitled to purchase any
shares of capital stock or Other Securities of the Company other than shares of
Common Stock, thereafter the number of such Other Securities so purchasable upon
exercise of each Warrant and the Exercise Price for such securities shall be
subject to adjustment from time to time in a
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manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in this Section 6; and the provisions
of Sections 3, 4, 5 and 7, inclusive, with respect to the Warrant Shares, shall
apply on like terms to any such Other Securities.
(g) Consolidations, Mergers and Other Transactions. In case of any
consolidation of the Company with or merger of the Company into another
corporation or entity or in case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation or entity, as the case may be, shall execute a binding agreement
agreeing that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities and
property which the Holder would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance had such
Warrant been exercised immediately prior to such action. The Company shall not
complete any such consolidation, merger, sale or conveyance unless the agreement
referred to in the foregoing sentence is executed and delivered, is binding and
the mailing thereof provided for in the next sentence is done at the time of
such completion. The Company shall mail by first class mail, postage prepaid,
to each Holder, notice of the execution of and a copy of such agreement. Such
agreement shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 6 and for
other protections and rights (including without limitation registration rights)
for the Holders as are as nearly equivalent as may be practical to those they
have under this Warrant Agreement. The provisions of this Section 6 shall
similarly apply to successive consolidations, mergers, sales or conveyances.
Each Holder of Warrants shall be under no duty or responsibility to determine
the correctness of any provisions contained in any such agreement relating
either to the kind or amount of shares of stock or Other Securities or property
receivable upon exercise of Warrants or with respect to the method employed and
provided therein for any adjustments.
(h) Notice of Adjustments. Whenever the Exercise Price or the kind or
amount of securities purchasable under the Warrants shall be adjusted pursuant
to any of the provisions of this Warrant Agreement, the Company shall forthwith
thereafter cause to be sent to VKCO and all other Holders a certificate setting
forth the adjustments in the Exercise Price and the number of shares and, in
addition, setting forth in detail the facts requiring such adjustments. In
addition, the Company at its expense shall within 90 days following the end of
each of its fiscal years during the term of this Agreement and promptly upon the
reasonable request of the Holders of at least ten percent of the Warrants in
connection with the exercise from time to time of all or any portion of any
Warrants, cause independent public
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accountants of nationally recognized standing selected by the Company to
compute any such adjustment in accordance with the terms of the Warrants and
prepare and deliver to the Holders a certificate setting forth such adjustment
and showing in detail the facts upon which the adjustment is based.
(i) Notice of Certain Events. In the event of (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any Other Securities or property, or to
receive any other right or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to, or
consolidation or merger of the Company with or into, any other corporation or
other entity or (iii) any voluntary or involuntary dissolution or liquidation of
the Company, then and in each such event the Company will mail or cause to be
mailed to each Holder and, in addition, on the same date as the earliest such
mailing, telecopied and mailed to VKCO, a notice specifying the date upon which
any such record date is to be taken for the purpose of such dividend,
distribution or right, stating the amount and character of such dividend,
distribution or right and the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place and the time, if any, as
of which the holders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 15
business days prior to the proposed record date therefor.
(j) Other Events Altering Exercise Price. Upon the occurrence of any
event not specifically denominated in this Section 6 as altering the Exercise
Price and the amount of Common Stock purchasable upon the exercise of the
Warrants, if the reasonable exercise of the business judgment of the independent
members of the Board of Directors of the Company (or, if none, the Board of
Directors or the Company) requires, on equitable principles, the alteration of
the Exercise Price favorable to Holders and/or corresponding adjustment
favorable to Holders to the number of shares for which the Warrants are
exercisable, the Exercise Price and such number of shares shall be equitably
altered.
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7. Further Covenants of the Company. The Company hereby agrees as
follows:
(a) Reservation of Stock. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon the exercise of the
Warrants, all Warrant Shares from time to time issuable upon the exercise of the
Warrants.
(b) Title to Stock. All of the Warrant Shares delivered upon the
exercise of the Warrants and payment of the Exercise Price (including for the
purpose by a net exercise of Warrants as permitted by Section 4(c)) shall be
validly issued, fully paid and nonassessable; each Holder of a Warrant shall
receive good and marketable title to the Warrant Shares, free and clear of all
voting and other trust arrangements, liens, encumbrances, equities, preemptive
rights and, without limitation, claims of any type whatsoever; and the Company
shall have paid all taxes, if any, in respect of the issuance thereof.
(c) Exchange of Warrants. Subject to Section 3(a) hereof, upon
surrender for exchange of any Warrant to the Company, the Company at its expense
will promptly issue and deliver to the Holder thereof a new Warrant or Warrants
of like tenor, in the name of such Holder, calling in the aggregate for the
number of Warrant Shares called by the Warrants so surrendered.
