EXHIBIT 4.2
WARRANT AGREEMENT
By and Among
DSI TOYS, INC.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INCORPORATED
SUTRO & CO. INCORPORATED
Dated as of May __, 1997
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of May __, 1997 by and among DSI TOYS,
INC., a Texas corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INCORPORATED and
SUTRO & CO. INCORPORATED (the "Underwriters").
The Company proposes to issue to the Underwriters warrants as
hereinafter described (the "Warrants") to purchase up to an aggregate of 250,000
shares of the Company's Common Stock, $0.01 par value per share (the "Common
Stock"), subject to adjustment as provided in Section 8 hereof (such 250,000
shares, as adjusted, being hereinafter referred to as the "Shares"), each
Warrant entitling the holder ("Holder") thereof to purchase one hundred shares
of Common Stock. All capitalized terms used herein and not otherwise defined
herein shall have the same meanings as in that certain underwriting agreement,
of even date herewith, by and between the Company and the Underwriters (the
"Underwriting Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows:
1. Issuance of Warrants; Form of Warrant. On the Closing Date the
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Company will issue, sell and deliver the Warrants to the Underwriters or their
bona fide officers for an aggregate price of $2,500. The Warrants shall be
issued to the Underwriters or such designees in the amounts set forth on
Schedule I attached hereto. The form of the Warrant and of the form of election
to purchase Shares to be attached thereto shall be substantially as set forth on
Exhibit A attached hereto. The Warrants shall be executed on behalf of the
Company by the manual or facsimile signature of the present or any future
Chairman, President or any Vice President of the Company and attested by the
manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
2. Registration. The Warrants shall be numbered and shall be
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registered in a Warrant register (the "Warrant Register"). The Company shall be
entitled to treat the registered holder of any Warrant on the Warrant Register
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or are to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the Company's actual
knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with such knowledge
of such facts that its participation therein amounts to bad faith. The Warrants
shall be registered initially in the name of the Underwriters in such
denominations as the Underwriters may request in writing to the Company;
provided, however, that the Underwriters may designate in writing that all or a
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portion of the Warrants be issued in varying amounts directly to their bona fide
officers and not to the Underwriters. Such designation will only be made by the
Underwriters if they determine that such issuances would not violate the
interpretation of the Board of Governors of the National Association of
Securities Dealers, Inc. (the "NASD"), relating to the review of corporate
financing arrangements.
3. Transfer of Warrants. The Warrants will not be sold, transferred,
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assigned or hypothecated, in part or in whole, prior to the first anniversary of
the effective date of the Registration Statement, and thereafter only to bona
fide officers, directors, shareholders, employees or registered representatives
of the Underwriters upon written request to the Company delivered in accordance
with Section 12 and upon delivery of the Warrant Certificate duly endorsed by
the Holder or by his duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to transfer. In all
cases of transfer by an attorney, the original power of attorney, duly approved,
or an official copy thereof, duly certified, shall be deposited with the
Company. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the persons entitled thereto. The Warrants may be
exchanged at the option of the Holder thereof for other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the Company
or its duly authorized agent. The Company may require payment of a sum
sufficient to cover all taxes and other governmental charges that may be imposed
in connection with any voluntary transfer, exchange or other disposition of the
Warrants. Notwithstanding the foregoing, the Company shall have no obligation
to cause Warrants to be transferred on its books to any person, if such transfer
would violate the Securities Act of 1933, as amended (the "Act") or applicable
state securities laws.
4. Term of Warrants; Exercise of Warrants.
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(a) Term of Warrants. Each Warrant entitles the registered
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owner thereof to purchase one hundred Shares at a purchase price of $____
per Share (as adjusted from time to time pursuant to the provisions hereof,
the "Exercise Price") at any time from the first anniversary of the
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effective date of the Registration Statement until 5:00 p.m., New York City
time, on ________ __, 2002 (the "Warrant Expiration Date").
