EXHIBIT 1.2
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CUMETRIX DATA SYSTEMS CORP.
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & COMPANY, INC.
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UNDERWRITERS'
WARRANT AGREEMENT
APRIL __, 1998
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UNDERWRITERS' WARRANT AGREEMENT dated as of April __,1998 by and among
CUMETRIX DATA SYSTEMS CORP., a California corporation (the "Company"), ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & COMPANY, INC. ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇"), and ROYCE INVESTMENT GROUP, INC.
("Royce")(collectively, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ are hereinafter referred to
variously as the "Holders" or the "Underwriters").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriters or its
designee(s) warrants ("Warrants") to purchase up to 230,000 shares ("Shares") of
common stock, no par value per share, of the Company ("Common Stock"); and
WHEREAS, the Underwriters have agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof by and
among the Underwriters and the Company to act as the underwriters in connection
with the proposed public offering of 2,300,000 shares of Common Stock at a
public offering price of $____ per share; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriters in consideration for, and as part
of the Underwriters' compensation in connection with the Underwriting Agreement;
NOW, THEREFORE, in consideration of the promises, the payment by the
Underwriters to the Company of twenty-three dollars ($23.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT. The Underwriters (or their designee(s)) are hereby
granted the right to purchase, at any time from April __, 1999 [one year from
the date hereof], until 5:00 p.m., New York time, on April __, 2003 [5 years
from the date hereof], up to 230,000 Shares at an initial exercise price
(subject to adjustment as provided in Section 8 hereof) of $____ per Share [165%
of the initial public offering price per share] subject to the terms and
conditions of this Agreement. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its designee(s) shall receive
certificate(s) evidencing the right to purchase up to an aggregate 211,600
Shares and Royce or its designee(s) shall receive certificate(s) evidencing the
right to purchase up to an aggregate 18,400 Shares.
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
3.1 METHOD OF EXERCISE. The Warrants are initially exercisable at an
initial exercise price per Share set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
Certificate, together with the annexed Form of Election to Purchase duly
executed and payment of the Exercise Price (as hereinafter defined) for the
Shares purchased at the Company's principal offices, located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Shares so purchased. The purchase rights represented by
each Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock underlying
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the Warrants). Warrants may be exercised to purchase all or part of the Shares
represented thereby. In the case of the purchase of less than all the Shares
purchasable under any Warrant Certificate, the Company shall cancel said Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares purchasable
thereunder.
3.2 EXERCISE BY SURRENDER OF WARRANT. In addition to the method of
payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time and
from time to time to exercise the Warrants in full or in part by surrendering
the Warrant Certificate in the manner specified in Section 3.1 in exchange for
the number of Shares equal to the product of (x) the number of Shares as to
which the Warrants are being exercised, multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined in Section 3.3 hereof) of the
Shares minus the Exercise Price of the Shares and the denominator of which is
the Market Price per Share. Solely for the purposes of this Section 3.2, Market
Price shall be calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Company pursuant to Section
13 hereof ("Notice Date") or (ii) as the average of the Market Price for each of
the five trading days immediately preceding the Notice Date, whichever of (i) or
(ii) results in a greater Market Price.
3.3 DEFINITION OF MARKET PRICE.
(a) As used herein, the phrase "Market Price" of the Shares, at any
date shall be deemed to be the last reported sale price of the Common Stock, or,
in case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange
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on which shares of the Common Stock are listed or admitted to trading or by the
Nasdaq National Market ("Nasdaq/NM") or the Nasdaq Small Cap Market ("Nasdaq
Small Cap"), or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted by the National Association of Securities
Dealers Automated Quotation System ("Nasdaq"), the average closing bid price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information. If the Market Price of the Shares cannot be determined pursuant to
the sentence above, the Market Price of the Shares shall be determined in good
faith (using customary valuation methods) by resolution of the members of the
Board of Directors of the Company, based on the best information available to
it.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrants shall be made forthwith (and in
any event such issuance shall be made within five (5) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall (subject to the provisions of Sections 5 and 7 hereof) be issued in the
name of, or in such names as may be directed by, the Holder thereof.