(d) Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
Warrants and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement by the Warrant Holder reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, upon surrender
by the Holder and cancellation of such Warrants, the Company at its expense will
execute and deliver, in lieu thereof, new Warrants of like tenor.
(e) Reporting by the Company. The Company agrees that, during the term
of the Warrants, it will use its best efforts to keep current in the filing of
all forms and other materials which it may be required to file with the
appropriate regulatory authority pursuant to the Exchange Act and all other
forms and reports required to be filed with any regulatory authority having
jurisdiction over the Company. The Company will take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Warrant Shares without registration under the Act
within the limitation of the exemptions provided by (a) Rule 144 under the Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission.R
8. Other Holders. The Warrants are issued upon the following terms, to
all of which each Holder or owner thereof by
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the taking thereof consents and agrees: (a) any person who shall become a
transferee, within the limitations on transfer imposed by Section 3(a) hereof,
of a Warrant properly endorsed, shall take such Warrant subject to the
provisions of Sections 3(a) and 3(b) hereof and thereupon shall be authorized
to represent that such transferee is the absolute owner thereof and, subject to
the restrictions contained in this Warrant Agreement, shall be empowered to
transfer absolute title by endorsement and delivery thereof to a permitted bona
fide purchaser for value; and (b) each prior taker or owner waives and
renounces all equities or rights in such Warrant in favor of each such
permitted bona fide purchaser, and each such permitted bona fide purchaser
shall acquire absolute title thereto and to all rights presented thereby; and
(c) until such time as the respective Warrant is transferred on the books of
the Company, the Company may treat the registered Holder thereof as the
absolute owner thereof for all purposes, notwithstanding any notice to the
contrary.
9. General Provisions. All notices, certificates and other
communications from or at the request of the Company to the Holder of any
Warrant or Warrant Share as such shall be mailed by first class, registered or
certified mail, postage prepaid to the Holder, with a copy to each of Xxx Xxxxxx
& Company, 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000,
Attn.: President, or to such other address for itself as VKCO shall have
furnished to the Company in writing. This Warrant Agreement and any of the
terms hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. In addition and
notwithstanding the foregoing, the provisions of Section 3(c) and (d) and
Section 6 hereof cannot be changed, waived, discharged or terminated in a manner
adverse to the Holders without the written consent of one or more Holder or
Holders who collectively own, of record, that number of Warrants and/or Warrant
Shares which in the aggregate shall constitute two-thirds of all Warrant Shares
issued or issuable under this Agreement (excluding Warrant Shares which have
been previously sold, transferred or otherwise disposed of in a registered
public offering, pursuant to Rule 144 under the Act, as such Rule may be amended
from time to time, or pursuant to Regulation S, as such regulation may be
amended from time to time). The headings in this Warrant Agreement are for
purposes of reference only and shall not limit or otherwise `affect any of the
terms hereof. This Warrant Agreement, together with the forms of instruments
annexed hereto, supersedes all prior negotiations and all prior written and
prior and contemporaneous oral agreements, representations, warranties and
inducements and constitutes the full and complete agreement of the parties
hereto with respect to the subject matter hereof.
10. GOVERNING LAW. THIS WARRANT AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS,
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AND NOT THE LAW PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF THE STATE OF
DELAWARE.
PARALLEL PETROLEUM CORPORATION
By:
-----------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written
XXX XXXXXX & COMPANY
By:
-------------------------
Name:
Title:
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Exhibit A
FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS
SPECIFIED IN A WARRANT AGREEMENT, DATED DECEMBER __, 1996, BETWEEN PARALLEL
PETROLEUM CORPORATION (THE "COMPANY") AND XXX XXXXXX & COMPANY. EXCEPT TO THE
EXTENT PERMITTED BY THE WARRANT AGREEMENT, NO TRANSFER, SALE, PLEDGE,
HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION OF THESE WARRANTS OR THE SHARES
OF COMMON STOCK OF THE COMPANY ACQUIRED ON EXERCISE OF THESE WARRANTS SHALL BE
VALID OR EFFECTIVE UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (OR, IF APPLICABLE, A SUCCESSOR LAW THERETO) OR THE COMPANY HAS BEEN
ADVISED BY AN OPINION OF COUNSEL THAT THESE WARRANTS OR SUCH SHARES OF COMMON
STOCK WILL BE TRANSFERRED IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION AND
UNTIL ANY APPLICABLE CONDITIONS CONTAINED IN THE WARRANT AGREEMENT HAVE BEEN
FULFILLED. A COPY OF THE WARRANT AGREEMENT IS ON FILE AT THE OFFICES OF THE
COMPANY. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT.