(b) Exercise of Warrants. The Exercise Price and the number of
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Shares issuable upon exercise of Warrants are subject to adjustment upon
the occurrence of certain events, pursuant to the provisions of Section 8
of this Agreement. Subject to the provisions of this Agreement, and in
addition to the right to surrender warrants without any cash payment as set
forth in subsection (c) below, each Holder shall have the right, which may
be exercised as set forth in such Warrants, to purchase from the Company
(and the Company shall issue and sell to such Holder) the number of fully
paid and nonassessable Shares specified in such Warrants, upon surrender to
the Company, or its duly authorized agent, of such Warrants, with the form
of election to purchase attached thereto duly completed and signed, with
signatures guaranteed by a member firm of a national securities exchange, a
commercial bank (not a savings bank or savings and loan association) or
trust company located in the United States or a member of the NASD and upon
payment to the Company of the Exercise Price, as adjusted in accordance
with the provisions of Section 8 of this Agreement, for the number of
Shares in respect of which such Warrants are then exercised. No adjustment
shall be made for any dividends on any Shares issuable upon exercise of a
Warrant. Upon each surrender of Warrants and payment of the Exercise
Price, the Company shall issue and cause to be delivered with all
reasonable dispatch, but in no event later than three trading days
following such surrender and payment, to or upon the written order of the
Holder of such Warrants and in such name or names as such Holder may
designate, a certificate or certificates for the number of full Shares so
purchased upon the exercise of such Warrants, together with cash, as
provided in Section 9 of this Agreement, in respect of any fractional
Shares otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a holder of
record of such Shares as of the date of the surrender of Warrants and
payment of the Exercise Price as aforesaid; provided, however, that if, at
the date of surrender of such Warrants, the transfer books for the Common
Stock or other class of securities issuable upon the exercise of such
Warrants shall be closed, the certificates for the Shares shall be issuable
as of the date on which such books shall next be opened (whether before, on
or after the Warrant Expiration Date) and until such date the Company shall
be under no duty to deliver any certificate for such Shares; provided,
further, however, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a
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period longer than twenty (20) days. The rights of purchase represented by
the Warrants shall be exercisable, at the election of the Holder(s)
thereof, either in full or from time to time in part in increments of 100
Shares and, in the event that any Warrant is exercised in respect of less
than all of the Shares issuable upon such exercise at any time prior to the
Warrant Expiration Date, a new Warrant or Warrants will be issued for the
remaining number of Shares specified in the Warrant so surrendered.
(c) Payment of Exercise Price. Payment of the Exercise Price
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may be made in cash or by certified check or official bank check payable to
the order of the Company. In addition and in lieu of any cash payment, the
Holder 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 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 below) of the Shares less the Exercise Price and the
denominator of which is such Market Price. Solely for the purposes of this
paragraph, "Market Price" shall be the average last reported sale price of
the Common Stock as calculated over the five (5) trading day period
preceding the date on which the Election to Purchase is sent to the
Company.
5. Payment of Taxes. The Company will pay all documentary stamp
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taxes, if any, attributable to the issuance of Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Holder of Warrants in respect of which such Shares are issued.
6. Mutilated or Missing Warrants. In case any of the Warrants shall
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be mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest, but only
upon receipt of evidence reasonably satisfactory to the Company of such
mutilation, loss, theft or destruction of such Warrant and indemnity, if
requested, reasonably satisfactory to the Company. An applicant for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges and expenses as the Company may prescribe.
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7. Reservation of Shares, etc. There have been reserved, and the
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Company shall at all times keep reserved, out of the authorized and unissued
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Warrants.
American Stock Transfer & Trust Company, transfer agent for the Common Stock
(the "Transfer Agent"), and every subsequent transfer agent, if any, for the
Company's securities issuable upon the exercise of the Warrants will be
irrevocably authorized and directed at all times until the Warrant Expiration
Date to reserve such number of authorized and unissued shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent and with every subsequent transfer agent for any
shares of the Company's securities issuable upon the exercise of the Warrants.
