1
EXHIBIT 10.37
COMMON STOCK AND OPTION PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇▇▇▇▇ COFFEE, INC.
"COMPANY"
AND
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
"PURCHASER"
APRIL 3, 1998
2
TABLE OF CONTENTS
PAGE
1. DEFINITIONS...............................................................1
2. PURCHASE AND SALE OF STOCK................................................3
2.1 Sale and Issuance of Common Stock.....................................3
2.2 Closing...............................................................3
3. RIGHT TO PURCHASE.........................................................3
3.1 Right to Purchase.....................................................3
3.2 Exercise of Option....................................................3
3.3 Exercise Prices.......................................................3
3.4 Procedure.............................................................4
3.5 Form of Payment: "Cashless" Exercise..................................4
3.6 Protection Against Dilution...........................................4
3.7 Reservation of Common Stock...........................................6
3.8 Transferability of The Option.........................................6
3.9 No Rights as Stockholder..............................................7
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........................7
4.1 Reliance Upon Purchaser's Representations.............................7
4.2 Receipt of Information................................................8
4.3 Investment Experience.................................................8
4.4 Organization; Good Standing; Qualification...........................8
4.5 Authorization; No Conflict............................................8
4.6 Restricted Securities.................................................8
4.7 Legend................................................................9
4.8 No Conflict...........................................................9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................9
5.1 Valid Issuance of Shares..............................................9
5.2 Organization; Good Standing; Qualification............................9
5.3 Authorization; No Conflict............................................9
5.4 Governmental Consents................................................10
5.5 Capitalization.......................................................10
5.6 Registration Rights..................................................10
5.7 Registration Statement...............................................10
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.......................10
6.1 Representations and Warranties.......................................10
7. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING.........................10
7.1 Representations and Warranties.......................................11
i
3
8. REGISTRATION RIGHTS......................................................11
8.1 Company Registration.................................................11
8.2 Demand Registration..................................................12
8.3 Expenses of Registration.............................................15
8.4 Company Obligations..................................................15
8.5 Indemnification......................................................16
8.6 Information by Holder................................................18
8.7 Transfer or Assignment of Registration Rights........................18
8.8 "Market Stand-Off" Agreement.........................................19
8.9 Allocation of Registration Opportunities.............................19
8.10 Delay of Registration...............................................19
8.11 Termination of Registration Rights..................................20
9. MARKET TRADING...........................................................20
10. MISCELLANEOUS............................................................20
10.1 Entire Agreement....................................................20
10.2 Survival of Warranties..............................................20
10.3 Governing Law.......................................................20
10.4 Counterparts........................................................20
10.5 Titles and Subtitles................................................20
10.6 Severability........................................................21
10.7 Expenses............................................................21
10.8 Attorneys' Fees.....................................................21
10.9 Amendment and Waivers...............................................21
10.10 Successors and Assigns.............................................21
10.11 Notices............................................................21
10.12 California Corporate Securities Law................................23
SCHEDULES
A. Registration Rights Agreements
EXHIBITS
1. Representative's Warrant Agreement By And Between The Company
And The Boston Group, L.P., Dated As Of September 17, 1996
2. Warrant Granted To Nuvrty, Inc., A Colorado Corporation, Dated
September 30, 1997
ii
4
▇▇▇▇▇▇▇▇ COFFEE, INC.
COMMON STOCK AND OPTION PURCHASE AGREEMENT
THIS COMMON STOCK AND OPTION PURCHASE AGREEMENT (this "AGREEMENT") is
made as of the 3rd day of April, 1998, (the "EFFECTIVE DATE") by and between
▇▇▇▇▇▇▇▇ Coffee, Inc., a Delaware corporation (the "COMPANY") and Franchise
Mortgage Acceptance Company, a Delaware corporation (the "PURCHASER"). In
consideration of the mutual promises and covenants set forth herein, and
pursuant to the terms and subject to the conditions hereinafter set forth, the
parties agree as follows:
RECITALS
A. The Company is a leading roaster, wholesaler and retailer of premium
coffee.
B. The Company needs working capital to enable it to complete its
turnaround and position the Company for growth.
C. The Purchaser is a sophisticated investor within the meaning of the
securities laws and wishes to invest in the Company on the terms and conditions
described below.
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
"AFFILIATE" shall mean a person or entity controlling, controlled by, or
under common control with a specified person.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON STOCK" shall mean the Company's common stock, par value $0.01
per share.
"DETERMINATION DATE" shall mean the date on which the Company receives
the Purchaser's written notice of an exercise of the Option pursuant to Section
3.4 hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXERCISE SHARES" shall mean those shares of Common Stock with respect
to which the Option is being exercised.
"EXTENSION DATE" shall mean the first date on which a Registration
Statement of the Company on a form permitting resales, in which participation
was offered to the Holders of Registrable Securities, is declared effective.
"FORM S-3" shall mean a Form S-3 registration statement under the
Securities Act, or any similar successor form.
"HOLDER" shall mean the Purchaser and any Holder of Registrable
Securities to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 8.7 hereof.
5
"INITIATING HOLDER" shall mean any Holder or Holders who in the
aggregate hold not less than fifty-one percent (51%) of the outstanding
Registrable Securities.
"OPTION" shall have the meaning set forth in Section 3.1.
"OPTION SHARES" shall have the meaning set forth in Section 3.1.
"OTHER STOCKHOLDERS" shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.
"REGISTRABLE SECURITIES" shall mean the following shares of Common Stock
of the Company: (i) the Shares, (ii) the Option Shares, and (iii) any Common
Stock issued as a dividend or other distribution with respect to or in exchange
for or in replacement of the Shares or Option Shares, provided, however, that
Registrable Securities shall not include any shares of Common Stock which have
previously been registered or which have been sold either pursuant to a
registration statement or Rule 144, or which have been sold in a private
transaction in which the transferor's registration rights under this Agreement
are not assigned.
"REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses and the compensation
of regular employees of the Company, which shall be paid in any event by the
Company.
"RULE 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
"RULE 415" shall mean Rule 415 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
"SECURITIES" shall mean the Shares, the Option and the Option Shares.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder (other than the
fees and disbursements of counsel included in Registration Expenses).
2
6
"SHARES" shall have the meaning set forth in Section 2.1.
2. PURCHASE AND SALE OF STOCK
2.1 SALE AND ISSUANCE OF COMMON STOCK.
Subject to the terms and conditions of this Agreement, the
Purchaser shall purchase at the Closing, and the Company shall issue and sell to
the Purchaser at the Closing, 200,000 shares of the Common Stock (the "SHARES")
at a per share purchase price of $6.375, which is equal to the closing sale
price per share for the Common Stock on the Nasdaq National Market on March 30,
1998 as reported in the Transaction Index of the Wall Street Journal.
2.2 CLOSING.
(a) The purchase and sale of the Shares shall take place at
the offices of the Company in Irvine, California, at 2:00 p.m., on April 3,
1998, subject to satisfaction or waiver of all the conditions set forth in
Sections 5 and 6; or at such other time and place as the Company and the
Purchaser shall mutually agree, either orally or in writing (which time and
place are designated as the "CLOSING").
(b) At the Closing, the Company shall instruct its transfer
agent to deliver to the Purchaser a certificate representing the Shares that
such Purchaser is purchasing against payment of the purchase price in good funds
therefor by wire transfer or such other form of payment as shall be mutually
agreed upon by the Purchaser and the Company.
3. RIGHT TO PURCHASE
3.1 RIGHT TO PURCHASE.
After the Closing, the Purchaser shall also have the right to
purchase from the Company One Hundred Thousand (100,000) shares of Common Stock
(as presently constituted and subject to subsequent adjustments for stock
splits, stock dividends, reverse stock splits and similar transactions) (the
"OPTION SHARES") on the terms and conditions set forth in this Section 3 (the
"OPTION").
3.2 EXERCISE OF OPTION.
The purchase rights represented by the Option are exercisable by
the Purchaser in whole or in part, but not less than 25,000 shares at a time (or
such lesser number of shares which may then constitute the maximum number
purchasable; such number being subject to adjustment as provided in Section 3.6
below), at any time, or from time to time during the term commencing on the
Effective Date and ending at 5:00 p.m. Pacific standard time on the day that is
two (2) years after the Effective Date, and shall be void thereafter.
3.3 EXERCISE PRICES.
The Option may be exercised as follows: Fifty thousand (50,000)
shares shall be exercisable at $10.00 per share of Common Stock and Fifty
Thousand (50,000) shares shall be
3
7
exercisable at $12.50 per share of Common Stock, each as adjusted from time to
time pursuant to Section 3.6 hereof (the "EXERCISE PRICES").
3.4 PROCEDURE.
Upon receipt by the Company of the Purchaser's written notice of
exercise, which notice shall contain the number of Option Shares to be exercised
and the Exercise Price, the Company shall, within ten (10) days from the date of
the Company's receipt of such notice issue and deliver to the Purchaser
certificates evidencing the Option Shares. For the purpose of this Section 3.4,
the purchase shall be deemed to occur at the close of business on the
Determination Date. In the event that the Purchaser shall elect to exercise its
right with respect to less than the entire number of shares covered by the
Option, such partial exercise shall not be interpreted to prevent the Purchaser
or its transferees, successors or assignees from asserting the then unexercised
rights or constitute a waiver of such unexercised rights.
3.5 FORM OF PAYMENT: "CASHLESS" EXERCISE.
The payment for the Option Shares with respect to which the
Option is exercised shall be made by surrendering a portion of the Option Shares
with respect to which the Option is exercised. The value attributed to Option
Shares so surrendered shall be the closing sale price for the Common Stock on
the Nasdaq National Market as reported in the Transaction Index of the Wall
Street Journal on the Determination Date. By way of illustration only, and
without limitation thereto, if the Purchaser exercises 50,000 Option Shares with
an exercise price of $10.00 per share of Common Stock, and the closing sale
price for the Common Stock on the Nasdaq National Market, as reported in the
Transaction Index of the Wall Street Journal on the Determination Date is
$20.00, the Purchaser shall surrender 25,000 Option Shares and receive a
certificate evidencing 25,000 Option Shares. No fractional shares or scrip
representing fractional shares shall be issued upon exercise of the Option. In
lieu of any fractional share to which the Purchaser would otherwise be entitled,
the Company shall make a cash payment equal to the product of the sale price set
forth above and such fraction.
3.6 PROTECTION AGAINST DILUTION.
(a) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company at any time or from time to time after the Effective Date effects a
subdivision of the outstanding Common Stock the numbers of shares of Common
Stock available for purchase upon exercise of the Option as of the effective
time of such subdivision shall be proportionately increased, and the Exercise
Prices per share then in effect immediately before the subdivision shall be
proportionately decreased, and conversely, if the Company at any time or from
time to time after the Effective Date combines the outstanding shares of Common
Stock, the number of shares of Common Stock available for purchase upon exercise
of this Option as of the effective time of such combination shall be
proportionately decreased, and the Exercise Prices then in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this Section 3.6(a) shall become effective as of the date and time the
subdivision or combination becomes effective.
4
8
(b) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Effective Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the number of shares of Common Stock
available for purchase upon exercise of the Option as of the record date for
such dividend or distribution shall be proportionately increased and the
Exercise Prices then in effect shall be proportionately decreased as of the time
of such issuance or, in the event such a record date is fixed, as of the close
of business on such record date, provided, however, that if such record date is
fixed and such dividend is not fully paid, or if such distribution is not fully
made on the date fixed therefor, the number of shares of Common Stock available
for purchase upon exercise of the Option as of the record date and the Exercise
Prices shall be computed to reflect that such dividend was not fully paid or
that such distribution was not fully made as of the close of business on such
record date and thereafter the number of Option Shares and the Exercise Prices
shall be adjusted pursuant to this Section 3.6(b) as of the time of actual
payment of such dividends or distributions.
(c) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the Effective Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, then and in each such event
provision shall be made so that the Purchaser shall receive upon exercise of the
Option, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which the Purchaser would
have received had the Option been fully exercised for Common Stock on the date
of such event and had the Purchaser thereafter, during the period from the date
of such event to and including the date of exercise retained such securities
receivable by it as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 3.6 with respect to
the Purchaser.
(d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable upon the exercise of the Option is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this Section
3.6), then, and in any such event, the Purchaser shall have the right
thereafter, upon exercise of the Option to receive the kind and amount of stock
and other securities and property receivable upon such reorganization,
reclassification or other change, in an amount equal to the amount that the
Purchaser would have been entitled to had the Purchaser immediately prior to
such reorganization, reclassification or change exercised the Purchaser's rights
to purchase under the Option, but only at such time and to the extent the Option
is actually exercised, all subject to further adjustment as provided herein.
(e) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OR
ASSETS. If at any time or from time to time there is a capital reorganization of
the Common Stock (other than a recapitalization, subdivision, combination,
reclassification or exchange of the Common Stock provided for elsewhere in this
Section 3.6) or merger or consolidation of the Company with or into another
entity, or the sale of all or substantially all of the Company's properties and
assets to any other person, then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the Purchaser shall
thereafter be entitled to receive, upon exercise of rights to purchase
5
9
under the Option (but only to the extent such rights are exercised), the number
of shares of stock or other securities or property of the Company, or of the
successor entity resulting from such merger or consolidation or sale, to which a
holder of Common Stock, or other securities, deliverable upon the exercise of
purchase rights under the Option would otherwise have been entitled on such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustments shall be made in the application of the provisions of
this Section 3.6 (including adjustment of the Exercise Prices then in effect and
number of shares purchasable) which shall be applicable after such events;
provided, however, that any such adjustments shall be made so as to ensure that
the provisions of this Section 3.6 applicable after such events shall be as
equivalent as may be practicable to the provisions of this Section 3.6
applicable before such events.
(f) OFFICER'S CERTIFICATE OF ADJUSTMENT. In any event of an
adjustment or readjustment of the Exercise Prices, or the number of shares of
Common Stock or other securities issuable upon exercise of the Option, the
Company's chief financial officer, at the Company's expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and shall
prepare a certificate showing such adjustment or readjustment, and shall deliver
such certificate as provided in Section 10.11, to the Purchaser's address as
shown in the Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (a) the consideration received or
deemed to be received by the Company for any Common Stock issued or sold or
deemed to have been issued or sold, (b) the Exercise Prices at the time in
effect, and (c) the type and amount, if any, of other property which at the time
would be received upon exercise of the Option. Notwithstanding the above, the
Purchaser may select and cause independent public accountants of recognized
standing also to compute such adjustment or readjustment in accordance with the
provisions hereof and to prepare a certificate showing such adjustment or
readjustment. If, by such computation, the Purchaser shall determine that the
computation performed by the Company's chief financial officer was incorrect by
at least five percent (5%) and such inaccuracy was prejudicial to the Purchaser,
then, at the option of the Purchaser, the cost of the Purchaser's computation
and certificate preparation shall be borne by the Company and shall be due and
owing upon demand.
(g) RESERVATION OF SHARES. The Company recognizes that the
adjustments provided in this Section will alter the number of shares subject to
purchase rights and agrees to adjust the appropriate number(s) of shares
reserved pursuant to Section 3.7 for issuance upon exercise of the Option.
3.7 RESERVATION OF COMMON STOCK.
The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the exercise of the purchase rights under the Option, such number
of shares of Common Stock as shall be issuable upon the exercise hereof.
3.8 TRANSFERABILITY OF THE OPTION.
(a) TRANSFER. Subject to Section 3.8(b), the Purchaser may
make an assignment or transfer of the Option, in whole or in part, provided that
such assignment or transfer is for a minimum of fifty percent (50%) of the
Option Shares (the "TRANSFER"). Except as set forth in this
6
10
Section 3.8(a), the Option is not assignable or transferable, in whole or in
part, including, without limitation, by any holder subsequent to the Transfer
(the "TRANSFER HOLDER"), and may not, directly or indirectly, be offered,
transferred, sold, pledged, assigned, alienated, hypothecated or otherwise
disposed of or encumbered (including without limitation by gift, operation of
law or otherwise) other than by will or by the laws of descent and distribution
to the estate of the Purchaser or Transfer Holder, if applicable, upon his or
her death, provided that the deceased Purchaser's beneficiary, Transfer Holder's
beneficiary or the representative of his or her estate acknowledge and agree in
writing, in a form reasonably acceptable to the Company to be bound by this
Agreement as if such beneficiary or estate were the Purchaser or Transfer
Holder.
