EXHIBIT 10.4
SEVERANCE AGREEMENT
AND
GENERAL RELEASE OF CLAIMS
This Severance Agreement and General Release of Claims (hereinafter
"Agreement") is entered into by and between Xxxx X. Xxxx (hereinafter "Xx.
Xxxx") and Advanced Aerodynamics & Structures, Inc. (hereinafter "AASI").
RECITALS
A. AASI is a Delaware corporation, doing business in the State of
California.
B. Xx. Xxxx has been employed by AASI since its incorporation on July 22,
1996 and by its predecessor for at least five years prior to that date.
C. Xx. Xxxx has resigned as an officer, director, and employee of AASI
effective as of January 8, 2002. Xx. Xxxx'x resignation was tendered in reliance
on an agreement with respect to the severance benefits and other matters that
are now more fully set forth in writing herein, the terms of which are mutually
intended to replace and supercede the prior oral agreement.
D. In consideration of the promises, terms, provisions and covenants
described below, including without limitation Xx. Xxxx'x agreement to grant an
irrevocable proxy to vote his shares of the Class E-1 and E-2 Common Stock of
AASI to Xxxxxx Xxxxxxx, a director of AASI, AASI has agreed to pay Xx. Xxxx the
severance described below, which severance shall be in lieu of any and all
severance, compensation and benefits provided under the terms of his Employment
Agreement dated May 1, 1996.
E. AASI and Xx. Xxxx further desire to settle and compromise any and all
possible claims and disputes he has against AASI arising out of his relationship
with AASI to date and to provide for a general release of any and all such
claims.
AGREEMENT
1. Termination of Employment.
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Xx. Xxxx'x employment with AASI is hereby terminated, by mutual
agreement, effective as of January 8, 2002.
2. Severance/Consideration.
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Eight (8) days after Xx. Xxxx'x execution of this Agreement and upon
his execution of the Proxy attached hereto as Exhibit 1, Xx. Xxxx shall become
eligible to receive the following consideration:
a. In consideration of the covenants and releases of all claims, other
than Age Discrimination in Employment Act of 1967 ("ADEA") claims, given herein,
Xx. Xxxx shall
receive a total amount of Two Hundred Seventy-Five Thousand Dollars ($275,000),
less applicable federal and California payroll tax deductions, to be paid by
AASI as follows: Twenty-Five Thousand Dollars ($25,000) less applicable
withholdings, eight (8) days after Xx. Xxxx'x execution of this Agreement and
the Proxy attached hereto as Exhibit 1; Fifty Thousand Dollars ($50,000), less
applicable withholdings on March 8, 2002; Fifty Thousand Dollars ($50,000), less
applicable withholdings on May 8, 2002; One Hundred Fifty Thousand Dollars
($150,000), less applicable withholdings on January 8, 2004.
b. In consideration of the covenants and releases of all ADEA claims
given herein, AASI will tender a check to Xx. Xxxx in an amount of Twenty-Five
Thousand Dollars ($25,000), less applicable federal and California payroll tax
deductions, eight (8) days after Xx. Xxxx'x execution of this Agreement and the
Proxy attached hereto as Exhibit 1.
c. In consideration of the covenants and releases set forth herein,
AASI agrees to issue Xx. Xxxx warrants to purchase shares of the Class A Common
Stock of AASI pursuant to the Warrant Agreement attached hereto as Exhibit 2.
d. In consideration of the covenants, and releases set forth herein,
AASI shall continue to provide medical insurance coverage to Xx. Xxxx through
July 31, 2003, or until he becomes eligible for medical insurance coverage with
a new employer, whichever date is earlier.
e. Xx. Xxxx'x right to receive the above-specified consideration, from
and after the date of his execution of this Agreement, is unconditional, except
as to any breach of this Agreement by Xx. Xxxx. The proxy to be given by Xx.
Xxxx pursuant to Section 5 hereof shall be subject to rescission and revocation,
at Xx. Xxxx'x election and regardless of the terms of Exhibit 1 to this
Agreement, in the event that all such consideration is not duly paid or
delivered.