Upon request, the Company will supply the Transfer Agent or any subsequent
transfer agent with duly executed certificates for such purpose and will itself
provide or otherwise make available any cash which may be distributable as
provided in Section 9 of this Agreement. All Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled, and such canceled
Warrants shall constitute sufficient evidence of the number of Shares that have
been issued upon the exercise of such Warrants. No shares of Common Stock shall
be subject to reservation in respect of unexercised Warrants subsequent to the
Warrant Expiration Date.
8. Adjustments of Exercise Price and Number of Shares. The Exercise
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Price and the number and kind of securities issuable upon exercise of each
Warrant shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) In case the Company shall (i) declare a dividend on its
Common Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue by reclassification of its shares of
Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), the number of Shares purchasable
upon exercise of each Warrant immediately prior thereto shall be adjusted
so that the Holder of each Warrant shall be entitled to receive the kind
and number of Shares or other securities of the Company which he would have
owned or have been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised immediately prior
to the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date
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of such event retroactive to immediately after the record date, if any, for
such event.
(b) In case the Company shall issue rights, options or warrants
to all holders of its shares of Common Stock, without any charge to such
holders, entitling them (for a period expiring within 45 days after the
record date mentioned below in this paragraph (b)) to subscribe for or to
purchase shares of Common Stock at a price per share that is lower at the
record date mentioned below than the then current market price per share of
Common Stock (as defined in paragraph (d) below), the number of Shares
thereafter purchasable upon exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise of
each Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then current market price per share of Common
Stock. Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective retroactively to
immediately after the record date for the determination of shareholders
entitled to receive such rights, options or warrants.
(c) In case the Company shall distribute to all holders of its
shares of Common Stock shares of stock other than Common Stock or evidences
of its indebtedness or assets (excluding cash dividends payable out of
consolidated earnings or retained earnings and dividends or distributions
referred to in paragraph (a) above) or rights, options or warrants or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those referred to in
paragraph (b) above), then in each case the number of Shares thereafter
issuable upon the exercise of each Warrant shall be determined by
multiplying the number of Shares theretofore issuable upon the exercise of
each Warrant, by a fraction, of which the numerator shall be the current
market price per share of Common Stock (as defined in paragraph (d) below)
on the record date mentioned below in this paragraph (c), and of which the
denominator shall be the current market price per share of Common Stock on
such record date, less the then fair value (as determined in good faith by
the Board of Directors of the Company, whose determination shall be
conclusive) of the portion of the shares of stock other than Common Stock
or assets or evidences of indebtedness so distributed or of such
subscription rights, options or
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warrants, or of such convertible or exchangeable securities applicable to
one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(d) For the purpose of any computation under paragraphs (b) and
(c) of this Section 8, the current market price per share of Common Stock
at any date shall be the average of the daily closing prices for fifteen
(15) consecutive trading days commencing twenty (20) trading days before
the date of such computation. The closing price for each day shall be the
last reported sale price regular way or, in case no such reported sale
takes place on such day, the average of the closing bid and asked prices
regular way for such day, in either case on the principal national
securities exchange on which the shares are listed or admitted to trading,
or if they are not listed or admitted to trading on any national securities
exchange, but are traded in the over-the-counter market, the closing sale
price of the Common Stock or, in case no sale is publicly reported, the
average of the representative closing bid and asked quotations for the
Common Stock, on the NASDAQ system or any comparable system, or if the
Common Stock is not listed on the NASDAQ system or a comparable system, the
closing sale price of the Common Stock or, in case no sale is publicly
reported, the average of the closing bid and asked prices as furnished by
two members of the NASD selected from time to time by the Company for that
purpose.
(e) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Shares purchasable
upon the exercise of each Warrant; provided, however, that any adjustments
which by reason of this paragraph (e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest one thousandth of a share.
(f) Whenever the number of Shares purchasable upon the exercise
of each Warrant is adjusted, as herein provided, the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately prior
to such adjustment by a fraction, of which the numerator shall be the
number of Shares purchasable upon the exercise of each Warrant immediately
prior to such adjustment, and of which the denominator shall be the number
of Shares so purchasable immediately thereafter.