No. ______________
Warrant to Purchase up to ______ Shares of Common Stock
EXERCISABLE COMMENCING 9:00 A.M., SAN FRANCISCO TIME, ON
DECEMBER __, 1997 AND ENDING 5:00 P.M., SAN FRANCISCO TIME,
ON DECEMBER __, 2001
PARALLEL PETROLEUM CORPORATION
COMMON STOCK PURCHASE WARRANT
This certifies that ___________________________, or registered assigns,
is the holder (the "Holder") of this Warrant to purchase, subject to adjustment,
the number of fully paid and nonassessable shares set forth above (the "Warrant
Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Parallel Petroleum Corporation, a Delaware corporation (the "Company"), at the
per share exercise price, subject to adjustment (the "Exercise Price"), set
forth in the Warrant Agreement, dated December __, 1996 (the "Warrant
Agreement"), between the Company and VKCO, at any time prior to the Expiration
Date (defined below), by surrendering this Warrant, with the form of
subscription set forth hereon duly executed, to the Company at the Company's
offices at 000 Xxxxx Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000 or at such other office or agency as the Company may
designate and by paying in full, in the manner provided in Section 4 of the
Warrant Agreement, the Exercise Price for the Warrant Shares then purchased.
Payment of the Exercise Price may be made in cash or by cashier's check payable
to the order of the Company, or by surrender of a portion of this Warrant as
provided in Section 4(c) of the Warrant Agreement.
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This Warrant may be exercised at any time and from time to time, in
whole or in part, at the option of the Holder, commencing 9:00 a.m., San
Francisco time, on December __, 1996 until 5:00 p.m., San Francisco time, on
December __, 2000 (the "Expiration Date"). Upon the purchase of fewer than all
of the Warrant Shares, there shall be issued to the Holder a new Warrant
exercisable for the number of Warrant Shares for which this Warrant has not been
exercised or surrendered as payment. Prior to the Expiration Date, the Holder
shall be entitled to exchange this Warrant, without charge, for another Warrant
or Warrants exercisable for the same aggregate number of Warrant Shares.
Prior to the Expiration Date, subject to any applicable laws restricting
transferability and to any restriction on transferability that may appear on
this Warrant or in the Warrant Agreement, the Holder shall be entitled to
transfer this Warrant upon delivery thereof, duly endorsed by the Holder or by
his, her or its duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer, with the
form of assignment set forth hereon duly executed. Upon any such transfer, a
new Warrant or Warrants exercisable for the same aggregate number of Warrant
Shares will be issued by the Company, without charge, in accordance with
instructions in the form of assignment.
This Warrant is issued under and in accordance with the Warrant
Agreement and, except as otherwise provided in this Warrant, is subject to the
terms and provisions contained therein. Upon certain events provided for in the
Warrant Agreement, the Exercise Price and the number of shares of Common Stock
issuable upon the exercise of this Warrant are subject to adjustment. No
fractional shares will be issued upon the exercise of a Warrant. Instead, the
Company shall pay the value of such fractional share to the Holder in cash, as
provided in the Warrant Agreement.
THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS AND NOT THE LAW PERTAININGS TO CHOICE OR CONFLICT OF LAWS, OF THE
STATE OF DELAWARE.
In witness whereof, the Company has caused this Warrant to be duly
executed.
PARALLEL PETROLEUM CORPORATION
By:
------------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title: Secretary
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ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this Warrant to
purchase ______________ shares of Common Stock, acknowledges that it will not
dispose of such shares except in compliance with Section 3(b) of the Warrant
Agreement and the Securities Act of 1933, as amended, and requests that
Certificates for such shares be issued and delivered as follows:
Issue to:
---------------------------------------------------
(Name)
---------------------------------------------------
(Address, including Zip Code)
---------------------------------------------------
(Social Security or Tax Identification Number)
Deliver to:
---------------------------------------------------
(Name)
---------------------------------------------------
(Address, including Zip Code)
In full payment of the aggregate purchase price with respect to the
number of shares being purchased upon exercise of this Warrant, the undersigned
hereby (check applicable payment method): (i) / / tenders payment of
$_________ by cashier's check payable to the order of Parallel Petroleum
Corporation or (ii) / / hereby surrenders to the Company, Warrants to purchase
________ shares of Common Stock. If the Warrant is exercised hereby (and, if
applicable, surrendered to purchase shares of Common Stock) so as to purchase
fewer than all the shares of Common Stock that may be purchased pursuant to
this Warrant, the undersigned requests that a new Warrant representing the
number of full shares for which the Warrant has not been exercised or
surrendered be issued and delivered as set forth below.
Name of Warrant holder or Assignee:
-----------------------------
(Please Print)
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
Signature Dated:
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
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ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
the Assignee named below all of the rights of the undersigned represented by
the within Warrant, with respect to the number of shares of Common Stock set
forth below:
Number of Taxpayer
Shares of Identification
Name of Assignee Address Common Stock Number
----------------------- ------------------------- ------------ --------------
and does hereby irrevocably authorize the Company to make such transfer on the
Warrant Register maintained at the principal office of the Company and, if
applicable, to issue to the undersigned a Warrant for the portion of such
Warrant not so sold, assigned or transferred.
Dated: ,
-------------- ----- -------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant).
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