3. Release of All Claims Except ADEA Claims.
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a. In consideration of the separation payment described in Section 2a
of this Agreement, which Xx. Xxxx would otherwise not be entitled to except for
signing this Agreement, Xx. Xxxx does hereby unconditionally, irrevocably and
absolutely release and discharge AASI, its owners, directors, officers,
employees, agents, attorneys, stockholders, insurers, divisions, successors and
assigns, and any related holding, parent, sister or subsidiary corporations from
any and all loss, liability, claims, demands, causes of action or suits of any
type, whether in law and/or in equity, related directly or indirectly, or in any
way connected with any transactions, affairs or occurrences between them to
date, including, but not limited to, Xx. Xxxx'x employment with AASI and the
termination of said employment. This Agreement specifically applies, without
limitation, to any and all contract or tort claims, claims for wrongful
termination, and claims arising under Title VII of the Civil Rights Act of 1991,
the Americans with Disabilities Act, the Equal Pay Act, the California Fair
Employment and Housing Act, the Fair Labor Standards Act, the Family and Medical
Leave Act, the California Family Rights Act, the California Labor Code, and any
and all federal or state statutes or provisions governing discrimination in
employment except the federal statute specifically excluded hereafter. This
release specifically excludes any and all loss, liability, claims, demands,
causes of action or suits of any type arising under ADEA. Xx. Xxxx'x release of
ADEA claims will be addressed separately in Section 4 of this Agreement.
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b. Xx. Xxxx does expressly waive all of the benefits and rights
granted to him pursuant to California Civil Code section 1542, which reads as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OF OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Xx. Xxxx does certify that he has read all of this Agreement,
including the release provisions contained herein and the quoted Civil Code
section, and that he fully understands all of the same. Xx. Xxxx hereby
expressly agrees that this Agreement shall extend and apply to all unknown,
unsuspected and unanticipated injuries and damages, as well as those that are
now disclosed.
c. Xx. Xxxx specifically acknowledges that he has not filed any
complaints, claims or actions against AASI with any state, federal or local
agency or court. Xx. Xxxx irrevocably and absolutely agrees that he will not
prosecute nor allow to be prosecuted on his behalf, in any administrative
agency, whether federal or state, or in any court, whether federal or state, any
claim or demand of any type related to the matters released above, it being the
intention of the parties that with the execution by Xx. Xxxx of this release,
AASI, its owners, directors, officers, employees, agents, attorneys,
stockholders, insurers, divisions, successors and assigns, and any related
holding, parent, sister or subsidiary corporations will be absolutely,
unconditionally and forever discharged of and from all obligations to or on
behalf of Xx. Xxxx related in any way to the matters discharged herein.
4. Release of All ADEA Claims.
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a. This section of the Agreement exclusively addresses Xx. Xxxx'x
release of claims arising under federal law involving discrimination on the
basis of age in employment (age forty and above). This section is provided
separately, in compliance with federal law, including but not limited to the
Older Workers' Benefit Protection Act of 1990, to ensure that Xx. Xxxx clearly
understands his rights so that any release of age discrimination claims under
federal law (the Age Discrimination in Employment Act of 1967 ("ADEA")) is
knowing and voluntary on the part of Xx. Xxxx.
b. Xx. Xxxx represents, acknowledges and agrees that AASI has advised
him, in writing, to discuss this Agreement with an attorney, and to the extent,
if any, that Xx. Xxxx has desired, Xx. Xxxx has done so; that AASI has given Xx.
Xxxx twenty-one (21) days from receipt of this Agreement to review and consider
this Agreement before signing it, and Xx. Xxxx understands that he may use as
much of this twenty-one (21) day period as he wishes prior to signing; that no
promise, representation, warranty or agreement not contained herein has been
made by or with anyone to cause him to sign this Agreement; that he has read
this Agreement in its entirety, and fully understands and is aware of its
meaning, intent, content and legal effect; and that he is executing this release
voluntarily and free of any duress or coercion. Xx. Xxxx further understands and
agrees that he is not waiving any rights or claims under the ADEA which might
arise after the date he signs this Agreement.