(b) NOTICE OF PROPOSED TRANSFERS. Prior to any transfer or
attempted transfer of the Option, the Purchaser shall give the Company written
notice of his intention to do so, describing briefly the nature of any such
proposed transfer. If, in the written opinion of counsel for the Purchaser, in
form and substance reasonably satisfactory to the Company or its counsel,
addressed to the Company or the Purchaser, the proposed transfer may be effected
without registration of the Option, the Option may be transferred in accordance
with the terms of said notice and in compliance with applicable state securities
laws and regulations. The Company shall not be required to effect any such
transfer prior to the receipt of such favorable opinion; provided that if the
proposed transfer is governed by Rule 144 promulgated by the Commission, or any
successor rule, such opinion shall not be required, but the Company may prevent
such transfer until it receives evidence satisfactory to it and its counsel that
the transfer complies with Rule 144. Each transfer shall comply with all
applicable state securities laws and regulations.
3.9 NO RIGHTS AS STOCKHOLDER.
The Purchaser will have no voting or other rights as a
stockholder of the Company with respect to any shares of Common Stock covered by
the Option until the exercise of such Option and the issuance of a certificate
or certificates to him for such shares of Common Stock. Except as expressly
provided in Section 3.6(b), no adjustment will be made for dividends or other
rights for which the record date is prior to the issuance of such certificate or
certificates.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company that:
4.1 RELIANCE UPON PURCHASER'S REPRESENTATIONS.
The Purchaser understands that the Securities are not registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on the Purchaser's
representations set forth herein. The Purchaser realizes that the basis for the
exemption may not be present if, notwithstanding such representations, the
Purchaser has in mind merely acquiring the Securities for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. The Purchaser represents that such Purchaser has no such
intention. The Securities to be acquired by the Purchaser hereunder will be
acquired for Purchaser's own account for investment purposes and not with a view
to or for sale in connection with any distribution of the Securities.
7
11
4.2 RECEIPT OF INFORMATION.
The Purchaser represents such Purchaser has received all the
information such Purchaser considers necessary or appropriate for deciding
whether to purchase the Securities. The Purchaser further represents that such
Purchaser has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Securities,
and the business, properties, prospects, and financial condition of the Company
and to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such Purchaser
or to which such Purchaser had access.
4.3 INVESTMENT EXPERIENCE.
The Purchaser represents that such Purchaser is experienced in
evaluating and investing in private placement transactions of securities of
companies and acknowledges that such Purchaser is able to fend for itself, can
bear the economic risk of such Purchaser's investment in the Securities and can
afford to sustain a total loss of such investment, and has such knowledge and
experience in financial and business matters that such Purchaser is capable of
evaluating the merits and risks of the investment in the Securities.
4.4 ORGANIZATION; GOOD STANDING; QUALIFICATION.
The Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and to execute and deliver this
Agreement. The Purchaser is duly qualified, is authorized to transact business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure so to qualify would have a material adverse effect on its business,
properties, prospects, or financial condition.
4.5 AUTHORIZATION; NO CONFLICT.
All corporate action on the part of the Purchaser necessary for
the authorization, execution and delivery of this Agreement and the performance
of all obligations of the Purchaser hereunder has been taken or will be taken
prior to the Closing. The execution, delivery, and performance by the Purchaser
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any violation or default in any material respect of any
provision of its organizational documents or in any material respect of any
provision of any material mortgage, indenture, agreement, instrument, or
contract to which it is a party.
4.6 RESTRICTED SECURITIES.
The Purchaser understands that the Securities may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the Securities Act, the Securities must be held indefinitely.
In particular, the Purchaser is aware that the Securities may not be sold
pursuant to Rule 144 promulgated under the Securities Act unless all of the
conditions of that Rule are met.
8
12
4.7 LEGEND.
Each certificate or other document evidencing any of the Shares
and the Option Shares shall be endorsed with a legend substantially in the form
set forth below:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
4.8 NO CONFLICT.
The execution, delivery, and performance by the Purchaser of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation or default in any material respect of any provision of
any material mortgage, indenture, agreement, instrument, or contract to which
the Purchaser or his Affiliates are a party.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that:
5.1 VALID ISSUANCE OF SHARES.
The Shares and the Option Shares being purchased by the Purchaser
hereunder, when issued, sold, and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
5.2 ORGANIZATION; GOOD STANDING; QUALIFICATION.
The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and to execute and deliver this
Agreement. The Company is duly qualified, is authorized to transact business and
is in good standing as a foreign corporation in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business,
properties, prospects, or financial condition.
5.3 AUTHORIZATION; NO CONFLICT.
All corporate action on the part of the Company necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Company hereunder has been taken or will be taken prior
to the Closing. The execution, delivery, and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation or default in any material respect of any provision of
its organizational documents or in any material respect of any
9
13
provision of any material mortgage, indenture, agreement, instrument, or
contract to which it is a party.
5.4 GOVERNMENTAL CONSENTS.
No consent, approval, qualification, order or authorization of,
or filing with, any (a) state or federal governmental authority or (b) stock
exchange or market system is required on the part of the Company in connection
with the Company's valid execution, delivery, or performance of this Agreement,
the offer, sale or issuance of the Securities by the Company, except certain
post-Closing filings which the Company agrees to make on a timely basis.
5.5 CAPITALIZATION.
As of March 31, 1998, there were 5,741,650 shares of the Common
Stock outstanding. From such date to the Effective Date, there has not been any
issuance by the Company of a material number of shares of the Common Stock.
5.6 REGISTRATION RIGHTS.
Except for registration rights provided pursuant to the
agreements set forth on Schedule A hereto, the Company is presently not under
any obligation and has not granted any rights to register under the Securities
Act any of its presently outstanding securities or any of its securities that
may subsequently be issued.
5.7 REGISTRATION STATEMENT.
The Company has a good faith intention to file a Form S-3
registering Common Stock to be offered for resale pursuant to Rule 415 within
one hundred twenty (120) days of the Effective Date in response to a demand for
registration from the Boston Group, L.P. pursuant to that certain
Representative's Warrant Agreement by and between the Company and the Boston
Group, L.P., dated as of September 17, 1996, as amended.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under this Agreement are subject
to the fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective unless the Company consents in
writing thereto.
6.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchaser contained in
Section 4 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
7. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING
The obligations of Purchaser under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective unless the Purchaser consents in
writing thereto.
10
14
7.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
Section 5 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
8. REGISTRATION RIGHTS
8.1 COMPANY REGISTRATION.
(a) If the Company shall determine to register any of its
Common Stock either for its own account or the account of Holders or Other
Stockholders exercising their respective demand registration rights (other than
pursuant to Section 8.2 hereof), other than a registration relating solely to
employee benefit plans, or a registration relating to a corporate reorganization
or other transaction under Rule 145, or a registration on any registration form
that does not permit secondary sales (a "COMPANY REGISTRATION"), the Company
will:
(i) promptly give to each Holder written notice thereof;
and
(ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Sections 8.1(b) and (c) below, and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder and received by the Company within ten (10) days
after the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify all or a
part of such Registrable Securities.
(b) If the registration of which the Company gives notice is
for an offering involving an underwriting, the Company shall so advise the
Holders as a part of the written notice given pursuant to this Section 8.1. In
such event, the right of any Holder to registration pursuant to this Section 8.1
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company which agreement shall
include, without limitation, customary indemnities reasonably requested by the
underwriter.
Notwithstanding any other provision of this Section 8.1, the
offer and sale of securities in a Company Registration may be effected through
an offering not involving an underwriting, which shall be determined in the
Company's sole discretion.
(c) Notwithstanding any other provision of this Section 8.1,
if the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so
11
15
advise all Holders and Other Stockholders requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
8.9. If any person does not agree to the terms of any such underwriting, such
person shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(d) If shares are withdrawn from the registration or if the
number of shares of securities to be included in a registration was previously
reduced as a result of marketing factors and as a result the registration can
accommodate additional securities, the Company shall then offer to all persons
who have retained the right to include securities in the registration the right
to include additional securities in the registration in an aggregate amount
equal to the additional number of shares the registration can accommodate, with
such shares to be allocated among the persons requesting additional inclusion in
accordance with Section 8.9 hereof.
(e) Any Company registration and related offering shall be
managed by the Company; the Company shall have the power to select the managing
underwriter(s), if any, for such offering, and shall, in consultation with the
managing underwriter(s), where applicable, have the power to determine the
offering price, the underwriting discounts and commissions, the terms of the
underwriting agreement, the timing of the registration and related offering,
counsel to the Company, and all other administrative matters related to the
registration and related offering. To the extent that the Holders participate in
an underwritten Company registration and related offering pursuant to this
Section 8.1, the Holders shall enter into, and sell their Registrable Securities
only pursuant to, the underwriting arranged by the Company, and shall either
commit to attend the closing of the offering and take such other actions as may
be reasonably necessary to effect the Holder's participation in the offering and
to provide any assurances reasonably requested by the Company and the managing
underwriter(s) in that regard, or shall deliver to the Company in custody
certificates representing all Registrable Securities to be included in the
registration and shall execute and deliver to the Company a custody agreement
and a power of attorney, each in form and substance appropriate for the purpose
of effecting the Holder's participation in the Company registration and related
offering and otherwise reasonably satisfactory to the Company.
8.2 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. The Company shall use its best
efforts to qualify and remain qualified for registration of the Registrable
Securities on a Form S-3 (or similar short-form registration statement). If the
Company shall receive from Initiating Holders at any time or times not earlier
than six (6) months after the Effective Date, a written request that the Company
effect any registration, including, if so requested by the Initiating Holders, a
registration under Rule 415, with respect to all, or a part of the Registrable
Securities having aggregate proceeds of which (after deduction for underwriter's
discounts and expenses related to the issuance) could reasonably be expected to
exceed $500,000 (a "DEMAND REGISTRATION"), the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
12
16
(ii) as soon as practicable, use its best efforts to
effect such registration including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws, and appropriate compliance with the Securities Act, as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request who, within ten (10) days after receipt of written notice from the
Company of such request, deliver to the Company a request to include some or all
of his, her or its Registrable Securities in the registration, stating the
number of Registrable Securities proposed to be included (such Holders,
collectively with the Initiating Holders, the "REGISTERING HOLDERS".)
Each Holder desiring to participate in such registration shall
deliver to the Company, within the time specified by the Company, such other
information as may reasonably be requested by the Company.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 8.2:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has initiated one such
registration pursuant to this Section 8.2 (counting for this purpose (i)
registrations which have been declared or ordered effective and pursuant to
which securities have been sold and (ii) registrations which have been withdrawn
by the Holders as to which the Holders have not elected to bear the Registration
Expenses pursuant to Section 8.3 hereof);
(C) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
Subject to the foregoing clauses (A) through (C), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders; provided, however, that if (i) in the good faith
judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing (except as provided in clause (C) above) for a period of not more than
one hundred eighty (180) days after receipt of the request of the Initiating
13
17
Holders, and, provided further, that the Company shall not defer its obligation
in this manner more than once in any twelve-month period.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Sections 8.2 and 8.9
hereof, include other securities of the Company, with respect to which
registration rights have been granted, and may include securities of the Company
being sold for the account of the Company.
Notwithstanding anything to the contrary herein, the offer and sale of
Registrable Securities included in a Demand Registration shall not be effected
through an underwritten public offering without the Company's written consent,
which may be withheld by the Company in its sole discretion. For purposes
hereof, offers and sales to a reasonably limited number of selected buyers will
not be deemed to be an underwritten public offering, notwithstanding any
participation by brokers, investment bankers, or other intermediaries.
(b) UNDERWRITING. If the Registering Holders determine that the
Registrable Securities to be registered should be sold through an underwriting
and the Company has consented to such an underwriting of the offering covered by
the requested Demand Registration, the right of any Holder to registration
pursuant to this Section 8.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Registering Holders and such Holder with respect
to such participation and inclusion) to the extent provided herein. A Holder may
elect to include in such underwriting all or a part of the Registrable
Securities such Holder holds.
(c) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to this Section 8.2 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 8.2, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in any underwriting and may condition such
offer on their acceptance of the further applicable provisions of this Section
8. The Company shall (together with all Holders and other persons proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Registering Holders, which underwriters are reasonably
acceptable to the Company. Such agreement shall include, without limitation,
customary indemnities reasonably requested by the underwriter. Notwithstanding
any other provision of this Section 8.2, if the representative of the
underwriters advises the Registering Holders in writing that marketing factors
require a limitation on the number of shares to be underwritten, the number of
shares to be included in the underwriting or registration shall be allocated as
set forth in Section 8.9 hereof. If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by written notice from the
Company, the underwriter or the Registering Holders. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall also be
withdrawn from such registration. If shares are so withdrawn from the
registration or if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
8.2(c) and as a result the registration can accommodate additional Registrable
Securities,
14
18
then the Company shall offer to all holders who have retained rights to include
securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the additional number of shares the
registration can accommodate, with such shares to be allocated among such
holders requesting additional inclusion in accordance with Section 8.9.
8.3 EXPENSES OF REGISTRATION.
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Sections 8.1 or 8.2 hereof shall be
borne by the Company; provided, however, that if the Holders bear the
Registration Expenses for any registration proceeding begun pursuant to Section
8.2 and subsequently withdrawn by the Holders registering shares therein, such
registration proceeding shall not be counted as a requested registration
pursuant to Section 8.2 hereof. All Selling Expenses relating to securities so
registered shall be borne by the holders of such securities pro rata on the
basis of the number of shares of securities so registered on their behalf, as
shall any other expenses in connection with the registration required to be
borne by the Holders of such securities.
8.4 COMPANY OBLIGATIONS.
In the case of each registration effected by the Company pursuant to
this Section 8, the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will use its best efforts to:
(a) Keep such registration effective for either, as applicable
(i) a period of one hundred twenty (120) days or until the Registering Holder or
Registering Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; provided,
however, that such 120-day period shall be extended for a period of time equal
to the period the Registering Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company or, (ii) if the registration is effected
pursuant to Rule 415, for the longest period permitted by such rule or until the
Holders listed in the registration statement no longer hold the Registrable
Securities described in the registration statement, whichever first occurs;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(d) Notify the Holders covered by such registration statement
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
15
19
misleading or incomplete in the light of the circumstances then existing, and at
the request of any such Holder, prepare and furnish to such Holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of the Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on the primary securities exchange on which the Common
Stock is then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and
(g) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first fiscal quarter after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
8.5 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers, directors, partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission (i) based upon written information furnished to
the Company by such Holder or underwriter and stated to be specifically for use
therein, or (ii) made in any preliminary prospectus, which did not appear in the
final prospectus, if the party seeking indemnification delivered a copy of the
16
20
preliminary prospectus to the person alleging such claim, loss, damage,
liability, or action and failed to deliver a copy of the final prospectus as
amended or supplemented, if applicable, to such person at or prior to the
written confirmation of the sale to such person. The indemnity agreement
contained in this Section 8.5(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, (or actions in respect thereof) if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the Company, each of
its directors, officers, partners, legal counsel, and accountants and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder and Other
Stockholder, and each of their officers, directors, partners, legal counsel, and
accountants , and each person controlling such Holder or Other Stockholder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular, or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such Holders, Other Stockholders, directors, officers, partners,
legal counsel, and accountants, persons, underwriters, or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein. The
Holders shall not have any liability under this Section 8.5 if the untrue
statement (or allegedly untrue statement) or omission (or alleged omission) was
made in any preliminary prospectus, and which did not appear in the final
prospectus, if the party seeking indemnification delivered a copy of the
preliminary prospectus to the person alleging such claim, loss, damage,
liability (or actions in respect thereof) and failed to deliver a copy of the
final prospectus, as amended or supplemented, as applicable, to such person at
or prior to the written confirmation of the sale to such person. The obligations
of such Holder hereunder shall not apply to amounts paid in settlement of any
such claims, losses, damages, or liabilities (or actions in respect thereof) if
such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section
8.5 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's sole expense, and provided further that the failure of
any Indemnified Party to give notice as provided herein
17
21
shall not relieve the Indemnifying Party of its obligations under this Section
8, to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 8.5 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with an underwritten offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The indemnification provided by this Section 8.5 shall be
a continuing right to indemnification and shall survive the registration and
sale of any securities by any person entitled to indemnification hereunder and
the expiration or termination of this Agreement.
8.6 INFORMATION BY HOLDER.
Each Holder of Registrable Securities shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification, or compliance
referred to in this Section 8.
8.7 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to cause the Company to register Registrable Securities
granted to a Holder by the Company under this Section 8 may be transferred or
assigned by a Holder only to a transferee or assignee of not less than 50,000
shares of Registrable Securities (as presently constituted and subject to
subsequent adjustments for stock splits, stock dividends, reverse stock splits,
or similar events), provided that the Company is given written notice at the
time of or within a reasonable time after such transfer or assignment, stating
the name and address of the transferee or assignee
18
22
and identifying the securities with respect to which such registration rights
are being transferred or assigned, and, provided further, that the transferee or
assignee of such rights assumes in writing the obligations of such Holder under
this Section 8. A Holder shall retain all rights to cause the Company to
register Registrable Securities granted to the Holder by the Company pursuant to
this Section 8 with respect to all Registrable Securities retained by such
Holder.