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(g) For the purpose of this Section 8, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of
the Company at the date of this Agreement or (ii) any other class of stock
resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from no par value to par
value, or from par value to no par value. In the event that at any time, as
a result of an adjustment made pursuant to paragraph (a) above, the Holders
shall become entitled to purchase any shares of capital stock of the
Company other than shares of Common Stock, thereafter the number of such
other shares so purchasable upon exercise of each Warrant and the Exercise
Price of such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Shares contained in paragraphs (a) through (f),
inclusive, and paragraphs (h) through (m), inclusive, of this Section 8,
and the provisions of Sections 4, 5, 7 and 10, with respect to the Shares,
shall apply on like terms to any such other shares.
(h) Upon the expiration of any rights, options, warrants or
conversion rights or exchange privileges, if any thereof shall not have
been exercised, the Exercise Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall, upon such expiration,
be readjusted and shall thereafter be such as each would have been had it
originally been adjusted (or had the original adjustment not been required,
as the case may be) as if (i) the only shares of Common Stock so issued
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion rights or exchange
privileges and (ii) such shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all of such rights, options,
warrants or conversion rights or exchange privileges whether or not
exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of shares issuable upon the exercise of
each Warrant or increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect of the issuance, sale or
grant of such rights, options, warrants or conversion rights or exchange
privileges.
(i) The Company may, at its option and in its sole discretion at
any time during the term of the Warrants, reduce the then current Exercise
Price to any amount deemed appropriate by the Board of Directors of the
Company.
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(j) Whenever the number of Shares issuable upon the exercise of
each Warrant or the Exercise Price of such Shares is adjusted, as herein
provided, the Company shall promptly mail by first class mail, postage
prepaid, to each Holder notice of such adjustment or adjustments.
(k) Except as provided in this Section 8, no adjustment in
respect of any dividends shall be made during the term of a Warrant or upon
the exercise of a Warrant.
(l) In case of any consolidation of the Company with or merger of
the Company with or into another corporation or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that each Holder shall have the
right thereafter upon payment of the Exercise Price in effect immediately
prior to such action to purchase upon exercise of each Warrant the kind and
amount of shares and other securities and property (including cash) which
he would have owned or have been entitled to receive after the happening of
such consolidation, merger, sale or conveyance had such Warrant been
exercised immediately prior to such action. The provisions of this
paragraph (l) shall similarly apply to successive consolidations, mergers,
sales or conveyances.
(m) Notwithstanding any adjustment in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants
pursuant to this Agreement, certificates for Warrants issued prior or
subsequent to such adjustment may continue to express the same price and
number and kind of Shares as are initially issuable pursuant to this
Agreement.
9. Fractional Interests. The Company shall not be required to issue
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fractions of Shares on the exercise of Warrants. If more than one Warrant shall
be presented for exercise in full at the same time by the same Holder, the
number of Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Shares issuable on exercise of
the Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 9, be issuable on the exercise of any Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the current market price per share
of Common Stock (determined as provided in Section 8(d) of this Agreement) on
the date of exercise.
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10. Registration Rights.