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c. The parties acknowledge that for a period of seven (7) days
following the execution of this Agreement, Xx. Xxxx may revoke the Agreement,
and the Agreement shall not become effective or enforceable until the revocation
period has expired. This Agreement shall become effective eight (8) days after
it has been signed by Xx. Xxxx and AASI, and in the event the parties do not
sign on the same date, then this Agreement shall become effective eight (8) days
after the date it is signed by Xx. Xxxx.
d. In consideration of the separation payment made to Xx. Xxxx
described in Section 2b of this Agreement, which Xx. Xxxx would otherwise not be
entitled to except for signing this Agreement, Xx. Xxxx does hereby
unconditionally, irrevocably and absolutely release and discharge AASI, its
owners, directors, officers, employees, agents, attorneys, stockholders,
insurers, divisions, successors and assigns, and any related holding, parent,
sister or subsidiary corporations from any and all loss, liability, claims,
demands, causes of action or suits of any type arising under ADEA and related
directly or indirectly to Xx. Xxxx'x employment with AASI and the termination of
said employment.
e. Xx. Xxxx does expressly waive all of the benefits and rights
granted to him pursuant to California Civil Code section 1542, which reads as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OF OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Xx. Xxxx certifies that he has read all of this Agreement, including
the release provisions contained herein and the quoted Civil Code section, and
that he fully understands all of the same. Xx. Xxxx hereby expressly agrees that
this Agreement shall extend and apply to all unknown, unsuspected and
unanticipated ADEA injuries and damages, as well as those ADEA injuries and
damages that are now disclosed.
5. Proxies.
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Xx. Xxxx agrees to grant to Xxxxxx Xxxxxxx an irrevocable proxy for
all of the Class E-1 and Class E-2 Common Stock of AASI which he owns as of the
date he executes this Agreement by executing the form of proxy attached hereto
as Exhibit 1.
Xx. Xxxx further agrees to use his reasonable efforts to persuade X.X.
Xxxxx to xxxxx to Xxxxxx Xxxxxxx on behalf of Harpa an irrevocable proxy for all
of the Class E-1 and Class E-2 Common Stock owned and controlled by Harpa,
pursuant to such mutually acceptable terms and conditions as AASI or Xxxxxx
Xxxxxxx may negotiate with X.X. Xxxxx/Harpa; provided, however, that Xx. Xxxx
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does not make any representation or warranty regarding the outcome of any such
negotiations, and that his right to receive the compensation described in
Section 2 of this Agreement shall not be subject to or limited by any
conditions, assumptions or expectations of AASI concerning the nature, quality
or extent of the efforts to be made by Xx. Xxxx with respect to X.X.
Xxxxx/Harpa.
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6. Confidentiality/Non-Disparagement.
---------------------------------
Xx. Xxxx agrees that all matters relative to this Agreement shall
remain confidential, except as may be required by applicable federal and state
securities laws or pursuant to the order of any court. Accordingly, Xx. Xxxx
hereby agrees that, with the exception of his spouse, counsel and tax advisors,
he shall not discuss, disclose or reveal to any other persons, entities or
organizations, whether within or outside of AASI, the terms and conditions of
this Agreement. Xx. Xxxx agrees not to make any derogatory or adverse
statements, written or verbal, regarding AASI or any of its present or former
directors, officers or employees, to anyone.
Xx. Xxxx further agrees not to disclose to any third party any
confidential or proprietary information concerning AASI which was acquired or
learned during the course of his employment with AASI. By way of example and not
limitation, such information includes product plans and design, pricing,
management organization or other organization charts, marketing plans, salary
structures, product quality, research and development plans, vendors, vendors'
pricing and other business activities and plans. This provision shall not
restrict any obligation to disclose such information to the extent required by
law or legal process, provided Xx. Xxxx gives AASI prompt notice of such legal
process and permits AASI a reasonable opportunity to object to the disclosure of
such information.
7. Entire Agreement.
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This Agreement constitutes the entire written agreement of severance
and compromise and settlement between the parties. There are no other
agreements, whether oral or written, modifying its terms. This Agreement
supersedes any and all prior written or oral agreements or negotiations between
the parties, except the covenants stated in Article V of Xx. Xxxx'x Employment
Agreement, dated May 1, 1996 and all provisions of the Employee Confidentiality
Agreement signed by Xx. Xxxx, which remain in full force and effect, and are
hereby incorporated by this reference as though fully set forth herein. The
terms of this Agreement may be modified only by a writing signed by the parties
expressly stating that such modification is intended.