8.8 "MARKET STAND-OFF" AGREEMENT.
If requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, a Holder shall not sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration) during the one hundred
eighty (180) day period following the effective date of a registration statement
of the Company filed under the Securities Act, provided that all officers and
directors of the Company and holders of at least one percent 1% of the Company's
voting securities are bound by and have entered into similar agreements.
8.9 ALLOCATION OF REGISTRATION OPPORTUNITIES.
In any circumstance of which all of the Registrable Securities and other
shares of Common Stock of the Company with registration rights (the "OTHER
SHARES") requested to be included in a registration on behalf of the Holders or
other selling stockholders (collectively "PARTICIPATING HOLDERS") cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, subject to the
rights of other selling shareholders under the Registration Rights Agreements
listed in Schedule A, the number of shares of Registrable Securities and Other
Shares that may be so included shall be allocated among the Participating
Holders pro rata based upon the ratio of the number of shares of Registrable
Securities or Other Shares held by such Participating Holder and the total
number of Registrable Securities and Other Shares then outstanding and owned by
all the Participating Holders; provided, however, that such allocation shall not
operate to reduce the aggregate number of Registrable Securities and Other
Shares to be included in such registration, and if any Participating Holder does
not request inclusion of the maximum number of shares of Registrable Securities
and Other Shares allocated to such Participating Holder pursuant to the
above-described procedure, the remaining portion of such Participating Holder's
allocation shall be reallocated among those Participating Holders whose
allocations did not satisfy their requests, up to that number that can be
accommodated pro rata based upon the ratio of the number of Registrable
Securities or Other Shares already included of a Participating Holder and the
total number of Registrable Securities and Other Shares already included of
Participating Holders desiring to participate in the additional allocation and
this procedure shall be repeated until all of the shares of Registrable
Securities and Other Shares which may be included in the registration on behalf
of the Participating Holders have been so allocated.
8.10 DELAY OF REGISTRATION.
No Holder shall have any right to take any action to restrain, enjoin,
or otherwise delay any registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Section 8.
19
23
8.11 TERMINATION OF REGISTRATION RIGHTS.
A Holder shall not have the right to request registration or inclusion
in any registration pursuant to Section 8.1 or 8.2 at any time when all shares
of Registrable Securities of such Holder may immediately be sold under Rule 144
during the 90 days succeeding the date of a request, and a Holder shall have the
right to request registration or inclusion in any registration pursuant to
Section 8.1 or 8.2 at any time, not earlier than six months after the Effective
Date, when all shares of Registrable Securities of such Holder may not
immediately be sold under Rule 144 during the 90 days immediately succeeding the
date of such request.
9. MARKET TRADING
No Holder, or any affiliate of a Holder, for any period in which such
Holder retains the right to purchase any Option Shares from the Company pursuant
to this Agreement, shall not directly or indirectly participate in any
short-sale or similar disposition with respect to the Common Stock or derivative
product of the Common Stock.
10. MISCELLANEOUS
10.1 ENTIRE AGREEMENT.
This Agreement and the documents referred to herein constitute
the entire agreement among the parties with respect to the subject matter hereof
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
10.2 SURVIVAL OF WARRANTIES.
The representations and warranties of the Purchaser and the
Company contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
10.3 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
10.4 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.5 TITLES AND SUBTITLES.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
20
24
10.6 SEVERABILITY.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
10.7 EXPENSES.
Each of the parties shall pay its own expenses incurred in
connection with the negotiation and preparation of this Agreement, the
performance of the covenants herein, including without limitation, all fees and
disbursements of its respective legal counsel, advisors and accountants.
10.8 ATTORNEYS' FEES.
If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and disbursements in addition to any other
relief to which such party may be entitled.
10.9 AMENDMENT AND WAIVERS.
Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated, except by a written instrument signed by the
Company and the Holders of greater than fifty percent (50%) of the Registrable
Securities and any such amendment, waiver, discharge or termination shall be
binding on all the Holders, but in no event shall the obligation of any Holder
hereunder be materially increased, except upon the written consent of such
Holder.
10.10 SUCCESSORS AND ASSIGNS.
Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including permitted transferees of any
Registrable Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
10.11 NOTICES.
Unless otherwise provided, all notices and other communications
required or permitted under this Agreement shall be in writing and shall be
mailed by United States registered or certified mail, postage prepaid, return
receipt requested, sent by facsimile or delivered personally by hand or by a
nationally recognized courier addressed to the party to be notified at the
address or facsimile number set forth below for such person, or at such other
address or facsimile number as such party may designate in accordance with this
paragraph. All such notices and other written communications shall be effective
upon actual receipt.
21
25
To the Company: ▇▇▇▇▇▇▇▇ Coffee, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Jamboree Center, ▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
22
26
To the Purchaser: Franchise Mortgage Acceptance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
with a copy to: Orloff, Lowenbach, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
10.12 CALIFORNIA CORPORATE SECURITIES LAW.
THE SALE OF THE SECURITIES HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
IN WITNESS WHEREOF, this Agreement has been executed in counterparts,
each of which shall be deemed an original, by each of the parties on the
Effective Date.
▇▇▇▇▇▇▇▇ COFFEE, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
President
23
27
SCHEDULE A
REGISTRATION RIGHTS AGREEMENTS
1. Representative's Warrant Agreement by and between the Company and the
Boston Group, L.P., dated as of September 17, 1996, as amended. (A
copy of which is attached as Exhibit 1).
2. Warrant granted to Nuvrty, Inc., a Colorado corporation, dated
September 30, 1997. (A copy of which is attached as Exhibit 2).
3. Warrant granted to Ocean Trust, a trust organized under the laws of
the State of California, dated October 16, 1997. (The form of which
is substantially similar to that set forth in Exhibit 2).
4. Warrant granted to Grandview Trust, a trust organized under the laws
of the State of California dated October 16, 1997. (The form of which
is substantially similar to that set forth in Exhibit 2).
5. Warrant granted to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust, a California dated
August 29, 1997. (The form of which is substantially similar to that
set forth in Exhibit 2).
28
EXHIBIT 1
REPRESENTATIVE'S WARRANT AGREEMENT
BY AND BETWEEN
THE COMPANY AND THE BOSTON GROUP, L.P.,
DATED AS OF SEPTEMBER 17, 1996
29
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ COFFEE, INC.
AND
THE BOSTON GROUP, L.P.
--------------------
REPRESENTATIVE'S WARRANT AGREEMENT
DATED AS OF SEPTEMBER 17, 1996
--------------------
--------------------------------------------------------------------------------
30
REPRESENTATIVE'S WARRANT AGREEMENT
THIS REPRESENTATIVE'S WARRANT AGREEMENT (the "Agreement"), dated as of
September 17, 1996, is made and entered into by and between ▇▇▇▇▇▇▇▇ COFFEE,
INC., a Delaware corporation (the "Company"), and THE BOSTON GROUP, L.P. (the
"Representative").
The Company agrees to issue and sell to the Representative and the
Representative agrees to purchase from the Company, for the price of $50, a
warrant, as hereinafter described (the "Warrant" and together with any warrants
subsequently issued hereunder, the "Warrants"), to purchase up to 160,000
shares, as may be adjusted from time to time as set forth herein, of the
Company's common stock, $0.01 par value (the "Common Stock"), in connection with
a public offering (the "Offering") by the Company and certain stockholders of
the Company of 2,200,000 shares of Common Stock (plus 330,000 shares subject to
an over-allotment option of the Underwriters named therein) pursuant to an
underwriting agreement (the "Underwriting Agreement"), dated as of September 11,
1996, by and among the Company, certain stockholders of the Company and the
Representative, as one of the representatives of the several Underwriters named
therein. The shares of Common Stock purchasable upon exercise of the Warrants,
as may be adjusted from time to time as set forth herein, are hereinafter
referred to as the "Warrant Stock." The Warrant shall be issued pursuant to this
Agreement on the closing date of the Offering (the "Closing Date").
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants, the Warrant Stock and the respective
rights and obligations thereunder, the Company and the Representative, for value
received, hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS.
1.1 Registration. All Warrants shall be numbered and shall be
registered on the books of the Company when issued.
1.2 Transfer. The Warrants shall be transferable only on the
books of the Company maintained at its principal office, wherever its principal
office may then be located, upon delivery thereof duly endorsed by a Warrant
holder (a "Warrantholder") or by its duly authorized attorney or representative
and with the signatures properly guaranteed, accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new certificate evidencing
each such Warrant to each person entitled thereto.
1.3 Limitations on Transfer of the Warrants. Warrants shall not
be sold, transferred, assigned or hypothecated by the Representative, except
that Warrants may be transferred (i) to one or more officers or partners of the
Representative, and after 9:00 a.m. Pacific time on September 11, 1997 to
employees of the Representative; (ii) to a purchaser of all or substantially all
of the assets of a Warrantholder; or (iii) by will, pursuant to the laws of
descent or distribution or by operation of law. The Warrants may be divided or
combined, upon
31
request to the Company by a Warrantholder, into a certificate or certificates
representing the right to purchase the same aggregate number of Warrant Stock.
Unless the context indicates otherwise, the term "Warrantholder" shall include
the Representative and any transferee or transferees of the Warrants pursuant to
this subsection 1.3 and as otherwise permitted by this Agreement, and the term
"Warrants" shall include any and all Warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange, substitution or transfer pursuant to this Agreement.
1.4 Form of Warrants. The text of the Warrants and of the form of
election to purchase Warrant Stock shall be substantially as set forth in
Exhibit A attached hereto. The aggregate number of shares of Common Stock
issuable upon exercise of the Warrants is subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by its Chief Executive Officer or its
President and attested to by its Secretary. A Warrant bearing the signature of
an individual who was at any time the proper officer of the Company shall bind
the Company, notwithstanding that such individual shall have ceased to hold such
office prior to the delivery of such Warrant or did not bold such office on the
date of this Agreement or at any time thereafter.
The Warrants shall be dated as of the date of signature thereof
by the Company either upon initial issuance or upon division, exchange,
substitution or transfer.
1.5 Legend on Warrants and Warrant Stock. Each certificate
evidencing a Warrant (or Warrant Stock issued upon exercise of a Warrant)
initially issued upon exercise of a Warrant shall bear the following legend,
unless, at the time of exercise, such Warrant Stock is subject to a currently
effective Registration Statement under the Securities Act of 1933, as amended
(the "Act"):
"'THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN
COMPLIANCE WITH SECTION 11 OF THE REPRESENTATIVE'S WARRANT
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to an effective registration statement under
the Act of the securities represented thereby) shall also bear the above legend
unless, in the opinion of the Company's counsel, the securities represented
thereby need no longer be subject to such restrictions.
SECTION 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the Warrantholder
to purchase a like aggregate number of shares of Warrant Stock as the
certificate or certificates surrendered then entitled such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the
-2-
32
Company shall execute and deliver to the person entitled thereto a new Warrant
certificate or certificates as so requested.
SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
(a) Subject to the terms of this Agreement, the Warrantholder
shall have the right, at any time during the period commencing at 6:30 a.m.,
Pacific Time, on September 11, 1997 (the "Commencement Date") and ending at 5:00
p.m., Pacific Time, on September 10, 1999 (the "Termination Date"), to purchase
from the Company up to the number of fully paid and nonassessable shares of
Warrant Stock to which the Warrantholder may at the time be entitled to purchase
pursuant to this Agreement, upon surrender to the Company, at its principal
office, of the certificate evidencing the Warrants to be exercised, together
with the purchase form on the reverse thereof duly completed and executed, and
upon payment to the Company of the Warrant Price (as defined in and determined
in accordance with the provisions of this Section 3 and Sections 7 and 8 hereof)
for the number of shares of Warrant Stock in respect of which such Warrants are
then exercised, but in no event for less than 100 shares of Warrant Stock
(unless less than an aggregate of 100 shares of Warrant Stock are then
purchasable under all outstanding Warrants held by such Warrantholder). This
Warrant, when exercisable, may be exercised from time to time in whole or in
part.
(b) Payment of the Warrant Price shall be made in cash, by
certified or official bank check in Los Angeles Clearing House funds (next day
funds), or any combination thereof.
(c) In addition to the method of payment set forth in Section
3(b) above and in lieu of any cash payment required thereunder, unless otherwise
prohibited by law, the Warrantholders shall have the right at any time, when
exercisable, and from time to time to exercise the Warrants in full or in part
(i) by receiving from the Company the number of shares of Warrant Stock equal to
the number of shares of Warrant Stock otherwise issuable upon such exercise less
the number of shares of Warrant Stock having an aggregate value on the date of
exercise equal to the Warrant Price multiplied by the number of shares of
Warrant Stock for which this Warrant is being exercised and/or (ii) by
delivering to the Company the number of shares of Common Stock having an
aggregate value on the date of exercise equal to the Warrant Price multiplied by
the number of shares of Warrant Stock for which this Warrant is being exercised.
For purposes hereof, the "value" of a share of Common Stock on a given date
shall be equal to the Current Market Price on such date as defined in Section 9
of this Agreement.
(d) Upon surrender of the Warrants and payment of the Warrant
Price as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Warrantholder, and in
such name or names as the Warrantholder may designate, a certificate or
certificates for the number of full shares of Warrant Stock so purchased upon
such exercise of the Warrant, together with cash, as provided in Section 9
hereof, in respect of any fractional shares otherwise issuable upon such
surrender. Such certificate or certificates, to the extent permitted by law,
shall be deemed to have been issued and any person so designated to be named
therein shall be defined to have become a holder of record of such securities as
of the date of surrender of the Warrants and payment of the Warrant Price, as
-3-
33
aforesaid, notwithstanding that the certificate or certificates representing
such securities shall not actually have been delivered or that the stock
transfer books of the Company shall then be closed. The Warrants shall be
exercisable, at the election of the Warrantholder, either in full or from time
to time in part and, in the event that a Warrant is exercised in respect of less
than all of the shares of Warrant Stock specified therein at any time prior to
the Termination Date, a new Warrant evidencing the remaining shares of the
Warrant Stock purchasable by such Warrantholders hereunder shall be issued by
the Company to such Warrantholders.
SECTION 4. VALIDITY; PAYMENT OF TAXES. All securities delivered upon
exercise of a Warrant shall be duly and validly issued and non-assessable. The
Company shall pay all documentary stamp taxes, if any, attributable to the
initial issuance of the Warrants and the shares of Warrant Stock issuable upon
the exercise of the Warrants; provided, however, the Company shall not be
required to pay any tax which may be payable in respect of any secondary
transfer of the Warrants or the Warrant Stock.
SECTION 5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and substitution for the certificate
or certificates lost, stolen or destroyed, a new Warrant certificate or
certificates of like tenor and representing an equivalent right or interest, but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant and a reasonable indemnification
undertaking.
SECTION 6. RESERVATION OF SHARES; NO CONTRARY ACTION. The Company
represents and warrants to the Warrantholder that there has been reserved, and
the Company shall at all times keep reserved so long as and to the extent the
Warrants remain outstanding, out of its authorized Common Stock, such number of
shares of Common Stock as shall be or remain subject to purchase under the
outstanding Warrants. Every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Warrants shall be
irrevocably authorized and directed at all times to reserve such number of
authorized shares and other securities as shall be requisite for such purpose.
The Company shall keep a copy of this Agreement on file with every transfer
agent for the Common Stock and other securities of the Company issuable upon the
exercise of the Warrants. The Company shall supply every such transfer agent
with duly executed stock and other certificates, as appropriate, for such
purpose and shall provide or otherwise make available any cash which may be
payable in lieu of the issuance of fractional shares, as provided in Section 9
hereof.
SECTION 7. WARRANT PRICE. The price per share at which shares of
Warrantt Stock shall be purchasable upon the exercise of the Warrants shall be $
13.80, subject to adjustment pursuant to Section 8 hereof (as so adjusted from
time to time, the "Warrant Price").
SECTION 8. ADJUSTMENTS OF NUMBER OF SHARES OF WARRANT STOCK AND WARRANT
PRICE. The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:
-4-
34
8.1 Adjustments. The number of shares of Warrant Stock
purchasable upon the exercise of each Warrant and the Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend or make a
distribution on its Common Stock in shares of its capital stock or other
securities, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding Common Stock into a smaller
number of shares or (iv) issue, by reclassification of its Common Stock, shares
of its capital stock or 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 of Warrant Stock
purchasable upon exercise of a Warrant immediately prior thereto shall be
adjusted so that the Warrantholder shall be entitled to receive the kind and
number of shares of Warrant Stock, shares of its capital stock and other
securities of the Company which such holder would have owned or would have been
entitled to receive immediately after the happening of any of the events
described above, had the Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. Any adjustment
made pursuant to this subsection 8.1(a) shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event.