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(a) Demand Registration Rights. The Company covenants and agrees with
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the Underwriters and any other or subsequent Holders of the Registrable
Securities (as defined in paragraph (f) of this Section 10) that, subject to the
availability of audited financial statements which would comply with Regulation
S-X under the Act, upon written request of the then Holder(s) of at least a
majority of the Warrants or the Registrable Securities, or both, which were
originally issued to the Underwriters or their designees, made at any time
within the period commencing one year and ending five years after the Effective
Date, the Company will file as promptly as practicable and, in any event, within
60 days after receipt of such written request, no more than once, a post-
effective amendment (the "Amendment") to the Registration Statement, or a new
registration statement under the Act, registering or qualifying the Registrable
Securities for sale. Within fifteen (15) days after receiving any such notice,
the Company shall give notice to the other Holders of the Registrable Securities
advising that the Company is proceeding with such Amendment or registration
statement, as applicable and offering to include therein the Registrable
Securities of such Holders. The Company shall not be obligated to any such
other Holder unless such other Holder shall accept such offer by notice in
writing to the Company within ten (10) days after receipt of such notice. The
Company will use its best efforts, through its officers, directors, auditors and
counsel in all matters necessary or advisable, to file and cause to become
effective such Amendment or registration statement as promptly as practicable
and for a period of two years thereafter to reflect in the Amendment or
registration statement financial statements which are prepared in accordance
with Section 10(a)(3) of the Act and any facts or events arising that,
individually, or in the aggregate, represent a fundamental and/or material
change in the information set forth in the Amendment or registration statement
to enable any Holders of the Warrants to exercise such Warrants and sell Shares,
or to enable any holders of Shares to sell such Shares, during said two year
period. If any registration pursuant to this paragraph (a) is an underwritten
offering, the Holders of a majority of the Registrable Securities to be included
in such registration shall be entitled to select the underwriter or managing
underwriter (in the case of a syndicated offering) of such offering, subject to
the Company's approval which shall not be unreasonably withheld.
(b) Piggyback Registration Rights. The Company covenants and agrees
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with the Underwriters and any other Holders or subsequent Holders of the
Registrable Securities that if, at any time within the period commencing one
year and ending five years after the Effective Date, it proposes to file a
registra-tion statement with respect to any class of equity or equity-related
security (other than in connection with an offering to
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the Company's employees or in connection with an acquisition, merger or similar
transaction) under the Act in a primary registration on behalf of the Company
and/or in a secondary registration on behalf of holders of such securities and
the registration form to be used may be used for registration of the Registrable
Securities, the Company will give prompt written notice (which, in the case of a
registration statement or notification pursuant to the exercise of demand
registration rights other than those provided in Section 10(a) of this
Agreement, shall be within ten (10) business days after the Company's receipt of
notice of such exercise and, in any event, shall be at least 30 days prior to
such filing) to the Holders of Registrable Securities (regardless of whether
some of the Holders shall have theretofore availed themselves of the right
provided in Section 10(a) of this Agreement) at the addresses appearing on the
records of the Company of its intention to file a registration statement and
will offer to include in such registration statement all of the Registrable
Securities subject to paragraphs (i) and (ii) of this paragraph (b), such number
of Registrable Securities with respect to which the Company has received written
requests for inclusion therein within ten (10) days after the giving of notice
by the Company. All registrations requested pursuant to this paragraph (b) are
referred to herein as "Piggyback Registrations". This paragraph is not
applicable to a registration statement filed by the Company with the Commission
on Forms S-4 or S-8 or any successor forms.
(i) Priority on Primary Registrations. If a Piggyback
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Registration includes an underwritten primary registration on behalf of the
Company, and the underwriter(s) for such offering determines in good faith
and advises the Company in writing that in its/their opinion the number of
Registrable Securities requested to be included in such registration
exceeds the number that can be sold in such offering without materially
adversely affecting the distribution of such securities by the Company, the
Company will include in such registration (A) first, the securities that
the Company proposes to sell and (B) second, the Registrable Securities
requested to be included in such registration and the shares of Common
Stock entitled to registration rights under that certain Warrant Agreement
dated December 11, 1995 (the "Hibernia Shares"), apportioned pro rata among
the Holders of Registrable Securities and the holders of the Hibernia
Shares, provided, however, the Company will use its best efforts to include
not less than 20% of the Registrable Securities requested to be included in
such registration, and (C) third, securities of the holders of other
securities requesting registration.