8. Applicable Law.
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The validity, interpretation, and performance of this Agreement shall
be construed and interpreted according to the laws of the State of California.
9. Dispute Resolution.
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Any dispute arising out of or related to this Agreement shall be
resolved through binding arbitration through JAMS/Endispute in Southern
California, under the then current applicable rules of JAMS/Endispute. Each
party shall be responsible for its or his own costs and attorneys' fees in
connection with the arbitration. Notwithstanding, this provision shall not apply
to any disputes concerning the breach or enforcement of Section 6 of this
Agreement or the covenants stated in Article V of Xx. Xxxx'x Employment
Agreement dated May 1, 1996, as to which the parties agree they may seek
injunctive and/or other relief from a court of competent jurisdiction.
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10. Complete Defense.
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This Agreement may be pleaded as a full and complete defense against
any action, suit or proceeding which may be prosecuted, instituted or attempted
by either party in breach thereof.
11. Severability.
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If any provision of this Agreement, or part thereof, is held invalid,
void or voidable as against public policy or otherwise, the invalidity shall not
affect other provisions, or parts thereof, which may be given effect without the
invalid provision or part. To this extent, the provisions, and parts thereof, of
this Agreement are declared to be severable.
12. Future Employment.
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Xx. Xxxx agrees that neither AASI nor any of its affiliates or related
entities are obligated to offer employment to him or to hire him for any reason,
regardless of the circumstances, at any time on or after the date of this
Agreement. Xx. Xxxx agrees that he shall not knowingly apply for nor accept such
employment except that Xx. Xxxx agrees to serve as a consultant to AASI as
requested by AASI on mutually agreeable terms. Xx. Xxxx acknowledges that any
such application for employment will be denied and he agrees to waive any and
all claims arising out of or related to his application and/or the denial of
such employment.
13. No Admission of Liability.
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It is understood that this Agreement is not an admission of any
liability by any person, firm, association or corporation.
14. Successors and Assigns.
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This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and
assigns.
15. Cooperation in Executing Settlement Documentation.
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The parties to this Agreement shall execute any and all further
documents that may be required to effectuate the purposes of this Agreement.
16. Counterparts.
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This Agreement may be executed in counterparts, and if so executed
each such counterpart shall have the force and effect of an original.
17. Waiver.
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No breach of any provision of this Agreement can be waived unless in
writing. Waiver of any one breach shall not be deemed to be a waiver of any
other breach of the same or any other provision of this Agreement.
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18. Construction.
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This Agreement shall not be interpreted for or against any party on
the basis that such party or its legal representative caused part or all of this
Agreement to be drafted.
19. Section Headings.
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The section headings of this Agreement are intended solely for
convenience of reference and shall not in any manner amplify, limit, modify or
otherwise be used in the interpretation of any of the provisions hereof.
20. Voluntary Agreement.
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Xx. Xxxx acknowledges that he has voluntarily entered into this
Agreement of his own free will and that no promises or representations have been
made to him by any person to induce him to enter into this Agreement other than
the express terms set forth herein. Xx. Xxxx further acknowledges that he has
read this Agreement and understands all of its terms.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the dates shown below.
Dated: March 8, 2002 /s/ Xxxx X. Xxxx
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[On or after January 8] Xxxx X. Xxxx
Advanced Aerodynamics & Structures, Inc.
Dated: February 28, 2002 By /s/ Xxx X. Xxxxxx
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Title: President & CEO
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APPROVED AS TO FORM:
LAW OFFICES OF XXXXXXXX X. XXXXXXXX
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Xxxxxxxx X. Xxxxxxxx
Attorney for Xx. Xxxx X. Xxxx
XXXX, FORWARD, XXXXXXXX & SCRIPPS, LLP
By: /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
Attorney for Advanced Aerodynamics &
Structures, Inc.