(b) In case the Company shall issue rights, options (other
than options issued under, and pursuant to, the Company's Stock Incentive Option
Plan (the "Incentive Plan") or the Company's 1996 Non-Employee Directors Stock
Option Plan (the "Non-Employee Directors Plan" and together with the Incentive
Plan, the "Option Plans"), both as in effect as of the date of this Agreement),
warrants or convertible securities to holders of its Common Stock, without any
charge to such holders, containing the right to subscribe for or purchase Common
Stock, the number of shares of Warrant Stock thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying the number of shares
of Warrant Stock theretofore purchasable upon exercise of a Warrant by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible securities 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 immediately prior to the issuance
of such rights, options, warrants or convertible securities. Such adjustment
shall be made whenever such rights, options, warrants or convertible securities
are issued, and shall become effective immediately upon issuance of such rights,
options, warrants or convertible securities.
(c) In case the Company shall distribute to holders of its
Common Stock evidences of its indebtedness or assets (excluding cash dividends
or distributions out of current earnings made in the ordinary course of business
consistent with past practices), then in each case the number of shares of
Warrant Stock thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of shares of Warrant Stock theretofore
purchasable upon exercise of such Warrant by a fraction, of which the numerator
shall be the then Current Market Price (as defined below) on the date of such
distribution, and of which the denominator shall be such Current Market Price on
such date minus the then fair value (determined as provided in subsection 8(f)
below) of the portion of the assets or evidences of indebtedness so distributed
applicable to one share of Common Stock. Such adjustment shall be
-5-
35
made whenever any such distribution is made and shall become effective on the
date of distribution.
(d) No adjustment in the number of shares of Warrant Stock
purchasable pursuant to subsections 8.1(b) or (c) hereof shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the number of shares of Warrant Stock then purchasable upon the
exercise of the Warrants or, if the Warrants are not then exercisable, the
number of shares of Warrant Stock purchasable upon the exercise of the Warrants
on the first date thereafter that the Warrants would become exercisable;
provided, however, that any adjustments which by reason of this subsection
8.1(d) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(e) Whenever the number of shares of Warrant Stock
purchasable upon the exercise of a Warrant is adjusted as herein provided, the
Warrant Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of shares of Warrant Stock
purchasable upon the exercise of such Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of shares of
Warrant Stock purchasable immediately thereafter.
(f) To the extent not covered by subsections 8.1(b) or (c)
hereof, in case the Company shall sell or issue Common Stock or rights, options
(other than Common Stock or options issued under and pursuant to the Option
Plans), warrants or convertible securities containing the right to subscribe
for, purchase or exchange into shares of Common Stock at a price per share
(determined, in the case of such rights, options, warrants or convertible
securities, by dividing (i) the total amount received or receivable by the
Company in consideration of the sale or issuance of such rights, options,
warrants or convertible securities, plus the total consideration payable to the
Company upon exercise, conversion or exchange thereof, by (ii) the total number
of shares of Common Stock covered by such rights, options, warrants or
convertible securities) lower than the greater of the then Current Market Price
or the Warrant Price in effect immediately prior to such sale or issuance, then
the Warrant Price shall be reduced to a price (calculated to the nearest cent)
determined by dividing (I) an amount equal to the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such sale or issuance
multiplied by the then existing Warrant Price, plus (B) the consideration
received or receivable by the Company upon such sale or issuance, by (II) the
total number of shares of Common Stock outstanding immediately after such sale
or issuance. The number of shares of Warrant Stock purchasable upon the exercise
of a Warrant shall thereafter be that number determined by multiplying the
number of shares of Warrant Stock purchasable upon exercise immediately prior to
such adjustment by a fraction, of which the numerator shall be the Warrant Price
in effect immediately prior to such adjustment and the denominator shall be the
Warrant Price as so adjusted. For the purposes of such adjustments, the Common
Stock which the holders of any such rights, options, warrants or convertible
securities shall be entitled to subscribe for, purchase or exchange into shall
be deemed issued and outstanding as of the date of such sale or issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants or
convertible securities, plus the consideration or premiums stated in such
rights, options, warrants or
-6-
36
convertible securities to be payable for the Common Stock covered thereby. In
case the Company shall sell or issue Common Stock or rights, options, warrants
or convertible securities containing the right to subscribe for, purchase or
exchange into Common Stock for a consideration consisting, in whole or in part,
of property other than cash or its equivalent, then, in determining the "price
per share" of Common Stock and the "consideration received by the Company" for
purposes of the first sentence of this subsection 8.1(f), the Board of Directors
shall determine the fair value of said property, and such determination, if
based upon the Board of Directors' good faith business judgment, shall be
binding upon the Warrantholders. In determining the "price per share" of Common
Stock, any underwriting discounts or commissions paid to brokers, dealers or
other selling agents shall not be deducted from the price received by the
Company for sales of securities registered under the Act or issued in a private
placement. There shall be no adjustment of the Warrant Price pursuant to this
subsection 8.1(f) if the amount of such adjustment would be less than $.05 per
share of Common Stock; provided, however, that any adjustment which by reason of
this provision is not required to be made immediately shall be carried forward
and taken into account in any subsequent adjustment.
(g) For the purpose of this Section 8, the term "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 reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 8, a Warrantholder shall become
entitled to purchase any securities of the Company other than Common Stock, (i)
if the Warrantholder's right to purchase is on any other basis than that
available to all holders of the Company's Common Stock, the Company shall obtain
an opinion of a reputable investment banking firm valuing such other securities
and (ii) thereafter the number of such other securities so purchasable upon
exercise of a Warrant and the Warrant Price of such securities 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 Common Stock contained in this
Section 8.
(h) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the number of
shares of Warrant Stock purchasable upon exercise of a Warrant and the Warrant
Price, to the extent a Warrant has not then been exercised, shall, upon such
expiration, be readjusted and shall thereafter be such number and such price as
they would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) on the basis of (A) the fact
that the only shares of Common Stock issued in respect of such rights, options,
warrants or conversion privileges were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion privileges, and (B) the fact that such shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise plus the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants or
conversion privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the numbers of shares of
Warrant Stock purchasable upon exercise of a Warrant or increasing the Warrant
Price by an amount in excess of the amount of the adjustment made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion
privileges.
-7-
37
(i) Whenever the number of shares of Warrant Stock
purchasable upon the exercise of a Warrant or the Warrant Price is adjusted
pursuant to this Section 8, the Company shall cause to be promptly mailed to
each Warrantholder by first class mail, postage prepaid, notice of such
adjustment or adjustments and a certificate of the chief financial officer of
the Company setting forth the number of shares of Common Stock, capital stock
and other securities purchasable upon the exercise of such Warrantholder's
Warrant and the applicable Warrant Price after such adjustment, a brief
statement of the facts requiring such adjustment and the computation by which
such adjustment was made.
8.2 No Adjustment for Dividends, Incentive Plan, Non-Employee
Directors Plan. Except as specifically provided in subsection 8.1, no adjustment
in respect of any cash dividends or distributions on the Company's Common Stock
out of current earnings made in the ordinary course of business consistent with
past practices shall be made during the term of the Warrants or upon the
exercise of the Warrants. No adjustment in respect to options issued under, and
pursuant to, the Option Plans, both as in effect as of the date of this
Agreement, shall be made during the term of the Warrants or upon the exercise of
the Warrants.
8.3 Preservation of Purchase Rights Upon Reclassification,
Consolidation, etc. At any time following the date of this Agreement, in case of
any consolidation of the Company with or merger of the Company into another
corporation or other entity or in case of any sale, lease, conveyance or other
transfer to another corporation, person or other entity of the property, assets
or business of the Company as an entirety or substantially as an entirety, the
Company or such successor or purchasing corporation, person or other entity, as
the case may be, shall execute with the Warrantholder, and the agreements
governing such consolidation, merger, sale, lease, conveyance or other transfer
shall require such execution of, an agreement that the Warrantholder shall have
the right thereafter upon payment of the Warrant Price in effect immediately
prior to such event, upon exercise of the Warrants, to receive the kind and
amount of shares and other securities and property which it would have owned or
have been entitled to receive after the happening of such consolidation, merger,
sale, lease, conveyance or other transfer had the Warrants (and each underlying
security) been exercised immediately prior to such action. The Company shall
promptly mail to each Warrantholder by first class mail, postage prepaid, notice
of the execution of any such agreement. In the event of a merger described in
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which the Company
is the surviving corporation, the right to purchase shares of Warrant Stock
under the Warrants shall terminate on the date of such merger and thereupon the
Warrants shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrants its warrant which entitles the holder
thereof to purchase upon its exercise the kind and amount of shares and other
securities and property which it would have owned or been entitled to receive
had the Warrants been exercised immediately prior to such merger. Any such
agreements referred to in this subsection 8.3 shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 8 hereof, and shall provide for terms and provisions at
least as favorable to the Warrantholder as those contained in this Agreement.
The provisions of this subsection 8.3 shall similarly apply to successive
consolidations, mergers, sales, leases, conveyances or other transfers.
8.4 Par Value of Shares of Common Stock. Before taking any action
which
-8-
38
would cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each share of Warrant Stock below the then par value per share, if
any, of the Warrant Stock issuable upon exercise of the Warrants, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Stock upon exercise of the Warrants.
8.5 Independent Public Accountants. The Company may retain BDO
▇▇▇▇▇▇▇, LLP (or such other accounting firm qualified to practice in front of
the Securities and Exchange Commission (the "Commission") as is reasonably
acceptable to the Representative) to make any computation required under this
Section 8, and a certificate signed by such firm shall be conclusive evidence of
the correctness of any computation made under this Section 8.
8.6 Statement on Warrant Certificates. Irrespective of any
adjustments in the number of securities issuable upon exercise of Warrants,
Warrant certificates theretofore or thereafter issued may continue to express
the same number of securities as are stated in the similar Warrant certificates
initially issuable pursuant to this Agreement, provided that such expression
shall in no way affect the number of shares of Warrant Stock actually
purchasable upon the exercise of such Warrants.
SECTION 9. FRACTIONAL SHARES; CURRENT MARKET PRICE. The Company shall
not be required to issue fractional shares of Common Stock on the exercise of a
Warrant. If any fraction of a share of Common Stock would, except for the
provisions of this Section 9, be issuable upon the exercise of a Warrant (or
specified portion thereof), the Company shall in lieu thereof pay an amount in
cash equal to the then Current Market Price multiplied by such fraction. For
purposes of this Agreement, the term "Current Market Price" shall mean (i) if
the Common Stock is traded on the Nasdaq National Market ("NNM") or on a
national securities exchange, the per share closing price of the Common Stock in
the NNM or on the principal stock exchange on which it is listed, as the case
may be, on the date of exercise of the Warrant or, with respect to any
adjustment pursuant to Section 8.1 hereof, on the date immediately preceding the
announcement of the event causing such adjustment or (ii) if the Common Stock is
traded in the over-the-counter market and not in the NNM or on any national
securities exchange, the average of the per share closing bid prices of the
Common Stock on the thirty (30) consecutive trading days immediately preceding
the date in question, as reported by The Nasdaq Small Cap Market (or an
equivalent generally accepted reporting service if quotations are not reported
on The Nasdaq Small Cap Market). The closing price referred to in clause (i)
above shall be the last reported sale price or, in the case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NNM or on the principal stock exchange on which
the Common Stock is then listed. For purposes of clause (ii) above, if trading
in the Common Stock is not reported by The Nasdaq Small Cap Market, the bid
price referred to in said clause shall be the lowest bid price as reported in
the Nasdaq Electronic Bulletin Board or, if not reported thereon, as reported in
the "pink sheets" published by National Quotation Bureau, Incorporated, and, if
such Common Stock is not so reported, shall be the price of a share of Common
Stock determined by the Company's Board of Directors in good faith.
SECTION 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO WARRANTHOLDER. Except
as expressly provided herein, nothing contained in this Agreement or in the
Warrants shall be
-9-
39
construed as conferring upon the Warrantholder or its transferees any rights as
a stockholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
their exercise, any one or more of the following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8 hereof;
(b) an issuance by the Company of rights, options, warrants
or convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, containing the right to subscribe for
or purchase Common Stock; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety or substantially as an entirety) shall be
proposed;
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 13 hereof, at least 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 any relevant dividend,
distribution or other rights or for the determination of stockholders entitled
to vote on such proposed dissolution, liquidation or winding up. Such notice
shall specify such record date or the date of closing of the transfer books, as
the case may be.
SECTION 11. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS; OBLIGATIONS
IN REGISTRATION.
(a) The Warrantholder agrees that prior to making any
disposition of the Warrants or the Warrant Stock, other than to persons or
entities identified in the first sentence of Section 1.3, the Warrantholder
shall give written notice to the Company describing briefly the manner in which
any such proposed disposition is to be made; and no such disposition shall be
made unless the Warrantholder has notified, or currently with such disposition
notifies, the Company that in the opinion of counsel reasonably satisfactory to
the Company a registration statement, application or other notification, filing
or post-effective amendment or supplement thereto (hereinafter collectively a
"Registration Statement") under the Act or the state securities or 'blue sky"
laws of any applicable jurisdiction is not required with respect to such
disposition and no such Registration Statement has been filed by the Company
with, and declared effective, if necessary, by, the Commission or state
securities commission or agency. The Warrantholder agrees that it shall obtain
from any transferee who acquires any Warrants in a private transaction with the
Warrantholder an agreement by such transferee that it agrees to be bound by any
transfer restrictions set forth in this subsection 11(a) then applicable to such
transferees.
(b) The Company shall be obligated to the registered holders
of the Warrants and the Warrant Stock as follows:
-10-
40
(i) During the period beginning on the Commencement Date
and ending four years following the Commencement Date, the Company will, as
promptly as practicable (but in any event within sixty (60) days), after written
request (the "Request") by a person or persons holding (or having the right to
acquire by virtue of holding the warrants) more than sixty percent (60%) of the
shares of Warrant Stock which have been (or may be) issued upon exercise of the
Warrants, prepare and file at the expense of the holder(s) making the Request a
Registration Statement with the Commission and such applications or other
filings as required under applicable state securities or blue sky laws
sufficient to permit the public offering of the Warrants and the Warrant Stock,
and shall use its reasonable best efforts (at the expense of the holder making
the Request) through its officers, directors, auditors and counsel, in all
matters necessary or advisable, to cause such Registration Statement to become
effective as promptly as practicable and to maintain such effectiveness so as to
permit resale of the securities covered by the Request until the earlier of the
time that all such Warrant Stock has been sold or the expiration of twelve (12)
months from the effective date of the Registration Statement; provided, however,
that the Company shall only be obligated to file one such Registration Statement
under this Section 11(b)(i). Notwithstanding the foregoing, once and only once
during the period the Company would have an obligation to register the Warrants
and the Warrant Stock pursuant to this Section 11(b)(i), the Company shall not
be obligated to effect a registration pursuant to this Section 11(b)(i) during
the three (3) month period starting with the date thirty (30) days prior to the
Company's estimated date of filing of an underwritten public offering of
securities for the account of the Company; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective and that the Company's estimate of the date of
filing such registration statement is made in good faith; provided further, that
the Company shall furnish to the Warrantholder and each holder of Warrant Stock
a certificate signed by the managing underwriter stating that it would be
seriously detrimental to the Company or its stockholders for the registration
statement to be filed in the near future.