The Warrant Certificates and the certificates representing the shares
of Common Stock underlying the Warrants or other securities, property or rights
shall be executed on behalf of the Company by the manual or facsimile signature
of the then present Chairman or Vice Chairman of the Board of Directors or
President or Vice President of the Company under its corporate seal reproduced
thereon, attested to by the manual or facsimile signature of the then present
Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of the
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Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers or partners of the Underwriters.
6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $____ per Share [165% of the initial public offering price per Share]. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 8 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrants and
the shares of Common Stock underlying the Warrants and any other securities
issuable upon exercise of the Warrants (collectively, the "Warrant Securities")
have not been registered under the Securities Act of 1933, as amended (the
"Act"), pursuant to the Company's Registration Statement on Form S-1
(Registration No. 333-43151) (the "Registration
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Statement"). Upon exercise, in part or in whole, of the Warrants, certificates
representing the Warrant Securities shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered, sold, pledged, hypothecated, assigned or
transferred except pursuant to (i) an effective registration statement
under the Act, (ii) to the extent applicable, Rule 144 under the Act
(or any similar rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an exemption
from registration under such Act is available.
7.2 PIGGYBACK REGISTRATION. If, at any time commencing after the
date hereof and expiring seven (7) years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form ▇-▇,
▇-▇ or a comparable registration statement), the Company will give written
notice by registered mail, at least thirty (30) days prior to the filing of each
such registration statement, to the Underwriters and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Underwriters or other Holders of the Warrants and/or Warrant Securities notify
the Company within twenty (20) days after receipt of any such notice of their
desire to include any such securities in such proposed registration statement,
the Company shall afford the Underwriters and such Holders of the Warrants
and/or Warrant Securities the opportunity to have any such Warrant Securities
registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 7.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
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7.3 DEMAND REGISTRATION.
(a) At any time after the date hereof and expiring five (5) years
thereafter, the Holders of the Warrants and/or Warrant Securities representing a
"Majority" (as hereinafter defined) of such securities (assuming the exercise of
all of the Warrants) shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the Underwriters
and Holders, in order to comply with the provisions of the Act, so as to permit
a public offering and sale of their respective Warrant Securities for nine (9)
consecutive months by such Holders and any other Holders of the Warrants and/or
Warrant Securities who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Securities
within the time period specified in Section 7.4(a) hereof pursuant to the
written notice specified in Section 7.3(a) of a Majority of the Holders of the
Warrants and/or Warrant Securities, the Company shall have the option, upon the
written notice of election of a Majority of the Holders of the Warrants and/or
Warrant Securities to repurchase (i) any and all Warrant
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Securities at the higher of the Market Price per Share of Common Stock on (x)
the date of the notice sent pursuant to Section 7.3(a) or (y) the expiration of
the period specified in Section 7.4(a) and (ii) any and all Warrants at such
Market Price less the Exercise Price of such Warrant. Such repurchase shall be
in immediately available funds and shall close within two (2) days after the
later of (i) the expiration of the period specified in Section 7.4(a) or
(ii) the delivery of the written notice of election specified in this Section
7.3(c).
(d) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing after the date hereof
and expiring five (5) years thereafter, any Holder of Warrants and/or Warrant
Securities shall have the right, exercisable by written request to the Company,
to have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such Holder of its Warrant Securities provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request.
7.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor, shall
use its best efforts to have any registration statement declared effective
at the earliest possible time, and shall furnish each Holder desiring to
sell Warrant Securities such number of prospectuses as shall reasonably be
requested.
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(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses.
The Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(d). If the Company
shall fail to comply with the provisions of Section 7.4(a), the Company
shall, in addition to any other equitable or other relief available to the
Holder(s), be liable for any or all incidental or special damages sustained
by the Holder(s) requesting registration of their Warrant Securities,
excluding consequential damages.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue
sky laws of such states as reasonably are requested by the Holder(s),
provided that the Company shall not be obligated to execute or file any
general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them
may become subject under the Act, the Exchange Act or otherwise, arising
from
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such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriters contained in Section 7 of the Underwriting
Agreement. The Company further agree(s) that upon demand by an indemnified
person, at any time or from time to time, it will promptly reimburse such
indemnified person for any loss, claim, damage, liability, cost or expense
actually and reasonably paid by the indemnified person as to which the
Company has indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Section 7.4(d) any such payment or
reimbursement by the Company of fees, expenses or disbursements incurred by
an indemnified person in any proceeding in which a final judgment by a
court of competent jurisdiction (after all appeals or the expiration of
time to appeal) is entered against the Company or such indemnified person
as a direct result of the Holder(s) or such person's gross negligence or
willful misfeasance will be promptly repaid to the Company.