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THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ADVANCED AERODYNAMICS & STRUCTURES, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 2,000,000 shares of
Common Stock of Advanced Aerodynamics
& Structures, Inc. (subject to
adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
Issue Date: January 8, 2002
ADVANCED AERODYNAMICS & STRUCTURES, INC., a corporation organized under the
laws of the State of Delaware (the "Company"), hereby certifies that, for value
received Xxxx X. Xxxx (the "Holder"), or assigns, is entitled, subject to the
terms set forth below, to purchase from the Company from and after the Issue
Date of this Warrant and at any time or from time to time before 5:00 p.m., New
York time, through three (3) years after such date (the "Expiration Date"), up
to 2,000,000 fully paid and nonassessable shares of Common Stock (as hereinafter
defined), $.0001 par value per share, of the Company. The shares of Common Stock
purchaseable hereunder shall have a per share purchase price of $.25. The
aforedescribed purchase price per share, as adjusted from time to time as herein
provided, is referred to herein as the "Purchase Price." The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Advanced Aerodynamics & Structures,
Inc. and any corporation which shall succeed or assume the obligations of
Advanced Aerodynamics & Structures, Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Class A Common
Stock, $.0001 par value per share, as authorized on the date of the Subscription
Agreement referred to in Section 9 hereof, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after
such date, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even if the right so to vote has been suspended by the
happening of such a contingency) and (c) any other securities into which or for
which any of the securities described in (a) or (b) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
(c) 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 holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, 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 pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
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1.1. Number of Shares Issuable upon Exercise. From and after the date
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hereof through and including the Expiration Date, the holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
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holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such holder and surrender of the original Warrant within seven (7)
days of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but not
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for a fractional share) by surrender of this Warrant in the manner and at the
place provided in subsection 1.2 except that the amount payable by the holder on
such partial exercise shall be the amount obtained by multiplying (a) the number
of shares of Common Stock designated by the holder in the Subscription Form by
(b) the Purchase Price then in effect. On any such partial exercise, the
Company, at its expense, will forthwith issue and deliver to or upon the order
of the holder hereof a new Warrant of like tenor, in the name of the holder
hereof or as such holder (upon payment by such holder of any applicable transfer
taxes) may request, the number of shares of Common Stock for which such Warrant
may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common Stock
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as of a particular date (the "Determination Date") shall mean the Fair Market
Value of a share of the Company's Common Stock. Fair Market Value of a share of
Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange or
on the NASDAQ National Market System or the NASDAQ SmallCap Market but is traded
in the over-the-counter market, then the mean of the closing bid and asked
prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then
standing of the American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.
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(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrant are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
----------------------
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
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company shall have been appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees
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that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within seven (7) 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 holder hereof, or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
2.2. Cashless Exercise.
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(a) Payment may be made either in (i) cash or by certified or official
bank check payable to the order of the Company equal to the applicable aggregate
Purchase Price, (ii) by delivery of Warrants, Common Stock and/or Common Stock
receivable upon exercise of the Warrants in accordance with Section (b) below or
(iii) by a combination of any of the foregoing methods, for the number of Common
Shares specified in such form (as such exercise number shall be adjusted to
reflect any adjustment in the total number of shares of Common Stock issuable to
the holder per the terms of this Warrant) and the holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully-paid
and non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.
(b) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of Common Stock is greater than the Purchase Price (at
the date of calculation as set forth below), in lieu of exercising this Warrant
for cash, upon consent of the Company, the holder may elect to
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receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Subscription Form in
which event the Company shall issue to the holder a number of shares of Common
Stock computed using the following formula:
X=Y (A-B)
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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, if only a portion of the Warrant is
being exercised, the portion of the Warrant being
exercised (at the date of such calculation)
A = the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B = Purchase Price (as adjusted to the date of such
calculation)
(c) The cashless exercise feature of this Warrant may be employed only
commencing on the first anniversary of the Issue Date of the Warrant and then
only if a Non-Registration Event (as defined in the Subscription Agreement) has
occurred and is continuing on such date or occurs after such date.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
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3.1. Reorganization, Consolidation, Merger, etc. In case at any time
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or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
-----------
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 3 to a bank or trust company having
its principal office in New York, NY, as trustee for the holder or holders of
the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
---------------------
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as
4
the case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the holders of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
-------------------------------------------
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The number
of shares of Common Stock that the holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 1, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 4)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 12 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
---------------------------------------------------------------------
Statements. From and after forty-five (45) days after the Issue Date of this
----------
Warrant, the Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
-------------------------------
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") with respect to any
or all of the Shares. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance
5
with applicable securities laws, the Company at its expense, but with payment by
the Transferor of any applicable transfer taxes) will issue and deliver to or on
the order of the Transferor thereof a new Warrant or Warrants of like tenor, in
the name of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
----------------------
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights.