(ii) In addition to any Registration Statement pursuant to
subparagraph (i) above, whenever during the period beginning on the Commencement
Date and ending four years following the commencement date, the Company proposes
to file with the Commission a Registration Statement under the Act (other than
as to securities issued pursuant to an employee benefit plan or as to a
transaction subject to Rule 145 promulgated under the Act), it shall, regardless
of whether a Request has been made pursuant to Section 11(a)(i) hereof, at least
thirty (30) days prior to each such filing, give written notice of such proposed
filing to each Warrantholder and each holder of the Warrant Stock at their
respective addresses as they appear on the records of the Company, and shall
offer to include and shall include in such filing any proposed disposition of
the Warrants and Warrant Stock upon receipt by the Company, not more than twenty
(20) days following the receipt of such notice, of a request therefor setting
forth the facts with respect to such proposed disposition and all other
information with respect to such person reasonably necessary to be included in
such Registration Statement. In the event that such registration statement
relates to an underwritten offering on a "firm commitment" basis and the
managing underwriter for said offering advises the Company in writing that the
inclusion of such securities in the offering would be materially and
substantially detrimental to the completion of the offering, such securities
shall nevertheless be included in the Registration Statement,
-11-
41
provided that the Warrantholder and each holder of Warrant Stock desiring to
have such securities included in the Registration Statement agrees in writing
for a period of ninety (90) days following such offering not to sell or
otherwise dispose of such securities pursuant to such Registration Statement,
which Registration Statement the Company shall keep effective for a period of at
least twelve (12) months following the expiration of such ninety (90) day
period. In the event that the total size of any offering contemplated by the
Company is reduced by the managing underwriter, the number of Warrants or
Warrant Stock eligible to be included in such registration or offering shall be
reduced in the same proportion and in part passu with the reduction in the
number of shares being offered by any other entity or person offering shares in
the offering. Notwithstanding the foregoing, in the event that an offering is
made pursuant to Regulation A promulgated under the Act, the Company shall be
obligated to offer only those Warrants which, in conjunction with the proposed
offering by the Company, would allow the Company to remain within the
restrictions contained in Regulation A, including but not limited limitations as
to the number of shares and dollar amount to be offered.
(c) With respect to any registration described in Section
11(b)(i) hereof, all fees, disbursements and out-of-pocket expenses in
connection with the filing of any Registration Statement or maintaining the
currency and effectiveness of the Registration Statement (or obtaining the
opinion of counsel and any no-action position of the commission with respect to
sales under Rule 144) and in complying with applicable federal securities and
state securities and blue sky laws shall be borne by the Warrantholder. With
respect to any registration, offering or notification described in Section
11(b)(ii) hereof, all fees, disbursements and out-of-pocket expenses (other than
the Warrantholder's brokerage fees and commissions and legal fees of counsel to
the Warrantholder, if any) in connection with the filing of any Registration
Statement or maintaining the currency and effectiveness of the Registration
Statement and in complying with applicable federal securities and state
securities and blue sky laws shall be borne by the Company, and the Company at
its expense shall supply any Warrantholder and any holder of Warrant Stock with
copies of such Registration Statement and the prospectus included therein and
other related documents and any opinions and no-action letters in such
quantities as may be reasonably requested by such Warrantholder or holder of
Warrant Stock.
(d) The Company shall not be required by this Section 11 to
file such Registration Statement if, in the opinion of counsel for the
Warrantholders, which counsel shall be reasonably satisfactory to the Company,
or in the opinion of another counsel experienced in securities law matters
acceptable to counsel for such Warrantholders and the Company, the proposed
public offering or other transfer as to which such Registration Statement is
requested is exempt, or without adverse economic effect could be structured to
be exempt, from applicable federal securities and state securities and blue sky
laws and would result in all proposed sales being made under Rule 144 under the
Act.
(e) The provisions of this Section 11 and of Section 12
hereof shall apply to the extent provided herein if the Company chooses to file
an Offering Statement under Regulation A promulgated under the Act.
-12-
42
(f) The Company agrees that until all the Warrants and
Warrant Stock have been sold under a Registration Statement or pursuant to Rule
144 under the Act, it shall keep current in filing all materials required to be
filed with the Commission in order to permit the holders of such securities to
sell the same under Rule 144.
(g) In the event any Warrantholder timely elects to make a
Request for registration or include Warrant Stock in a Registration Statement
pursuant to subsection 11(b) above, the Company shall use its reasonable best
efforts to effect such registration to permit the sale of Warrant Stock in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto, the Company shall, as expeditiously as possible:
(i) Prepare and file with the Commission a Registration
Statement or Registration Statements on a form available for the sale of the
Warrant Stock, and to cause any such Registration Statement filed under the Act
pursuant to subsection 11(b) above to become effective at the earliest possible
date after the filing thereof and remain effective as provided herein and to
comply with all applicable rules and regulations of the Commission (the "Rules
and Regulations") in connection therewith, provided, however, that before filing
a Registration Statement or prospectus or any amendments or supplements thereto,
including documents which would be incorporated or deemed to be incorporated by
reference in the Registration Statement after the initial filing of any
Registration Statement, the Company will furnish to the Warrantholders, their
respective counsel, and the underwriters, if any, to be engaged in connection
with the offering and sale by the Company (for purposes of this subsection
11(g), the "Public Underwriter"), copies of all such documents proposed to be
filed, which documents will be subject to the review of the Warrantholders,
their respective counsel and the Public Underwriter, if any, and the Company
will not file any Registration Statement, amendment thereto, any prospectus or
any supplement thereto (including such documents incorporated or deemed to be
incorporated by reference) to which the Public Underwriter, if any, shall
reasonably object;
(ii) Prepare and promptly file with the Commission such
amendments and post-effective amendments to a Registration Statement as may be
necessary to keep such Registration Statement continuously effective for a
period of twelve (12) months or, if earlier, until all the Warrant Stock has
been sold; cause the related prospectus to be supplemented, by any required
prospectus supplement, and as so supplemented, to be filed pursuant to Rule 424
under the Act; and comply with the provisions of the Act with respect to the
disposition of all Warrant Stock covered by such Registration Statement during
the applicable period in accordance with the intended methods of disposition as
set forth in such Registration Statement or supplement to such prospectus. The
Company shall not be deemed to have used its reasonable best efforts to keep a
Registration Statement effective during the applicable period if it
intentionally or voluntarily takes any action that would result in such
Warrantholders not being able to sell such Warrant Stock;
(iii) As soon as the Company is advised or obtains
knowledge thereof, advise the Warrantholders and confirm the same in writing (A)
when the Registration Statement, as amended, becomes effective and when any
post-effective amendment to the Registration Statement becomes effective, (B) of
the issuance by the Commission or any State or
-13-
43
other regulatory body of any stop order or other order, or of the initiation or
the threat or contemplation of any proceeding, the outcome of which may result
in the suspension of the effectiveness of the Registration Statement or the
issuance of any order preventing or suspending the use of any preliminary
prospectus or the prospectus, or any amendment or supplement thereto, or the
institution of any proceedings for that purpose, (C) of the issuance by the
Commission or any State or other regulatory body of any proceedings for the
suspension of the qualification of any of the Warrant Stock for offering or sale
in any jurisdiction or of the initiation or the threat or contemplation of any
proceeding for that purpose, (D) of the receipt of any comments from the
Commission and (E) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the prospectus related
thereto or for additional information; if the commission or any State or other
regulatory body shall enter a stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of any preliminary prospectus or the prospectus, or any amendment or supplement
thereto, or suspend such qualification at any time, make every effort to obtain
promptly the lifting of such order or suspension;
(iv) If requested by the Public Underwriter, if any, or
any Warrantholder (1) immediately incorporate in a prospectus supplement or
post-effective amendment such information as such Warrantholder and the Public
Underwriter, if any, agree should be included therein relating to such sale and
distribution of the Warrant Stock, including, without limitation, information
with respect to the number of shares of Warrant Stock being sold to such Public
Underwriter, the purchase price being paid therefor by such Public Underwriter
and with respect to any other terms of the underwritten offering of the Warrant
Stock to be sold in such offering; (2) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be so incorporated in such prospectus supplement or post-effective
amendment; and (3) supplement or amend any Registration Statement if requested
by the Warrantholders or any Public Underwriter;
(v) Furnish to each of the Warrantholders and their
respective counsel, without charge in the case of a Registration Statement under
Section 1 l(b)(ii) hereof, and at such place as such Warrantholders may
designate, copies of each preliminary prospectus, the Registration Statement
(and any pre-effective or post-effective amendments thereto), the Prospectus,
and all amendments and supplements thereto, including any prospectus prepared
after the effective date of the Registration Statement and any term sheet, in
each case as soon as available and in such quantities as each Warrantholder may
request;
(vi) During the time when a prospectus is required to be
delivered under the Act, the Company shall comply with all requirements imposed
upon it by the Act and the Securities ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇, as amended (the
"Exchange Act"), as now and hereafter amended, and by the Rules and Regulations,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Warrant Stock in accordance with the provisions
hereof and the prospectus, or any amendments or supplements thereto; if at any
time when a prospectus relating to the Warrant Stock is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of the Company or counsel for the Company or counsel for the
Warrantholders, the prospectus, as then amended or supplemented, would include
an untrue statement of a material fact or omit to state any material
-14-
44
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading, or if
it is necessary at any time to amend or supplement the prospectus to comply with
the Act, notify the Public Underwriter and prepare and file, at the Company's
expense, with the Commission an appropriate amendment or supplement to the
Registration Statement or an amendment or supplement to the prospectus which
will correct such statement or omission, or effect such compliance, each such
amendment or supplement to be reasonably satisfactory to the Warrantholders and
the counsel for the Warrantholders; and furnish to the Warrantholders copies of
such amendment or supplement as soon as available and in such quantities as the
Warrantholders may request;
(vii) As soon as practicable, but in any event not later
than forty-five (45) days after the end of the twelve (12) month period
beginning after the effective date of the Registration Statement occurs, make
generally available to its security holders, in the manner specified in Rule
158(b) promulgated under the Act, and to the Representative, an earnings
statement which will comply with the provisions of Section 11(a) of the Act and
Rule 158(a) promulgated under the Act;
(viii) Deliver to each of the Warrantholders, their
respective counsel and the Public Underwriter, if any, without charge in the
case of a Registration Statement under Section 11(b)(ii) hereof, as many copies
of the prospectus or prospectuses (including each preliminary prospectus) and
any amendment or supplement thereto as such persons may reasonably request; the
Company consents to the use of any such prospectus or any amendment or
supplement thereto by the Warrantholders and the Public Underwriter, if any, in
connection with the offering and sale of the Warrant Stock covered by such
prospectus or any amendment or supplement thereto;
(ix) Prior to any public offering of Warrant Stock, use
its reasonable best efforts, at or prior to the time the Registration Statement
becomes effective, to qualify the Warrant Stock for offering and sale under the
securities or "blue sky" laws of such jurisdictions as the Warrantholders may
reasonably designate to permit the continuance of sales and dealings therein for
as long as may be necessary to complete the distribution, and make such
applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or to execute a general consent to service
of process in any such jurisdiction; in each jurisdiction where such
qualification shall be effected, use its reasonable best efforts to file and
make such statements or reports at such times as are or may be required by the
laws of such jurisdiction to continue such qualification;
(x) Cooperate with the Warrantholders and the Public
Underwriter, if any, to facilitate the timely preparation and delivery of
certificates representing Warrant Stock to be sold, which certificates shall not
bear any restrictive legends; and enable such Warrant Stock to be in such
denominations and registered in such names as the Public Underwriter, if any,
may request at least two (2) business days prior to any sale of Warrant Stock;
(xi) Use its reasonable best efforts to cause the Warrant
Stock covered by the Registration Statement to be registered with or approved by
such other
-15-
45
governmental bodies, agencies or authorities as may be necessary to enable the
Warrantholders or the Public Underwriter, if any, to consummate the disposition
of such Warrant Stock;
(xii) Make every reasonable effort to cause all Warrant
Stock covered by such Registration Statement to be (1) listed on each securities
exchange, if any, in which equity securities issued by the Company are then
listed or (2) authorized to be quoted on the NNM or Nasdaq Small Cap Market or
any exchange if the Company's Common Stock is then authorized to be quoted on
the NNM or Nasdaq Small Cap Market or any exchange;
(xiii) Enter into such agreements (including, without
limitation, if applicable, an underwriting agreement, in form, scope and
substance as is customary in underwritten offerings) and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of such Warrant Stock and, in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is an
underwritten registration, (1) make such representations and warranties to the
Warrantholders and the Public Underwriter, if any, with respect to the business
of the Company and its subsidiaries and the Registration Statement, the
prospectus, the prospectus supplement (if any) and documents, if any,
incorporated or deemed to be incorporated by reference in the Registration
Statement, in each case in such form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings and confirm the same
if and when requested; (2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Warrantholders), addressed to the Warrantholders
with respect to the matters referred to in the preceding clause in such form,
scope and substance as are customarily rendered to underwriters in underwritten
offerings and such other matters as may be reasonably requested by counsel to
the Warrantholders or the Public Underwriter, if any; (3) obtain "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in or incorporated by reference into the Registration Statement)
addressed to the Warrantholders and each of the Public Underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in connection with
underwritten offerings; (4) if an underwriting agreement is entered into, the
same shall set forth in full the indemnification and contribution provisions and
procedures of Section 12 hereof (or such other provisions and procedures as
shall be acceptable to the Warrantholders and to the Public Underwriter of such
underwritten offering) with respect to all parties to be indemnified pursuant to
said section; and (5) deliver such documents and certificates as may be
reasonably requested by the Warrantholders and the Public Underwriter, if any,
to evidence the continued validity of the representations and warranties made
pursuant to clause (1) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company; the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
(xiv) Make available for inspection by a representative of
the Warrantholders or any Public Underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant retained
by the Warrantholders or such
-16-
46
Public Underwriter, all financial and other records, pertinent corporate
documents and properties and assets of the Company and its subsidiaries and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information reasonably requested by any such
representative, Public Underwriter, attorney or accountant in connection with
any registration of Warrant Stock; provided, however, that any records,
information or documents that are designated by, the Company in writing at the
time of delivery of such records, information or documents as confidential shall
be kept confidential by such persons unless (1) disclosure of such records,
information or documents is required by court or administrative order or is
necessary to respond to inquiries of governmental or regulatory bodies, agencies
or authorities, (2) disclosure of such records, information or documents is, in
the opinion of counsel to the Warrantholders or to any Public Underwriter,
required by law regulations or legal process, (3) such records, information or
documents are otherwise publicly available or (4) such records, information or
documents become available to such person from a source other than the Company,
and such source is not bound by a confidentiality agreement or law prohibiting
such disclosure; and
(xv) If the Company, in the exercise of its reasonable
judgment, objects to any change reasonably requested by the Warrantholders or
the Public Underwriter, if any, to any Registration Statement or prospectus or
any amendments or supplements thereto (including documents incorporated or
deemed to be incorporated therein by reference) as provided for in this
Subsection 11(g), the Company shall not be obligated to make any such change and
the Warrantholders may withdraw the Warrants and Warrant Stock from such
registration, in which event the Company shall pay all registration expenses
(including, without limitation, attorneys' fees and expenses) incurred by the
Warrantholders in connection with such Registration Statement or prospectus or
any amendment thereto or supplement thereof; provided, that if the Company
provides the Warrantholders, as applicable, with a written opinion of
independent counsel (which counsel may be the Company's regular outside
counsel), upon which such Warrantholders may rely, that the change so requested
is not required in order that the Registration Statement comply with all
applicable securities laws (including any rules and regulations promulgated
thereunder), such Warrantholders may withdraw the Warrants and the Warrant Stock
from such registration but the Company shall not be obligated to pay any
registration expenses incurred by the Warrantholders; and
(xvi) Pay all costs and expenses incident to the
performance of or compliance with the Company's obligations under the second
sentence of subsection 11(c) above and under this subsection 11(g)
(collectively, "Registration Expenses") whether or not any Registration
Statement is filed or becomes effective, including, without limitation, the fees
and disbursements of the Company's auditors, legal counsel, special legal
counsel, legal counsel responsible for qualifying the Warrants and the Warrant
Stock under blue sky laws and with the NASD, all filing fees (including, without
limitation, the Commission, states, NASD, the Nasdaq Stock Market or any
exchange) and printing expenses, all expenses in connection with the transfer
and delivery of the Warrant Stock, and all expenses in connection with the
qualification of the Warrants and the Warrant Stock under applicable blue sky
laws and with the NASD; provided, however, that the Company shall not bear the
Public Underwriter's discount or commission with respect to, or any transfer
taxes imposed on, the Warrant Stock or the fees and expenses of counsel to the
Warrantholders; provided, further, however, that the Company shall
-17-
47
not be responsible in any way for any fees or expenses of counsel to the
Warrantholders or any Public Underwriter, except, in each case, as provided in
Subsection 11(g)(xv) above.