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally,
and not jointly, indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Act, the Exchange Act or otherwise,
arising from information furnished by or on behalf of such Holders, or
their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the
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Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company. The Holder(s) further agree(s) that upon demand by
an indemnified person, at any time or from time to time, they will promptly
reimburse such indemnified person for any loss, claim, damage, liability,
cost or expense actually and reasonably paid by the indemnified person as
to which the Holder(s) have indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this Section 7.4(e) any such
payment or reimbursement by the Holder(s) of fees, expenses or
disbursements incurred by an indemnified person in any proceeding in which
a final judgment by a court of competent jurisdiction (after all appeals or
the expiration of time to appeal) is entered against the Company or such
indemnified person as a direct result of the Company or such person's gross
negligence or willful misfeasance will be promptly repaid to the Holder(s).
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof other than the holders of
securities in the Company's private placement consummated through closings
on November 26, 1997, December 16, 1997, and December 23, 1997, without the
prior written consent of the Holders of the Warrants and Warrant Securities
representing a Majority of such securities (assuming the exercise of all of
the Warrants).
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(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed
to such Holder or underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the
date of the closing under the underwriting agreement), and (ii) a "cold
comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a
letter dated the date of the closing under the underwriting agreement)
signed by the independent public accountants who have issued a report on
the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters
in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of
at least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below
and to the
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managing underwriter, if any, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all memoranda
relating to discussions with the Commission or its staff with respect to
the registration statement and permit each Holder and underwriter to do
such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it
deems reasonably necessary to comply with applicable securities laws or
rules of the NASD. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the
Company with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriter selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested to be included in such
underwriting, which may be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇. Such agreement shall
be satisfactory in form and substance to the Company, each Holder and such
managing underwriter, and shall contain such representations, warranties
and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The
Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Securities and may, at their option,
require that any or all of the representations, warranties and covenants of
the Company to or for the benefit of such underwriters shall also be made
to and for the benefit of such Holders. Such Holders shall not be required
to make any representations or warranties to or agreements with
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the Company or the underwriters except as they may relate to such Holders
and their intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written request
therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of
the date of filing of such registration statement, including without
limitation, restricted shares of Common Stock, options, warrants or any
other securities convertible into shares of Common Stock.
(m) For purposes of this Agreement, the term "Majority" in reference
to the Holders of Warrants or Warrant Securities shall mean in excess of
fifty percent (50%) of the then outstanding Warrants or Warrant Securities
that (i) are not held by the Company, an affiliate, officer, creditor,
employee or agent thereof or any of their respective affiliates, members of
their family, persons acting as nominees or in conjunction therewith and
(ii) have not been resold to the public pursuant to a registration
statement filed with the Commission under the Act.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the Company shall pay
dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately
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decreased. An adjustment made pursuant to this Section 8.2 shall be made as of
the record date for the subject stock dividend or distribution.
8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted Exercise Price of
each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Certificate of Incorporation of the Company as may be amended or
restated as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
8.5 MERGER OR CONSOLIDATION OR SALE.
(a) In case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the holder of each Warrant then outstanding or
to be outstanding shall have the right thereafter (until the expiration of such
Warrant) to receive, upon exercise of such Warrant, the kind and amount of
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shares of stock and other securities and property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(b) In the event of (i) the sale by the Company of all or
substantially all of its assets, or (ii) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, or (iii) a distribution to the Company's stockholders
of any cash, assets, property, rights, evidences of indebtedness, securities or
any other thing of value, or any combination thereof, the Holders of the
unexercised Warrants shall receive notice of such sale, transaction or
distribution twenty (20) days prior to the date of such sale or the record date
for such transaction or distribution, as applicable, and, if they exercise such
Warrants prior to such date, they shall be entitled, in addition to the shares
of Common Stock issuable upon the exercise thereof, to receive such property,
cash, assets, rights, evidence of indebtedness, securities or any other thing of
value, or any combination thereof, on the payment date of such sale, transaction
or distribution.