(ii) Priority on Secondary Registrations. If a Piggyback
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Registration consists only of an underwritten secondary registration on
behalf of holders of securities of
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the Company (other than pursuant to Section 10(a)), and the underwriter(s)
for such offering advises the Company in writing that in its/their opinion
the number of Registrable Securities requested to be included in such
registration exceeds the number which can be sold in such offering without
materially adversely affecting the distribution of such securities by the
Company, the Company will include in such registration (A) first, the
securities requested to be included therein by the holders requesting such
registration; (B) second, the Registrable Securities requested to be
included in such registration, pro rata among all such holders on the basis
of the number of shares requested to be included by each such holder
(provided, that if the person requesting registration is not a holder of
Hibernia Shares, the securities to be included in such registration under
this clause (B) shall be the Registrable Securities and the Hibernia Shares
requested to be included in such registration, apportioned pro rata among
the Holders of Registrable Securities and the holders of the Hibernia
Shares); and (C) third, other securities requested to be included in such
registration.
Notwithstanding the foregoing, if any such underwriter shall consent
to such Registrable Securities being included in the Company's registration
statement but shall determine in good faith and advise the Company in writing
that the distribution of the Registrable Securities requested to be included in
the registration concurrently with the securities being registered by the
Company would materially adversely affect the distribution of such securities by
the Company, then the Holders of such Registrable Securities shall delay their
offering and sale for such period ending on the earliest of (1) 90 days
following the effective date of the Company's registration statement, (2) the
day upon which the underwriting syndicate, if any, for such offering shall have
been disbanded or, (3) such date as the Company, managing underwriter and
Holders of Registrable Securities shall otherwise agree. In the event of such
delay, the Company shall file such supplements, post-effective amendments and
take any such other steps as may be necessary to permit such Holders to make
their proposed offering and sale for a period of 120 days immediately following
the end of such period of delay. If any party disapproves of the terms of any
such underwriting, it may elect to withdraw therefrom by written notice to the
Company, the underwriter, and the Underwriters. Notwithstanding the foregoing,
the Company shall not be required to file a registration statement to include
Shares pursuant to this Section 10(b) if independent counsel, reasonably
satisfactory to counsel for the Company and counsel for the Underwriters,
renders an opinion to the Company that the Shares proposed to be disposed of may
be transferred pursuant to the provisions of Rule 144 under the Act or otherwise
without registration under the Act.
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(c) Other Registration Rights. In addition to the rights above
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provided, the Company will cooperate with the then Holders of the Registrable
Securities in preparing and signing any registration statement, in addition to
the registration statements discussed above, required in order to sell or
transfer the Registrable Securities and will supply all information required
therefor, but such additional registration statement, shall be at the then
Holders' cost and expense; provided, however, that if the Company elects to
-------- -------
register or qualify additional shares of Common Stock, the cost and expense of
such registration statement will be pro rated between the Company and the
Holders of the Registrable Securities according to the aggregate sales price of
the securities being issued. Notwithstanding the foregoing, the Company will
not be required to file a registration statement pursuant to this paragraph (c),
(i) at a time when the audited financial statements required to be included
therein are not available, which time shall be limited to the period commencing
45 days after the end of the Company's last fiscal year and ending 90 days after
the end of such fiscal year, or (ii) within 90 days after completion of a public
offering by the Company of any of its Common Stock or equity-related securities
or (iii) if it would adversely impact the Company in its capital raising plans
or otherwise (in which latter case filing may be delayed no longer than 120
days).
(d) During a period of up to 45 days duration (a Blackout Period), the
Holders agree that upon receipt of a notice from the Company of the occurrence
of an event which requires the making of any change in a registration statement
or related prospectus so that such document will not contain any untrue
statements of material fact or omit to state any material fact required to be
stated therein, Holders will forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until the Holders shall have received notice from the
Company of the end of such delay period and, if applicable, copies of any
supplemental or amended prospectus; provided, that the aggregate number of days
during which one or more Blackout Periods in effect shall not exceed 90 days
during any twelve month period and at least 20 days shall have elapsed between
each Blackout Period.