SECTION 12. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the
Representative, the Warrantholder, and any Holder of Warrant Stock (for purposes
of this Section 12, "Holder" shall include the officers, directors, partners,
employees, agents and counsel of a Warrantholder or a holder of Warrant Stock),
and each person, if any, who controls a Holder ("controlling person") within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses (including, without
limitation, reasonable attorneys' fees and expenses) or liabilities and all
actions, suits, proceedings, injuries, arbitrations, investigations, litigation
or governmental or other proceedings (in this Section 12, collectively,
"actions") in respect thereof, whatsoever (including, without limitation, any
and all expenses whatsoever reasonably incurred in investigating preparing or
defending against any action, commenced or threatened, or any claim whatsoever),
as such are incurred, to which a Holder or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material tact contained (i) in any preliminary prospectus, any
Registration Statement, the Registration Statement or any prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Warrants; or
(iii) in any application or other document or written communication (in this
Section 12, collectively, "application") executed by the Company or based upon
written information furnished by the Company in any jurisdiction in order to
qualify the Warrants or the Warrant Stock under the securities or blue sky laws
thereof or filed with the Commission, any state securities commission or agency,
the National Association of Securities Dealers, Inc. (the "NASD") or the NNM,
Nasdaq Small Cap Market or any other securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (in light of the
circumstances in which they were made), unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to a Holder by or on behalf of such Holder expressly
for use in any preliminary prospectus, the registration statement or any
prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be. In addition to its other obligations under this
subsection 12(a), the Company agrees that, as an interim measure during the
pendency of any action arising out of or based upon any untrue statement or
omission, or alleged untrue statement or alleged omission as described in this
subsection 12(a), it shall reimburse the Holders (and, to the extent applicable,
each controlling person) on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such action
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligations to reimburse the Holders (and, to
the extent applicable, each controlling person) for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement is so held to have been improper as to the Company, the Holders
(and, to the extent applicable, each controlling person) shall promptly return
it to the Company, together with interest compounded
-18-
48
daily, based on the "reference rate" announced from time to time by Bank of
America NTSA (the "Prime Rate"). Any such interim reimbursement payments which
are not made to the applicable Holder within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. In no case shall any interest be in excess of that permitted by law.
The indemnity agreement in this subsection 12(a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each Holder severally agrees to indemnify and hold
harmless the Company (for purposes of this Section 12, "Company" shall include
the officers, directors, partners, employees, agents and counsel of the Company)
and each other person, if any, who controls the Company ("controlling person")
within the meaning of the Act, to the same extent as the foregoing indemnity
from the Company to the Holders, but only with respect to statements or
omissions, if any, made in any preliminary prospectus, any Registration
Statement, or any prospectus or any amendment thereof or supplement thereto or
in any application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Holder by or on behalf
of such Holder expressly for use in any preliminary prospectus, any Registration
Statement or any prospectus or any amendment thereof or supplement thereto or in
any application, provided that such written information or omissions only
pertain to disclosures in any preliminary prospectus, any Registration Statement
or any prospectus directly relating to the transactions in connection with the
offering contemplated hereby. In addition to its other obligations under this
subsection 12(b), each Holder severally agrees that, as an interim measure
during the pendency of any action arising out of or based upon any untrue
statement or omission, or alleged untrue statement or alleged omission as
described in this subsection 12(b), it shall reimburse the Company (and, to the
extent applicable, each controlling person) on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any action with respect to such Holder notwithstanding the absence of
a judicial determination as to the propriety and enforceability of such Holder's
obligations to reimburse the Company (and, to the extent applicable, each
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement is so held to have been
improper as to such Holder, the Company (and, to the extent applicable, each
controlling person) shall promptly return it to such Holder, together with
interest compounded daily, based on the Prime Rate. Any such interim
reimbursement payments which are not made to the company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request. In no case shall any interest be in excess of that
permitted by law. Notwithstanding the provisions of this subsection 12(b), in
connection with a registration which includes the Warrants or Warrant Stock
pursuant to Subsection 11(b)(i) hereof, no such Holder shall be required to
indemnify or hold harmless the Company or any controlling person for any amounts
in excess of the net proceeds (before deducting expenses) applicable to the
Warrants or Warrant Stock sold by such Holder pursuant to the Registration
Statement. Notwithstanding the provisions of this subsection 12(b), in
connection with a registration that includes a Holder's Warrants or Warrant
Stock pursuant to subsection 11(b)(ii) hereof, no such Holder shall be required
to indemnify and hold harmless the Company or any controlling person for any
amounts in excess of that portion of all expenses as to which indemnification is
properly claimed under this Agreement equal to such Holder's
-19-
49
relevant proportion of all net proceeds (before deduction of expenses)
applicable to all securities sold pursuant to any Registration Statement or the
Registration Statement, as applicable.
(c) Promptly after receipt by an indemnified party under this
Section 12 of notice of the commencement of any action, such indemnified party
shall notify each party against whom indemnification is to be sought in writing
of the commencement thereof (but the failure to so notify an indemnifying party
shall not relieve it from any liability which it may have under this Section 12
except to the extent that it has been materially prejudiced by such failure). In
case any such action is brought against any indemnified party, and it notifies
an indemnifying party or parties of the commencement thereof, the indemnifying
party or parties shall be entitled to participate therein, and to the extent it
or they may elect by written notice delivered to the indemnified party or
parties promptly after receiving the aforesaid notice from such indemnified
party or parties, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, an
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party or parties in connection with
the defense of such action at the expense of the indemnifying party or parties,
(ii) the indemnifying party or parties shall not have employed counsel
reasonably satisfactory to such indemnified party to have charge of the defense
of such action within a reasonable time after notice of commencement of the
action or (iii) such indemnified party shall have reasonably concluded that
there may be one or more defenses available to it which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel (in addition to
appropriate local counsel) shall be borne by the indemnifying parties. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to appropriate local counsel) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 12 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent may not be unreasonably withheld or
delayed.
(d) In order to provide for just and equitable contribution
in any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 12, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 12 provide for indemnification in such
case or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or liabilities
(or actions in respect thereof), as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things,
-20-
50
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder, and the parties' relative intent,
knowledge, state of mind and access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to in the first sentence of this subsection
12(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection 12(d), in a
registration that includes a Holder's Warrants or Warrant Stock pursuant to
subsection 11(b)(i) hereof, no Holder shall be required to contribute any amount
in excess of the net proceeds (before deducting expenses) applicable to the
shares of Warrants and Warrant Stock sold by such Holder pursuant to such
registration statement and prospectus. Notwithstanding the provisions of this
subsection 12(d), in a registration that includes a Holder's Warrant Stock
pursuant subsection 11(b)(ii) hereof, no such Holder shall be required to
contribute any amount in excess of that portion of all expenses as to which
contribution is properly claimed under this Agreement equal to such Holder's
relevant portion of all net proceeds (before deducting expenses) applicable to
all securities sold pursuant to the Registration Statement, as applicable. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act and the cases and promulgations thereunder) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action against such ▇▇▇▇▇ in respect to
which a claim for contribution may be made against another party or parties
under this subsection 12(d), notify such party or parties from whom contribution
may be sought, but the omission to so notify such party or parties shall not
relieve the parry or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this subsection
12(d) except to the extent it has been materially prejudiced by such failure.
The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
Notwithstanding anything to the contrary contained in this Agreement, no Holder
shall be required to contribute any amount in excess of the lesser of (i) that
proportion of the total of such losses, claims, damages or liabilities
indemnified or contributed against equal to the proportion of the total
securities sold pursuant to the Registration Statement, as the case may be,
which is being sold by it, or (ii) the proceeds received by it in any such
offering. The Holders' obligations in this Section 12(d) to contribute are
several in proportion to the number of Warrants or Warrant Shares registered on
their behalf and not joint.
(e) The indemnity and contribution agreements contained in
this Section 12 and the representations shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of any
Holder or any person controlling any Holder, the Company, its directors or
officers or any Public Underwriter or any person controlling such Public
Underwriter, (ii) acceptance of any Warrants or Warrant Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Holder or any person controlling any Holder, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 12.
-21-
51
(f) In any proceeding relating to any Registration Statement
or any prospectus or any amendment or supplement thereto, each party against
whom contribution may be sought under this Section 12 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing party,
agrees that process issuing from such court may be served upon him or it by any
other contributing party and consents to the service of such process and agrees
that any other contributing party may join him or it as an additional defendant
in any such proceeding in which such other contributing party is a party.
SECTION 13. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed, delivered by hand or transmitted by any
standard form of telecommunication. Notices to the Warrantholders or a holder of
Warrant Stock shall be directed to The Boston Group, L.P. at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇-▇▇▇▇▇, Esq.
Notices to the Company shall be directed to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, with a copy to
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq;
SECTION 14. PARTIES. This Agreement shall inure solely to the benefit of
and shall be binding upon, the Representative, the Company and the
Warrantholders and the holders of Warrant Stock and the controlling persons,
officers, directors and others referred to in Section 12 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.
SECTION 15. MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall
not merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of Section 8.3 hereof are complied with.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in the Underwriting Agreement, any schedule, exhibit, certificate or
other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated by this Agreement, shall be deemed
to be representations and warranties hereunder. Notwithstanding any
investigations made by or on behalf of the parties to this Agreement, all
representations, warranties and agreements made by the parties to this Agreement
or pursuant hereto shall survive the termination of this Agreement and the
issuance, sale and delivery of the Warrant and the Warrant Stock.
SECTION 17. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without giving effect to conflict of laws principles thereof.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
-22-
52
SECTION 19. ENTIRE AGREEMENT, AMENDMENTS. This Agreement and the
Underwriting Agreement constitute the entire agreement of the parties hereto
concerning the subject matter hereof and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended, modified or altered except in a
writing signed by the Representative and the Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
▇▇▇▇▇▇▇▇ COFFEE, INC.
By:_________________________________
President and CEO
THE BOSTON GROUP, L.P.
By:_________________________________
Name:_______________________________
Title:______________________________
-23-
53
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN
ANY MANNER EXCEPT IN COMPLIANCE WITH SECTIONS 1.3 AND
11(a) OF THE REPRESENTATIVE'S WARRANT AGREEMENT
PURSUANT TO WHICH THEY WERE ISSUED.
WARRANT CERTIFICATE NO. 1
WARRANT TO PURCHASE 160,000
SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.
PACIFIC TIME, ON SEPTEMBER 10, 1999
▇▇▇▇▇▇▇▇ COFFEE, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received, THE BOSTON GROUP, L.P.. the
registered holder hereof or assigns (the "Warrantholder"), is entitled to
purchase from ▇▇▇▇▇▇▇▇ COFFEE, INC. (the "Company"), at any time during the
period commencing at 6:30 am., Pacific time, on September 11, 1997, and before
5:00 p.m., Pacific time, on September 10, 1999, at the purchase price per share
of Common Stock of $13.80 (the "Warrant Price"), 160,000 shares of Common Stock
of the Company (the "Warrant Stock"). The number of shares of Common Stock of
the Company purchasable upon exercise of each Warrant evidenced hereby shall be
subject to adjustment from time to time as set forth in the Representative's
Warrant Agreement, dated as of September 11, 1996, by and between the Company
and the Representative (the "Representative's Warrant Agreement").
The Warrants evidenced hereby represent the right to purchase an
aggregate of up to 160,000 shares of Warrant Stock (subject to adjustment as
provided in the Representative's Warrant Agreement) and are issued under and in
accordance with the Representative's Warrant Agreement, and are subject to the
terms and provisions contained in the Representative's Warrant Agreement, to all
of which the Warrantholder by acceptance hereof consents.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided hereon) and simultaneous
payment of the Warrant Price at the principal office of the Company. Payment of
such price shall be made at the option of the Warrantholder in any manner
allowed in the Representative's Warrant Agreement.
Upon any partial exercise of the Warrants evidenced hereby, there shall
be signed and issued to the Warrantholder a new Warrant Certificate in respect
of the shares of Warrant Stock as to which the Warrants evidenced hereby shall
not have been exercised. These Warrants may
54
be exchanged at the office of the Company by surrender of this Warrant
Certificate properly endorsed for one or more new Warrants of the same aggregate
number of shares of Warrant Stock as evidenced by the Warrant or Warrants
exchanged. No fractional securities shall be issued upon the exercise of rights
to purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. These Warrants are transferable at
the office of the Company in the manner and subject to the limitations set forth
in the Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of
the rights of a stockholder of the Company.
▇▇▇▇▇▇▇▇ COFFEE, INC.
By:_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Dated: September 17, 1996
ATTEST: [Seal]
____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Secretary
-2-
55
▇▇▇▇▇▇▇▇ COFFEE, INC.
PURCHASE FORM
▇▇▇▇▇▇▇▇ COFFEE, INC. (the "Company")
_______________________________________
_______________________________________
Attention:_____President
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of common stock of the Company (the "Warrant Stock") provided
for therein, and requests that certificates for the Warrant Stock be issued in
the name of:
__________________________________________
(Please print or Type Name, Address and
Social Security Number)
__________________________________________
__________________________________________
and, if said number of shares of Warrant Stock shall not be all the Warrant
Stock purchasable hereunder, that a new Warrant Certificate for the balance of
the Warrant Stock purchasable under the within Warrant Certificate be registered
in the name of the undersigned Warrantholder or his Assignee as below indicated
and delivered to the address stated below.
Dated:
Name of Warrantholder
or Assignee: _____________________________
(Please Print)
Address: _____________________________
_____________________________
Signature: _____________________________
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
Signature Guaranteed:____________________________________________
56
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange of the National Association of Securities Dealers, Inc.)
-2-
57
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the right to purchase _____ shares of Warrant Stock represented by the within
Warrant Certificate unto, and requests that a certificate for such Warrant be
issued in the name of:
__________________________________________
(Name and Address of Assignee Must
be Printed or Typewritten)
__________________________________________
__________________________________________
hereby irrevocably constituting and appointing ______________ Attorney to
transfer said Warrants on the books of the Company, with full power of
substitution in the premises and, if said number of Warrant Stock shall not bear
all of the Warrant Stock purchasable under the within Warrant Certificate, that
a new Warrant Certificate for the balance of the Warrant Stock purchasable under
the within Warrant Certificate be registered in the name of the undersigned
Warrantholder and delivered to such Warrantholder's address as then set forth on
the Company's books.
Dated:________________ ______________________________
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:________________________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
58
EXHIBIT 2
WARRANT GRANTED TO NUVRTY, INC., A COLORADO CORPORATION,
DATED SEPTEMBER 30, 1997
59
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT OR SUCH
LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE.
--------------------------------------------------------------------------------
WARRANT
--------------------------------------------------------------------------------
September 30, 1997
▇▇▇▇▇▇▇▇ Coffee, Inc., a Delaware corporation ("Company"), hereby grants
to Nuvrty, Inc., a Colorado corporation ("Holder"), or its registered assigns
the right to acquire the shares of Common Stock issuable upon exercise hereof,
subject to the terms and conditions set forth below:
1. Definitions. As used in this Warrant, the following terms shall mean:
1.1 "Agreement" - shall mean the Term Loan Agreement of even
date, between Company and Holder.
1.2 "Common Stock" - shall mean the Common Stock, $0.01 par value
issued by Company issuable on exercise of this Warrant.
1.3 "Company" shall include ▇▇▇▇▇▇▇▇ Coffee, Inc. and each
successor corporation or ▇▇▇▇▇▇▇▇ Coffee, Inc. under this Warrant, whether such
assumption is express, implied, or by operation of law.
1.4 "Determination Date" - shall mean the date on which Company
receives Holder's written notice of an exercise of the stock purchase right
pursuant to Section 2.1 hereof.
1.5 "Indemnified Person" - shall have the meanings given in
Section 3.7(a) and Section 3.7(b).
1.6 "Issuance Date" - shall mean the date of this Warrant.
1.7 "Note" - shall mean the Secured Promissory Note issued by
Company to Holder as further described in the Agreement.
1.8 "Liability" - shall have the meaning given in Section 3.7.
60
1.9 "Purchase Price" - shall mean initially $2.25 per share, as
adjusted in accordance with Section 5, depending upon the context.
1.10 "Registration Expenses" - shall have the meaning given in
Section 3.6.
1.11 "SEC" - shall mean the Securities Exchange Commission.
1.12 "Securities Act" - shall mean the Securities Act of 1933, as
amended.
1.13 "Shares" - shall mean the shares of Warrant Stock for which
this Warrant may be exercised pursuant to Section 2.1 hereof.
1.14 "Subsidiary" - shall mean any corporation, association or
other business entity at least fifty percent (50%) of the outstanding voting
stock of which is at the time owned or controlled directly or indirectly by
Company or by one or more of such subsidiary entities or both.
1.15 "Warrant Amount" - shall mean an amount equal to the initial
Purchase Price times 340,000 shares, as reduced by the exercise of rights
hereunder; provided however that if Company repays Holder all amounts due under
the Note within 120 days of the date hereof, thereafter the term "Warrant
Amount" shall mean an amount equal to the initial Purchase price times 170,000
shares, as reduced by the exercise of rights hereunder.
1.16 "Warrant Stock" - shall mean the authorized and unissued
Common Stock reserved for issuance upon exercise of the Warrant.