-------------------
(a) If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the Company for
shareholders other than the Holder) any of its stock or other securities under
the Securities Act of 1933, as amended (the "Act") in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give the Holder written notice of such registration. Upon the
written request of the Holder given within twenty (20) days after mailing of
such notice by the Company, the Company shall cause to be registered under the
Act all of the Common Stock that the Holder has requested to be registered.
(b) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 9 that the Holder shall
furnish to the Company such information regarding himself, the Common Stock held
by him, and the intended method of disposition of such securities as shall be
required to effect the registration of the Holder's Registrable Securities.
(c) The Company shall bear and pay all expenses incurred in connection
with any registration, filing or qualification of Common Stock, including
(without limitation) all registration, filing and qualification fees, printers
and accounting fees relating or apportionable thereto and the reasonable fees
and disbursements of counsel for the Holder, but excluding underwriting
discounts and commissions and stock transfer taxes relating to Registrable
Securities.
(d) In connection with any offering involving an underwriting of
shares of the Company's capital stock, the Company shall not be required to
include any of the Holder's securities in such underwriting unless he accepts
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities requested by shareholders to be
included in such offering exceeds the amount of securities to be sold other than
by the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of securities which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering (the securities so included to be apportioned pro rata among the
selling shareholders according to the total amount of securities entitled to
6
be included therein owned by each selling shareholder or in such other
proportions as shall mutually be agreed to by such selling shareholders.
10. Lock-Up. Shares obtained upon the exercise of this Warrant may not
-------
be sold or otherwise transferred for a period of six (6) months following the
date hereof, and each certificate evidencing such shares shall bear a legend
describing this limitation. Transfers to immediate family members or to one or
more trusts controlled by the transferor for estate planning purposes shall not
be subject to this limitation, provided that the transferee agrees to be subject
to this limitation.
11. Transfer on the Company's Books. Until this Warrant is transferred on
-------------------------------
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
12. Notices. All notices and other communications from the Company to the
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holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the Company
in writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term 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. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
ADVANCED AERODYNAMICS & STRUCTURES, INC.
By: /s/ Xxx Xxxxxx
-------------------------------------------------
Xxx Xxxxxx, Chairman & Chief Executive Officer
Witness:
/s/ Xxxxxxx Xxxxxx
----------------------
Xxxxxxx Xxxxxx
7
Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: Advanced Aerodynamics & Structures, Inc.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $_______ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock (using
a Fair Market Value of $_______ per share for purposes of this
calculation); and/or
___ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2,
to exercise this Warrant with respect to the maximum number of
shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ______________ whose address is ______________________
________________________________________________________________________________
________________________________________________________________________________
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________ __________________________________
(Signature must conform to name of
holder as specified on the face of
the warrant)
___________________________________
___________________________________
(Address)
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Advanced Aerodynamics & Structures, Inc. to which the
within Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Advanced Aerodynamics & Structures, Inc. with full power of substitution in
the premises.
--------------------- ---------------------------- -----------------------------
Transferees Percentage Transferred Number Transferred
--------------------- ---------------------------- -----------------------------
--------------------- ---------------------------- -----------------------------
--------------------- ---------------------------- -----------------------------
--------------------- ---------------------------- -----------------------------
Dated: ______________, ___________ _______________________________________
(Signature must conform to name of
holder as specified on the face of the
warrant)
Signed in the presence of:
__________________________________ _______________________________________
(Name)
_______________________________________
(address)
ACCEPTED AND AGREED: _______________________________________
[TRANSFEREE]
_______________________________________
(address)
__________________________________
(Name)