(e) Action to be Taken by the Company. In connection with the
---------------------------------
registration of Registrable Securities in accordance with paragraphs (a), (b) or
(c) of this Section 10, the Company agrees to:
(i) Bear the expenses of any registration or qualification under
paragraphs (a) or (b) of this Section 10, including, but not limited to,
legal, accounting and printing fees; provided, however, that in no event
-------- -------
shall the Company be obligated to pay (A) any fees and
13
disbursements of counsel for Holders of Registrable Securities, or (B) any
underwriters' discount or commission in respect of such Registrable
Securities, (C) any stock transfer taxes attributable to the sale of the
Registrable Securities, or (D) upon the exercise of any demand registration
right provided for in paragraph (a) of this Section 10, the cost of any
liability or similar insurance required by an underwriter, to the extent
that such costs are attributable solely to the offering of such Registrable
Securities, payment of which shall, in each case, be the sole
responsibility of the Holders of the Registrable Securities; and
(ii) Use its best efforts to register or qualify the Registrable
Securities for offer or sale under state securities or Blue Sky laws of
such jurisdictions in which the Underwriters or such Holders shall
reasonably request, provided, however, that no qualification shall be
-------- -------
required in any jurisdiction where, as a result thereof, the Company would
be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction to which it is not then
subject, and to do any and all other acts and things which may be necessary
or advisable to enable the holders to consummate the proposed sale,
transfer or other disposition of such securities in any jurisdiction.
(f) Action to be Taken by the Holders. In connection with the
---------------------------------
registration of Registrable Securities in accordance with paragraphs (a), (b) or
(c) of this Section 10, the Company's obligation shall be conditioned as to each
such public offering upon a timely receipt by the Company in writing of:
(i) Information as to the terms of such public offering furnished
by or on behalf of each Holder intending to make a public offering of his
or its Registrable Securities; and
(ii) Such other information as the Company may reasonably require
from such Holders, or any underwriter for any of them, for inclusion in
such Registration Statement.
(g) For purposes of this Section 10, (i) the term "Holder" shall
include holders of Shares, and (ii) the term "Registrable Securities" shall
include the Warrants and the Shares, if issued.
14
11. Notices to Holders.
------------------
(a) Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders thereof the right to vote or
to receive dividends or to consent or to receive notice as shareholders in
respect of the meetings of shareholders or the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company; provided, however, that in the event that a meeting of shareholders
-------- -------
shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, other than in connection with a consolidation,
merger or sale of all, or substantially all, of its property, assets, business
and good will as an entirety, then and in that event the Company shall cause a
notice thereof to be sent by first-class mail, postage prepaid, at least twenty
(20) days prior to the date fixed as a record date or the date of closing the
transfer books in relation to such meeting, to each registered Holder of
Warrants at such Holder's address appearing on the Warrant Register; but failure
to mail or to receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any action taken in connection with
such voluntary dissolution.
(b) In the event the Company intends to make any distribution on its
Common Stock (or other securities which may be issuable in lieu thereof upon the
exercise of Warrants), including, without limitation, any such distribution to
be made in connection with a consolidation or merger in which the Company is the
continuing corporation, or to issue subscription rights or warrants to holders
of its Common Stock, the Company shall cause a notice of its intention to make
such distribution to be sent by first-class mail, postage prepaid, at least
twenty (20) days prior to the date fixed as a record date or the date of closing
the transfer books in relation to such distribution, to each registered Holder
of Warrants at such Holder's address appearing on the Warrant Register, but
failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such distribution.
12. Notices. Any notice pursuant to this Agreement to be given or
-------
made by the Holder of any Warrant and/or the holder of any Share to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed as follows or to such other address as the Company may
designate by notice given in accordance with this Section 12, to the Holders of
Warrants and/or the holders of Shares:
15
DSI TOYS, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇)
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
Notices or demands authorized by this Agreement to be given or made by
the Company to or on the Holder of any Warrant and/or the holder of any Share
shall be sufficiently given or made (except as otherwise provided in this
Agreement) if sent by first-class mail, postage prepaid, addressed to such
Holder or such holder of Shares at the address of such Holder or such holder of
Shares as shown on the Warrant Register or the books of the Company, as the case
may be.