2. Right to Purchase.
2.1 Exercise. Holder shall have the right to purchase for all or
any portion of the Warrant Amount that number of shares of fully paid and
nonassessable Warrant Stock of Company which is determined by dividing the
Warrant Amount by the Purchase Price. Such right shall be exercisable at any
time through and including September 30, 2003, or, if later, one year after the
final payment of all principal and accrued interest on the Secured Promissory
Note issued to Holder pursuant to the Agreement (the "Note"). Upon the surrender
of this Warrant to Company, accompanied by Holder's written notice of exercise
and a payment of the Purchase Price for the Shares identified in the notice,
Company shall, within ten (10) days from the date of Company's receipt of such
notice (a) issue and deliver to Holder certificates evidencing the Shares (as
hereinafter set forth) and (b) if any or all of rights to purchase evidenced by
this Warrant remain unexercised, return this Warrant or a substitute Warrant to
Holder with such notation thereon as appropriate to indicate that partial
exercise has occurred and to purchase rights. For the purpose of this Section 2,
the purchase shall be deemed to occur at the close of business on the
Determination Date. In the event that Holder shall elect to exercise its right
with respect to less than the entire number of shares covered by this Warrant,
such partial exercise shall not be interpreted to prevent Holder or its
transferees, successors or assignees from asserting the then unexercised rights
or constitute a waiver of such unexercised rights.
2
61
2.2 Form of Payment: "Cashless" Exercise. Payment on exercise of
this Warrant may be in cash, by check payable to the order of the Company, by
surrender of one or more of the Company's promissory notes (or portion thereof),
securities, or other obligations (or portion thereof), or any combination of the
above. At Purchaser's option, exercisable in the notice delivered pursuant to
Section 2.1, all or a portion of the Purchase Price may be paid by surrendering
a portion of the Shares. The value attributed to any Shares so surrendered shall
be the closing offer price on the date of the notice.
2.3 Fractional Shares. No fractional shares of Warrant Stock, or
other class of capital stock, will be issued in connection with any exercise
hereunder, but in lieu of such fractional shares, Company shall make a cash
payment therefor upon the basis of the fair market value of each Share as of the
Determination Date, as determined in good faith by the Board of Directors of
Company less the Purchase Price.
2.4 Interest Adjustment. The parties agree that if the Note was
not accompanied by this Warrant, the interest rate would be not more than one
percent (1%) higher.
2.5 Surrender Warrant Following Kickout. If Company repays Holder
all amounts due under the Note within 120 days of the date hereof, Holder shall
immediately surrender this Warrant to Company and Company shall reissue to
Holder a replacement Warrant reflecting the change in the Warrant Amount.
3. Registration Rights; Transfer of Securities. This Warrant and the
Warrant Stock to be issued pursuant to exercise of this Warrant is not
transferable except, to the extent such transfers would not violate the
provisions of the Securities Act or any applicable state securities laws, (a) to
affiliates (as such term is defined in Rule 144 of the Securities Act) of the
Holder who are accredited investors within the meaning of Regulation D of the
Securities Act, (b) such other persons upon the prior written consent of
Company, which consent shall not be unreasonably be withheld, or (c) upon the
conditions specified in this Section 3, which conditions are intended to assure
compliance with the provisions of the Securities Act and state securities laws
in respect of the transfer of any such Warrants or Warrant Stock.
3.1 Restrictive Legends. Unless and until they are registered
under the Securities Act, this Warrant (and any replacement therefor) and the
Shares issued upon the exercise of this Warrant shall be stamped or otherwise
imprinted with legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER THAT ACT OR SUCH LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION IS AVAILABLE.
3
62
Company may cause its transfer agent to stop the transfer of such
Warrants or Warrant Stock if Holder or the owner of Warrant Stock wishing to
make the transfer fails to provide the Company with such a written opinion of
counsel.
3.2 Notice of Proposed Transfers. Subject to Section 3.1, prior
to any transfer or attempted transfer of this Warrant (or any Warrant Stock)
bearing the legend described in Section 3.1, Holder (or the owner of Warrant
Stock) shall give the Company written notice of its intention so to do,
describing briefly the nature of any such proposed transfer. If, in the written
opinion of counsel for Holder (or the owner of Warrant Stock), in form and
substance reasonably satisfactory to the Company or its counsel, addressed to
the Company or Holder (or the owner of Warrant Stock), the proposed transfer may
be effected without registration of this Warrant (or such Warrant Stock), this
Warrant (or the Warrant Stock proposed to be transferred) may be transferred in
accordance with the terms of said notice and in compliance with applicable state
securities laws and regulations. Company shall not be required to effect any
such transfer prior to the receipt of such favorable opinion; provided that if
the proposed transfer is governed by Rule 144 promulgated by the SEC, or any
successor rule, such opinion shall not be required, but Company may prevent such
transfer until it receives evidence satisfactory to it and its counsel that the
transfer complies with Rule 144. Each transfer shall comply with all applicable
state securities laws and regulations.
3.3 Piggyback Registration. If Company at any time prior to
September 30, 2003 proposes to register any of its securities under the
Securities Act (other than a registration effected solely to implement an
employee benefit plan, a transaction to which Rule 145 of the SEC is applicable
or any other form or type of registration in which the Warrant Stock cannot be
included pursuant to SEC rule or practice), it will give a written notice to
Holder and the registered owners of Warrant Stock of its intention to do so. If
such registration is proposed on a form which permits inclusion of the Warrant
Stock, upon the written request of Holder or any owner of Warrant Stock given
within 30 days after the transmittal by Company to such Holder or owner of such
notice, the Company will, subject to the limits contained in this Section 3.3,
use its best efforts to cause all Warrant Stock which said requesting Holder or
owner identifies in its request (including Warrant Stock to be issued upon
exercise of this Warrant) to be registered under the Securities Act and
qualified for sale under any state blue sky law, all to the extent requisite to
permit such sale or other disposition by such Holder or owner. Notwithstanding
the above, however, if the underwriter managing such registration gives a
written notice to the person requesting registration pursuant to this Section
3.3 that market or economic conditions limit the amount of securities of the
Company which may reasonably be expected to be sold, the underwriter shall first
exclude from the proposed registration the shares of Common Stock which persons
other than (a) such requesting Holder or owners of Warrant Stock, (b) the
holders of the warrants issued pursuant to the Other Agreements (as that term is
defined in the Agreement) or (c) Company have requested to be registered. If,
after such exclusion, the total number of shares of Common Stock to be
registered still exceeds the number of shares of Common Stock which the
underwriter will permit to be registered, each requesting Holder or owner will
be allowed to register Warrant Stock pro rata according to the proportion which
the number of shares of Warrant Stock held (including shares issuable upon
exercise of this Warrant) by such requesting Holder or owner bears to the total
number of shares of Common Stock which were proposed to be sold by the
underwriter. Company may for any reason determine not to proceed with a
4
63
proposed registration of its securities even though Holder or one or more owners
of Warrant Stock has requested the inclusion of Warrant Stock in such proposed
registration. However, if Company determines not to proceed and withdraws the
Company's registration statement, Company shall pay all fees and expenses
reasonably incurred by the requesting Holder or owner(s) in connection with the
proposed registration.
3.4 Demand Registration. Company shall use its best efforts to
qualify and remain qualified for registration of the Warrant Stock on Form S-3
(or a similar short-form registration statement). If singly or in combination,
the Holder, holders of any other warrant issued pursuant to the Agreement or the
Other Agreements, or owners of Common Stock issued pursuant to this Warrant or
any other warrant issued pursuant to the Agreement or the Other Agreements
request to have 300,000 or more of their shares of Common Stock (or shares of
Warrant Stock which they are entitled to acquire under this or such other
warrants) registered, Company will use its best efforts to promptly register
such shares on Form S-3 (or a similar short-form registration statement). Such
request(s) shall be in writing and shall state the number of shares of Warrant
Stock to be registered and the intended method of disposition of such Warrant
Stock in sufficient detail to permit a description in a registration statement
and shall contain a statement of a good-faith intention to sell the Warrant
Stock proposed to be registered. The Company may delay registration pursuant to
this Section 3.4 if, in the good-faith judgment of the Company, such
registration will hinder or interfere with a concurrent or proposed security
issuance of, or acquisition by, the Company; provided that the Company shall use
its best efforts to effect the registration following the completion of the
transaction or transactions involving such issuance or acquisition. The Company
shall give notice to Holder and all registered owners of Warrant Stock of the
receipt of a request for registration pursuant to this Section 3.4 and shall
provide a reasonable opportunity for such persons to participate in the
registration. If any requesting Holder or owner of Warrant Stock determines not
to proceed with a registration requested pursuant to this Section 3.4 and the
registration is not completed (or is completed but less than 300,000 shares of
Warrant Stock are registered), such withdrawing Holder or owner shall pay its
proportionate share of the expenses reasonably incurred by Company pursuant to
the registration request, unless the decision not to proceed is:
(a) based upon a material adverse fact or condition relating
to Company which was not disclosed to such Holder or owner of Warrant Stock
prior to the request for registration;
(b) based upon a written opinion of such Holder or owner's
counsel that one or more specific statements or omissions in the proposed
registration statement are materially misleading without changes which Company
declines to make after written request therefor; or
(c) followed by a decision by Company or other holders of
Company's Common Stock (or holders of rights to such stock) to proceed with the
registration in question, which results in the proposed registration statement
becoming effective with respect to shares of Common Stock to be issued by the
Company or held by others.
5
64
3.5 Registration Procedures. If and whenever Company proposes the
registration of any of its securities under the Securities Act, or is in receipt
of a request pursuant to Section 3.3 or 3.4, Company will, as expeditiously as
possible, subject in all cases to the right of Company to withdraw a proposed
registration as described in Section 3.3 or delay the registration as described
in Section 3.4.
(a) prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period provided
for in Section 3.5(g);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period provided for in Section 3.5(g) and to otherwise comply with the
provisions of the Securities Act with respect to the sale or other disposition
of the securities covered by such registration statement;
(c) furnish to Holder and the owners of Warrant Stock whose
securities are to be included in the registration such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as Holder or such
owners may reasonably request to facilitate the sale or other disposition of the
Warrant Stock to be covered by such registration statement;
(d) use every reasonable effort to register or qualify the
securities covered by such registration statement under such other securities or
state blue sky laws of such jurisdictions as Holder or the owners of Warrant
Stock participating in such registration shall reasonably request and do any and
all other acts and things which may be necessary under such securities or blue
sky laws to enable such Holder or owners to consummate the sale or other
disposition in such jurisdictions of the securities owned by them which are
covered by the registration statement in question, except that the Company shall
not for any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) before filing the registration statement or prospectus or
amendments or supplements thereto, furnish to one counsel selected by Holder and
the owners of Warrant Stock who have requested registration copies of such
documents proposed to be filed which shall be subject to the reasonable approval
of such counsel; and
(f) furnish to Holder and each requesting owner of Warrant
Stock a signed counterpart, addressed to such Holder or owner, of (i) an opinion
of counsel for Company, dated the effective date of the registration statement,
and (ii) a "comfort" letter signed by the independent public accountants who
have certified Company's financial statements included in the registration
statement, covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and (in case of the
accountants' letter with respect to events subsequent to the date of the
financial statements, as are customarily covered (at the time of such
registration) in opinions of Company's counsel and in accounts' letters
delivered to the underwriters in underwritten public offerings of securities;
and
6
65
(g) notwithstanding any other provision of this Section 3,
Company shall not in any event be required to use its best efforts to maintain
the effectiveness of any such registration statement for a period in excess of
90 days (or at the request of Holder or any owner of Warrant Stock who so
requests, an additional 90 days).
3.6 Expenses. All expenses incurred in effecting all
registrations provided for above, including without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for
Company, expenses of any audits incident to or required by any such registration
and expenses of complying with the securities or blue sky laws of any
jurisdictions relating to a registration pursuant to Section 3.3 or 3.4 hereof
(all of such expenses referred to as "Registration Expenses") shall be paid by
Company; provided, however, that Company shall bear the Registration Expenses
for no more than two registrations pursuant to Section 3.4 for all holders of
this Warrant and the warrants issued in connection with the Other Agreements.
The Company shall not pay any fees or expenses of counsel for Holder or the
owners of Warrant Stock or any counsel for underwriters or any fees or
commissions due to any underwriter with respect to any Warrant Stock.
3.7 Indemnification.
(a) In the event of any registration of any of its securities
under the Securities Act pursuant to Section 5, Company shall indemnify and hold
harmless the seller of such securities, each underwriter (as defined in the
Securities Act), and each other person, if any, who controls (within the meaning
of the Securities Act) such seller, underwriter or participating seller
(individually and collectively the "Indemnified Person") against any losses,
claims, damages or liabilities (collectively the "liability"), joint or several,
to which such Indemnified Person may become subject under the Securities Act or
any other statute or at common law, insofar as such liability (or action in
respect thereof) is caused by (i) any untrue statement of material fact
contained on the effective date thereof, in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein or any amendment or supplement
thereto, or (ii) any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Except as otherwise provided in Section 3.7(d), Company shall reimburse each
such Indemnified Person in connection with investigating or defending any such
liability, provided, however, that Company shall not be liable to any
Indemnified Person in any such case to the extent that any such liability is
caused by any untrue statements or omissions made in such registration
statement, preliminary or final prospectus, or amendment or supplement thereto
in reliance upon and in conformity with information furnished to Company by such
Indemnified Person specifically for use therein; and provided further, that
Company shall not be required to indemnify any Indemnified Person against any
liability caused by any untrue or misleading statement or omission contained in
any preliminary prospectus if such deficiency is corrected in the final
prospectus or for any liability which is caused by the failure of any person
other than Company to deliver a prospectus as required by the Securities Act.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Person and shall survive
transfer of such securities by such seller.
7
66
(b) If, at the request of Holder or any owner of Warrant
Stock, Company shall register any of the Warrant Stock of such requesting Holder
or owner, that requesting Holder or owner shall indemnify and hold harmless
Company, Company's directors and officers, each underwriter and each other
person, if any, who controls (within the meaning of the Securities Act) Company
or such underwriter (individually and collectively also the "Indemnified
Person") against any liability (or actions in respect thereof) was caused by (i)
the disposition of this Warrant or Warrant Stock by such Holder or owner in
violation of the provisions of Section 3.2; (ii) an untrue statement of material
fact contained in, on the effective date thereof, any registration statement
under which such securities were registered, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, which
untrue statement was included therein in good faith reliance on and in
conformity with information furnished to Company in writing by such Holder or
owner specifically for use in such registration statement, preliminary or final
prospectus, or amendment or supplement thereto, or (iii) an omission of material
fact required to be stated in any registration statement under which such
securities were registered, an preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, which omission was
the result of the Indemnified Person's good-faith reliance on and in conformity
with information furnished to Company in writing by such Holder or owner
specifically for use in such registration statement, preliminary or final
prospectus, or amendment or supplement thereto. Notwithstanding the above,
however, no Holder or owner of Warrant Stock shall be required to indemnify any
Indemnified Person if any untrue statement or omission of material fact was made
in reliance on the advise, conclusions, calculations, determinations, or
authority of an expert so long as Holder or such owner of Warrant Stock had no
reasonable ground to disbelieve, and did not in tact disbelieve, the accuracy or
completeness of the information provided by the Holder or owner in reliance on
such expert. A Holder or owner of Warrant Stock otherwise required to provide
indemnification pursuant to this Section 3.7(b) shall reimburse any Indemnified
Person for any legal fees incurred in investigating or defending any such
liability, provided, however, that no such Holder or owner of Warrant Stock
shall be required to indemnify any person against any liability arising from any
untrue or misleading statement or omission contained in any preliminary
prospectus if such deficiency is corrected in the final prospectus or for any
liability which arises out of the failure of any person other than Holder (or
the indemnity obligation shall apply to the benefit of the Company, the
Company's directors and officers, each underwriter and each other person, if
any, who controls the Company or such underwriter and to no other persons or
entities.
(c) Subject to such modifications as the context may require,
indemnification similar to that specified in Section 3.7(a) above shall be given
by Holder and owners of Warrant Stock who have indemnity obligations (but only
to the extent of such Holder or owner's obligations thereunder) with respect to
any required registration or other qualification of Warrant Stock under any
federal or state law or regulation of governmental authority other than the
Securities Act.
(d) If Company, Holder, or any owner of Warrant Stock
receives a complaint, claim or other notice of any liability or action, giving
rise to a claim for indemnification under Section 3.7(a), 3.7(b), or 3.7(c), the
person claiming indemnification under such sections shall promptly notify the
person against whom indemnification is sought of
8
67
such complaint, notice, claim or action and such indemnifying person shall have
the right to investigate and defend any such loss, claim, damage, liability, or
action. The person claiming indemnification shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses sought unless the indemnifying party fails to promptly
defend (in which case the fees and expenses of such separate counsel shall be
borne by the person against whom indemnification is sought). In no event shall a
person against whom indemnification is sought be obligated to indemnify any
person for any settlement of any claim or action effecting without indemnifying
person's prior written consent.
3.8 Contribution. If the indemnification by Company as provided
for in Sections 3.7(a) or 3.7(c) is unavailable or insufficient to hold harmless
the Indemnified Persons in respect of any liability, then Company shall
contribute to the amount paid or payable by such Indemnified Persons as a result
of such liability in such proportion as is appropriate to reflect the relative
fault of Company on the one hand and the Indemnified Person(s) on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities, expenses or actions as well as any other relevant
equitable considerations, including the failure to file the notice required
hereunder. The relative fault of Company and the Indemnified Person(s) shall be
determined by reference to, among other things, whether the untrue statement of
material fact relates to the information supplied by Company or the Indemnified
Person(s) and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Company agrees
that it would not be just and equitable if contributions pursuant to this
Section 3.8 were determined by pro rata allocation or by any other method of
allocation which did not take account of the equitable considerations referred
to above.
3.9 Registration Rights Do not Necessarily Follow the Warrant
Stock. Notwithstanding the provisions of this Section 3, if Holder causes
Company to issue any Warrant Stock to a third party, or if Holder transfers any
Warrant Stock issued to it to a third party, Holder shall retain the right to
have those shares registered as set forth in this Section 3, and the third-party
owner of such Warrant Stock shall not have any registration rights under this
Warrant, unless the Company shall give its written consent to the transfer of
such registration rights.
3.10 Termination of Registration Rights. Notwithstanding the
provisions of this Section 3, the rights to registration of the Warrant Stock
shall terminate, as to any particular Warrant Stock, when such Warrant Stock
shall have been lawfully sold by the holder pursuant to a registration statement
or Rule 144 or may be sold pursuant to Rule 144 during any three month period
or, if earlier, the later of September __, 2003 and one year after the final
payment of all principal and accrued interest on the Note.
3.11 Compliance with Rule 144. At the request of Holder or any
owner of Warrant Stock who proposes to sell Warrant Stock in compliance with
Rule 144 of the SEC, Company shall forthwith furnish to Holder or such owner a
written statement of compliance with the filing requirements of the SEC as set
forth in such Rule, as such Rule may be amended from time to time and make
available to the public and Holder or such owner such information as will enable
holder of the owner to make sales of Warrant Stock pursuant to Rule 144.
9
68
3.12 Consent to Be Bound. Each subsequent Holder and each
transferee of any Warrant Stock must consent in writing to be bound by the terms
and conditions of this Section 3 in order to acquire the registration rights
granted pursuant to this Section.
3.13 Investment Intent. Holder represents and warrants that this
Warrant and the Warrant Stock issuable upon exercise of the Warrant are being
acquired by Holder solely for Holder's own account, for investment purposes
only, and with no present intention of distributing, selling or otherwise
disposing of the Warrant or the Warrant Stock issuable upon exercise of the
Warrant.
3.14 Sophistication. Holder represents and warrants that Holder
is able to bear the economic risk of the investment required pursuant to this
Warrant and the Warrant Stock issuable upon exercise of the Warrant and can
afford to sustain a total loss on such investment, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the proposed investment and therefore has the capacity
to protect its own interests in connection with the Warrant.
4. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or destruction) upon
delivery of an indemnity agreement in an amount reasonably satisfactory to
Company, or (in the case of mutilation) upon surrender and cancellation of the
mutilated Warrant, Company will execute and deliver, in lieu thereof, a new
Warrant of like tenor.
5. Protection Against Dilution
5.1 Adjustment for Stock Splits and Combinations. If Company at
any time or from time to time after the Issuance Date effects a subdivision of
the outstanding Warrant Stock, the Purchase Price then in effect immediately
before the subdivision shall be proportionately decreased, and conversely, if
Company at any time or from time to time after the Issuance Date combines the
outstanding shares of Warrant Stock, the Purchase Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 5.1 shall become effective as of the date and time
the subdivision or combination becomes effective.
5.2 Adjustment for Certain Dividends and Distributions. If
Company at any time or from time to time after the Issuance Date makes, or fixes
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Purchase Price then in effect shall be
decreased as of the time of such issuance or, in the event such a record date is
fixed, as of the close of business on such record date, by multiplying the
Purchase Price then in effect by a fraction (1) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in
10
69
payment of such dividend or distribution; provided, however, that if such record
date is fixed and such dividend is not fully paid, or if such distribution is
not fully made on the date fixed therefor, the Purchase Price shall be
recomputed to reflect that such dividend was not fully paid or that such
distribution was not fully made as of the close of business on such record date
and thereafter the Purchase Price shall be adjusted pursuant to this Section 5.2
as of the time of actual payment of such dividends or distributions.
5.3 Adjustments for Other Dividends and Distributions. In the
event Company at any time or from time to time after the Issuance Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of Company other
than shares of Common Stock, then and in each such event provision shall be made
so that Holder shall receive upon exercise of this Warrant, in addition to the
number of shares of Common Stock receivable thereupon, the amount of securities
of Company which Holder would have received had the Warrant been fully exercised
for Common Stock on the date of such event and had Holder thereafter, during the
period from the date of such event to and including the date of exercise,
retained such securities receivable by it as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 5 with respect to the rights of Holder.
5.4 Adjustment for Reclassification, Exchange and Substitution.
If the Warrant Stock issuable upon the exercise of this Warrant is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this Section
5), then, and in any such event, Holder shall have the right thereafter, upon
exercise of this Warrant to receive the kind and amount of stock and other
securities and property receivable upon such reorganization, reclassification or
other change, in an amount equal to the amount that Holder would have been
entitled to had it immediately prior to such reorganization, reclassification or
change exercised Holder's rights to purchase under this Warrant, but only at
such time and to the extent this Warrant is actually exercised, all subject to
further adjustment as provided herein.
5.5 Reorganizations, Mergers, Consolidations or Sales of Assets.
If at any time or from time to time there is a capital reorganization of the
Warrant Stock (other than a recapitalization, subdivision, combination,
reclassification or exchange of the Warrant Stock provided for elsewhere in this
Section 5) or merger or consolidation of Company with or into another entity, or
the sale of all or substantially all of Company's properties and assets to any
other person then, as a part of such reorganization, merger, consolidation or
sale, provision shall be made so that Holder shall thereafter be entitled to
receive, upon exercise of rights to purchase under this Warrant (but only to the
extent such rights are exercised), the number of shares of stock or other
securities or property of Company, or of the successor entity resulting from
such merger or consolidation or sale, to which a holder of Warrant Stock, or
other securities, deliverable upon the exercise of purchase rights under this
Warrant would otherwise have been entitled on such capital reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustments shall
11
70
be made in the application of the provisions of this Section 5 (including
adjustment of the Purchase Price then in effect and number of shares
purchasable) which shall be applicable after such events; provided, however,
that any such adjustments shall be made so as to ensure that the provisions of
this Section 5 applicable after such events shall be as equivalent as may be
practicable to the provisions of this Section 5 applicable before such events.
5.6 Officer's Certificate of Adjustment. In any case of an
adjustment or readjustment of the Purchase Price, the number of shares of
Warrant Stock or other securities issuable upon exercise of this Warrant, the
Company's chief financial officer at its expense shall compute such adjustment
or readjustment in accordance with the provisions hereof and shall prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to Holder at Holder's address
as shown in Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (a) the consideration received or
deemed to be received by Company for any Warrant Stock issued or sold or deemed
to have been issued or sold, (b) the Purchase Price at the time in effect, and
(c) the type and amount, if any, of other property which at the time would be
received upon exercise of this Warrant. Notwithstanding the above, the Holder
may select and cause independent public accountants of recognized standing also
to compute such adjustment or readjustment in accordance with the provisions
hereof and to prepare a certificate showing such adjustment or readjustment. If,
by such computation, the Holder shall determine that the computation performed
by the Company's chief financial officer was incorrect by five percent (5%) and
such inaccuracy was prejudicial to the Holder, then, at the option of Holder,
the cost of Holder's computation and certificate preparation shall be borne by
Company and shall be due and owing upon demand.
5.7 No Change in Warrant Required. The form of this Warrant need
not be changed because of any adjustment in the Purchase Price or in the number
of shares of Warrant Stock purchasable on its exercise. A Warrant issued after
any such adjustment on any partial exercise or in replacement may continue to
express the same Purchase Price and the same number of shares of Warrant Stock
(appropriately reduced in the case of partial exercise) as are stated on the
face of this Warrant as initially issued, and that Purchase Price and number of
shares shall be considered to have been so changed as of the close of business
on the date of adjustment.
5.8 Reservation of Shares. Company recognizes that since the
Warrant Amount is a fixed number, the adjustments provided in this Section will
alter the number of shares subject to purchase rights and agrees to adjust the
appropriate number(s) of shares reserved pursuant to Section 7.1 for issuance
upon exercise of purchase rights.
6. Transfer of Securities.
6.1 Transfer. Subject to the restrictions on transfer contained
in the Agreement, this Warrant and all rights hereunder are transferable on the
books of Company maintained for such purpose at its principal office referred to
above by Holder in person or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer. Each taker and holder of
this Warrant, by taking or holding the same, consents and agrees that this
Warrant
12
71
when endorsed in blank shall be deemed negotiable and that when this Warrant
shall have been so endorsed, Holder hereof may be treated by Company and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of Company, any notice to the contrary
notwithstanding; but until such transfer on such books, Company may treat the
registered Holder hereof as the owner for all purposes.
6.2 Rights Under Agreement. The Shares issuable upon the exercise
of this Warrant are subject to the terms, conditions and limitations set forth
in the Agreement.
6.3 Payment of Taxes. All Shares issued upon the exercise of
rights under this Warrant shall be validly issued, fully paid and nonassessable,
and Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issuance of any certificate for Shares in any name
other than that of Holder surrendered in connection with the purchase of such
Shares, and in such case Company shall not be required to issue or deliver any
stock certificate until such tax or other charge has been paid or it has been
established to Company's satisfaction that no tax or other charge is due.
7. Affirmative Duties of Company.
7.1 Reservation of Warrant Stock. Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the exercise of the purchase
rights under this Warrant, such number of shares of Warrant Stock as shall be
issuable upon the exercise hereof. Company covenants and agrees that, upon such
exercise all Shares issuable upon such exercise shall be duly and validly
issued, fully paid and nonassessable.
7.2 No Dilution or Impairment. Company will not, by amendment of
its certificate of incorporation or through reorganization, consolidation,
merger, dissolution, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant.
Without limiting the generality of the foregoing, Company will take all such
action as may be necessary or appropriate in order that Company may validly and
legally issue fully paid and nonassessable Warrant Stock upon the exercise of
the purchase rights in this Warrant.
8. Notices to Warrant Holder
8.1 Notices to be Given. Nothing contained in this Warrant shall
be construed as conferring upon Holder hereof the right to vote or to consent or
to receive notice as a shareholder in respect of any meetings of shareholders
for the election of directors or any other matter or as having any rights
whatsoever as a shareholder of Company. If, however, at any time prior to the
expiration (by lapse of time or complete exercise) of the purchase right under
this Warrant, any of the following events shall occur:
13
72
(a) Company shall take a record of the holders of its shares
of Warrant Stock for the purpose of entitling them to receive a dividend or
distribution; or
(b) Company shall offer to the holders of its Common Stock
generally any additional shares of capital stock of Company or securities
convertible into or exchangeable for shares of capital stock of Company, or any
option, right or warrant to subscribe therefor; or
(c) Company shall reclassify its Common Stock; or
(d) Company shall engage in or enter into any capital
reorganization, consolidation or merger; or
(e) A dissolution, liquidation or winding up of 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 Company shall give written notice of such event to Holder at
least fifteen (15) days prior to the date fixed as a record date or the date of
closing the transfer books for the determination of the shareholders entitled to
receive 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.
8.2 Listing on Stock Exchange. The Common Stock is currently
listed on NASDAQ. If the Company at any time lists any Common Stock or other
securities of the same class as those issuable on exercise of this Warrant on
any national securities (other than NASDAQ), the Company will, at its sole
expense, simultaneously list on that exchange, an official notice of issuance on
exercise of this Warrant and maintain such listing or inclusion of all shares of
Warrant Stock or other securities from time to time issuable on exercise of this
Warrant.
8.3 Methods; Addresses. Except as otherwise provided herein, any
notice or demand which, by the provisions hereof, is required or which may be
given to or served upon the parties hereto shall be in writing and, if by
telegram, telecopy or telex, shall be deemed to have been validly served, given
or delivered when delivery is confirmed electronically, if by personal delivery,
shall be deemed to have been validly served, given or delivered upon actual
delivery and, if mailed, shall be deemed to have been validly served, given or
delivered three (3) business days after deposit in the United States mails, as
registered or certified mail, with proper postage prepaid and addressed to the
party or parties to be notified, at the following addresses (or such other
address(es) as a party may designate for itself by like notice):
14
73
(a) If to Holder:
Nuvrty, Inc.
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, A Professional Corporation
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
1900 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Company:
▇▇▇▇▇▇▇▇ Coffee, Inc.
Attention: President
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Seventeenth Floor
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
8.4 Warrant Agent. The Company may, on written notice to the
Holder, appoint an agent for the purposes of issuing Warrant Stock or other
securities on the exercise of this Warrant and/or replacing or exchanging this
Warrant. If any such appointment is made, any issuance, replacement, or exchange
shall be made at that office by that agent.
8.5 No Right as Shareholder. No Holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be considered a shareholder of
the Company for the purposes, nor shall anything in this Warrant be construed to
confer on any Holder of this Warrant, as such, any rights of a shareholder of
the Company or any right to vote, to give or withhold consent to corporate
action, to receive notice of meetings of shareholders, or to receive dividends
or subscription rights or otherwise.
15
74
9. Miscellaneous.
9.1 Survival of Covenants. All agreements and covenants made
herein shall survive the execution and delivery hereof.
9.2 Failure or Indulgence Not Waiver. No failure or delay on the
part of Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any one or more of such failures or
delays constitute a course of performance or dealing on which Company is
entitled to rely, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercises thereof or of any other
right, power or privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
9.3 Cost of Enforcement. If any default is made in the
fulfillment of Company's duties under this Warrant, Company shall pay Holder all
costs of enforcement, including, without limitation, reasonable attorneys' and
accountants' fees and costs of appeals and interest on any sums actually
disbursed at the rate set forth herein.
9.4 Governing Law. This Warrant has been executed in and shall be
governed by the laws of the State of California. As part of the consideration
for Holder's investment herein, Company and Holder hereby agree that all actions
or proceedings arising directly or indirectly hereunder, whether instituted by
Holder or Company, may, at the option of Holder, be litigated in courts having
situs within the State of California, County of Orange and Company hereby
expressly consents to the jurisdiction of any local, state or federal court
located within said state and county, and consents that any service of process
in such action or proceeding may be made by personal service upon Company
wherever Company may be located, or by certified or registered mail directed to
Company at its last known address. Company and Holder waive trial by jury, any
objection based on forum non conveniens, and any objection to venue of any
action instituted hereunder.
9.5 Modification. Neither this Warrant nor any provision hereof
may be amended, modified, waived, discharged or terminated with respect to
Holder unless agreed to by the Holder.
9.6 Severability. Whenever possible, each provision of this
Warrant will be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Warrant is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Warrant.
9.7 Further Assurance. At any time or from time to time upon the
request of Holder, Company will execute and deliver such further documents and
do such other acts and things as Holder may reasonably request in order fully to
effectuate the purposes of this Warrant, the exercise of Holder's purchase
right.
16
75
9.8 Successors. All the covenants, agreements, representations
and warranties contained in this Note shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
9.9 Headings. The section headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
9.10 Construction. Both of the parties have participated in the
drafting of this Warrant. Consequently, no provision of this Warrant shall be
construed in favor of or against any party by reason of his or its attorney
having drafting it.
[Signature Page Follows]
17
76
[SIGNATURE PAGE - WARRANT]
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
executed as of the day and year first written above.
▇▇▇▇▇▇▇▇ COFFEE, INC.
By:_________________________________
▇▇▇▇▇ Coin, President
NUVRTY, INC.
By:_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇,____________________
18
77
[SIGNATURE PAGE - WARRANT]
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
executed as of the day and year first written above.
▇▇▇▇▇▇▇▇ COFFEE, INC.
By:_________________________________
▇▇▇▇▇ Coin, President
NUVRTY, INC.
By:_________________________________
▇▇▇▇ ▇▇▇▇▇▇▇,____________________
19