8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment
of the Exercise Price shall be made if the amount of said adjustment shall be
less than ten cents (10 CENTS) per Warrant Security, provided, however, that in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time
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of and together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least ten cents (10 CENTS) per
Warrant Security.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock, or other securities, properties
or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof.
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The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any stockholder. As long
as the Warrants shall be outstanding, the Company shall use its best efforts to
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Common Stock issued to the public in connection herewith may then
be listed and/or quoted on Nasdaq National Market or Nasdaq Small Cap Market.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
18
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof
or to such other address as the Company may designate by notice to the
Holders.
(c) If to the Underwriters, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc., ▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; and to
Royce Investment Group, Inc. ___________________________________________.
19
14. SUPPLEMENTS AND AMENDMENTS. The Company and the Underwriters may
from time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates (other than the Underwriters) in order to cure
any ambiguity, to correct or supplement any provision contained herein which may
be defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Underwriters may deem necessary or desirable and which the Company and
the Underwriters deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
15. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. TERMINATION. This Agreement shall terminate at the close of
business on April __, 2005. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on April __, 2011.
17. GOVERNING LAW, SUBMISSION TO JURISDICTION. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Underwriters and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriters and the Holders hereby
20
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum. Any such process or summons to be served upon any of the Company, the
Underwriters and the Holders (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by registered
or certified mail, return receipt requested, postage prepaid, addressed to it at
the address as set forth in Section 13 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the party so served in any
action, proceeding or claim. The Company, the Underwriters and the Holders
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contain the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriters
21
and any other registered Holder(s) of the Warrant Certificates or Warrant
Securities any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole and exclusive benefit of the Company
and the Underwriters and any other Holder(s) of the Warrant Certificates or
Warrant Securities.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall constitute but one and the same
instrument.
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
CUMETRIX DATA SYSTEMS CORP.
By:
-----------------------------------
Max Toghraie
Chief Executive Officer
Attest:
-------------------------
Secretary
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & COMPANY, INC.
By:
-----------------------------------
Name:
Title:
ROYCE INVESTMENT GROUP, INC.
By:
-----------------------------------
Name:
As Attorney-In-Fact for
Royce Investment Group, Inc.
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, __________, 2003
No. UW-01 Warrants to Purchase ________
Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that______________________________,
or registered assigns, is the registered holder of Warrants to purchase
initially, at any time from __________, 1999 until 5:00 p.m. New York time on
__________, 2003 ("Expiration Date"), up to 230,000 fully paid and
non-assessable shares of common stock, no par value ("Common Stock") of
CUMETRIX DATA SYSTEMS CORP., a California corporation (the "Company"), at the
initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $____ per share upon surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, or by surrender of this Warrant Certificate in lieu of cash payment,
but subject to the conditions set forth herein and in the warrant agreement
dated as of __________, 1998 by and among the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Company, Inc. and Royce Investment Group, Inc. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank
check in New York Clearing House funds payable to the order of the Company or
by surrender of this Warrant Certificate.
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No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of April __, 1998
CUMETRIX DATA SYSTEMS CORP.
[SEAL] By:
----------------------------------------
Max Toghraie
Chief Executive Officer
Attest:
--------------------------
Secretary
3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____________ Shares and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of CUMETRIX DATA
SYSTEMS CORP. in the amount of $__________, all in accordance with the terms of
Section 3.1 of the Underwriters' Warrant Agreement dated as of ___________, 1998
by and among CUMETRIX DATA SYSTEMS CORP., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc., and
Royce Investment Group, Inc. The undersigned requests that certificates for such
securities be registered in the name of _______________ whose address is
__________________________ and that such certificates be delivered to
______________________________ whose address is ____________________________.
Dated:
Signature
-------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ____________ Shares all in
accordance with the terms of Section 3.2 of the Underwriters' Warrant Agreement
dated as of ______________, 1998 by and among CUMETRIX DATA SYSTEMS CORP.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc., and Royce Investment Group, Inc. The
undersigned requests that certificates for such securities be registered in the
name of __________________ whose address is _______________________ and that
such certificates be delivered to _____________________ whose address is
____________________________________.
Dated:
Signature
-------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
5
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers
unto
--------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
--------------------------- ----------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
6