13. Governing Law. This Agreement and each Warrant issued hereunder
-------------
shall be governed by and construed in accordance with the substantive laws of
the Commonwealth of Massachusetts. The Company hereby agrees to accept service
of process by notice given to it pursuant to the provisions of Section 12.
14. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day, month and year first above written.
DSI TOYS, INC.
By:
-----------------------------
Its:
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INCORPORATED
By:
-----------------------------
Its:
-------------------------
SUTRO & CO. INCORPORATED
By:
-----------------------------
Its:
-------------------------
16
SCHEDULE I
Name of Number of
Underwriter Warrants
----------- ---------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated 100,000
Sutro & Co. Incorporated 150,000
-------
Total 250,000
=======
No. Warrants
---- -----
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON ________ __, 2002
DSI TOYS, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received ________________, or registered
assigns, is the owner of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase at any time from ________ __, 1998, until
5:00 p.m., New York City time on ________ __, 2002 (the "Warrant Expiration
Date"), one hundred fully paid and nonassessable shares of common stock, $0.01
par value per share (the "Common Stock"), of DSI TOYS, INC., a Texas corporation
(the "Company"), at the purchase price of $____ per share (as adjusted from time
to pursuant to the Warrant Agreement referenced below, the "Exercise Price")
upon presentation and surrender at the principal office of the Company or its
duly authorized agent of this Warrant Certificate with the Form of Election to
Purchase duly executed. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Exercise Price per share set forth above, are
the number and Exercise Price as of the date of original issuance of the
Warrants, based on the shares of Common Stock of the Company as constituted at
such date. As provided in the Warrant Agreement referred to below, the Exercise
Price and the number or kind of shares which may be purchased upon the exercise
of the Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of an agreement dated as of ________
__, 1997 (the "Warrant Agreement") among the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Incorporated and Sutro & Co. Incorporated, which Warrant Agreement is hereby
incorporated herein by reference and made a part hereof and to which Warrant
Agreement reference is hereby made for a full description of the rights,
limitations of rights, duties and immunities hereunder of the Company and the
holders of the Warrant Certificates. Copies of the Warrant Agreement are on
file at the principal office of the Company.
1
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote, receive
dividends, subscription rights or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue of stock, reclassification of stock, change of
par value or change of stock to no par value, consolidation, merger, conveyance,
or otherwise) or, except as provided in the Warrant Agreement, to receive notice
of meetings, until the Warrant or Warrants evidenced by this Warrant Certificate
shall have been exercised and the Shares shall have become deliverable as
provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common Stock or other class of
stock purchasable upon the exercise of this Warrant are closed for any purpose,
the Company shall not be required to make delivery of certificates for shares
purchasable upon such exercise until the date of the reopening of said transfer
books, provided, however, that such books shall not be closed for longer than a
20-day period.
2
IN WITNESS WHEREOF, DSI TOYS, INC. has caused the signature (or facsimile
signature) of its Chairman or its President and its Secretary to be affixed
hereon and its corporate seal (or facsimile) to be affixed hereon.
Dated ________ __, 1997
DSI TOYS, INC.
By:
-----------------------------
Its:
-------------------------
Attest:
-------------------------
3
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers
unto ________________________ this Warrant Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
____________________, to transfer the within Warrant Certificate on the books of
the within-named Company, with full power of substitution.
The undersigned represents and warrants that the transfer of the within
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
within Warrant has been issued, and the transferee hereof, by his acceptance of
this Assignment, represents and warrants that he is familiar with the terms of
said Warrant Agreement and agrees to be bound by the terms thereof with the same
force and effect as if a signatory thereto.
Dated: ______________________, ____
---------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate).
TO: DSI TOYS, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase ______ shares of Common
Stock issuable upon the exercise of such Warrants and requests that certificates
for such shares be issued in the name of:
Please insert social security, tax identification or other
identifying number
------------------------------
------------------------------
------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security, tax identification or other identifying number
-----------------------------
-----------------------------
-----------------------------
(Please print name and address)
Dated: _______________, ____
------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed: