EXHIBIT 10.04
THIS WARRANT HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S)
FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 8 OF THIS
WARRANT.
SHELLS SEAFOOD RESTAURANTS, INC.
WARRANT TO PURCHASE 400,000 SHARES
OF COMMON STOCK (this "Warrant")
Warrant No.: B-3
Shells Seafood Restaurants, Inc., a Delaware corporation (the
"Company"), hereby certifies that, for value received, GCM Shells Seafood
Partners, LLC ("GCM") or registered assigns, is the registered holder of a
warrant (the "Warrant") to subscribe for and purchase Four-Hundred Thousand
(400,000) shares of the fully paid and nonassessable Common Stock (as adjusted
pursuant to Section 4 hereof, the "Warrant Shares") of the Company, at the
price of $0.50 per share (such price and such other price as shall result, from
time to time, from the adjustments specified in Section 4 hereof is herein
referred to as the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, (a) the
term "Common Stock" shall mean the Company's presently authorized
Common Stock, par value $.01 per share, and any stock into
or for which such Common Stock may hereafter be converted or
exchanged, (b) the term "Date of Grant" shall mean August 4,
2004, and (c) the term "Other Warrants" shall mean any warrant
issued upon transfer or partial exercise of this Warrant. The
term "Warrant" as used herein shall be deemed to include
Other Warrants unless the context hereof or thereof clearly
requires otherwise.
The Warrant evidenced by this warrant certificate is a portion of
a series of like warrants (collectively, the "Series Warrants")
exercisable for the purchase of an aggregate of 2,000,000 shares
of the Company's Common Stock (the "Series Warrant Shares")
which Series Warrants are evidenced by certificates of
like tenor (the "Series Warrant Certificates") that have been
issued pursuant to the extension of Secured Senior Notes
associated with certain Securities Purchase Agreement
dated of even date and January 31, 2002, as amended, restated,
supplemented or otherwise modified from time to time (the
"Securities Purchase Agreement"), between the Company, its
subsidiaries, GCM Shells Seafood Partners, LLC, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
and ▇▇▇▇▇▇ Capital, L.P.
1. Term. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time after January 31,
2005 (the "Initial Exercise Date") and from time to time
thereafter through and including the close of business on January
31, 2007 (the "Expiration Date"); provided, however, that in
the event that any portion of this Warrant is unexercised as of
the Expiration Date, the terms of Section 2(b), below, shall
apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant.
Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the holder hereof, in whole or in
part and from time to time after the Initial Exercise Date, by the
surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company of an
amount equal to the then applicable Warrant Price multiplied by
the number of Warrant Shares then being purchased. The person or
persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this Warrant shall
be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been
issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any
exercise of the rights represented by this Warrant, certificates
for the shares of stock so purchased shall be delivered to
the holder hereof as soon as possible and in any event within
thirty (30) days after such exercise and, unless this Warrant has
been fully exercised, a new Warrant representing the portion of
the Warrant Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the
holder hereof as soon as possible and in any event within such
thirty (30)-day period.
b. Automatic Conversion. In the event that any portion of this
Warrant is unexercised as of the Expiration Date, such portion of
this Warrant shall be deemed to have been converted automatically
into shares of Common Stock pursuant to the terms of Section 11.2
below immediately prior to the close of business on the Expiration
Date (or, in the event that the Expiration Date is not a business
day, the immediately preceding business day) (the "Automatic
Conversion Date") and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for
all purposes as the holder of record of such Warrant Shares as of
the close of business on such Automatic Conversion Date.
This Warrant shall be deemed to be surrendered to the Company on
the Automatic Conversion Date, by virtue of this Section 2(b) and
without any action by the holder of this Warrant or any other
person. As promptly as practicable on or after the Automatic
Conversion Date and in any event within thirty (30) days
thereafter, the Company at its expense shall issue and deliver to
the person or persons entitled to receive the same a certificate
or certificates for the number of Warrant Shares issuable upon
such conversion.
3. Stock Fully Paid; Reservation of Shares. All Warrant Shares
that may be issued upon the exercise of the rights represented by
this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from
all taxes (other than any taxes determined with respect to, or
based upon, the income of the person to whom such shares are
issued), liens and charges (other than liens or charges created by
actions of the holder of this Warrant or the person to whom such
shares are issued), and pre-emptive rights with respect to the
issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the
issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from
time to time upon the occurrence of certain events, as follows:
a. INTENTIONALLY LEFT BLANK
b. Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or
from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than
a merger with another corporation in which the Company is the
acquiring and the surviving corporation and which does not result
in any reclassification or change of outstanding securities
issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case
may be, shall duly execute and deliver to the holder of this
Warrant a new Warrant (in form and substance satisfactory to the
holder of this Warrant), so that the holder of this Warrant shall
have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion
of this Warrant, and in lieu of the shares of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a
holder of the number of shares of Common Stock then purchasable
under this Warrant. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4.
The provisions of this Section 4(b) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
c. Subdivision or Combination of Shares. If at any time while
this Warrant remains outstanding and unexpired the Company shall
subdivide or combine its outstanding shares of Common Stock, the
Warrant Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination, effective
at the close of business on the date the subdivision or
combination becomes effective.
d. Stock Dividends. If at any time while this Warrant is
outstanding and unexpired the Company shall pay a dividend with
respect to Common Stock payable in Common Stock, then the Warrant
Price shall be adjusted, from and after the date of determination
of stockholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a
fraction (i) the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to such
dividend, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after
such dividend.
e. Sales to Affiliates. If at any time while this Warrant is
outstanding and unexpired the Company shall sell or grant shares
of its equity securities or rights, options, warrants or
convertible or exchangeable securities of the Company to any
Affiliate of the Company, in all instances at below fair market
value, then the Warrant Price shall be reduced, from and after the
date of such sale, to the lesser of (i) the price to such
Affiliate of the Company and (ii) that price determined by
multiplying the Warrant Price in effect immediately prior to such
date of sale by a fraction (x) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately
prior to such dividend, and (y) the denominator of which shall be
the total number of shares of Common Stock outstanding immediately
after such sale. The number of shares for which the Warrant is
exercisable shall be proportionately increased so that the
aggregate Warrant Price shall remain the same. In the event such
sale is not so consummated, the Warrant Price shall again be
adjusted to the Warrant Price that would then be in effect if the
Affiliate of the Company had not so purchased such shares, but
such subsequent adjustment shall not affect the number of Warrant
Shares issued upon any exercise of the Warrant prior to the
date such subsequent adjustment was made. As used herein,
"Affiliate of the Company" shall mean (1) any Person (other than
Shells Investment Partners, LLC, Banyon Investment, LLC or any
Affiliate of either entity) that directly or indirectly through
one or more intermediaries, Controls or is Controlled by or
is under common Control with the Company, (2) any owner,
shareholder or director of the Company, and (3) any spouse or any
person related by birth or marriage to any Affiliate of the
Company described in clauses (1) and (2) above and "Control" shall
mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise.
f. Rights Offerings. In case the Company shall, at any time
after the Date of Grant, issue rights, options or warrants to the
holders of equity securities of the Company, entitling them to
subscribe for or purchase shares of Common Stock (or securities
convertible or exchangeable into Common Stock) at a price
per share of Common Stock (or having a conversion or exchange
price per share of Common Stock if a security convertible or
exchangeable into Common Stock) less than the fair market value
per share of Common Stock on the record date for such
issuance (or the date of issuance, if there is no record date),
the Warrant Price to be in effect on and after such record date
(or issuance date, as the case may be) shall be determined by
multiplying the Warrant Price in effect immediately prior to such
record date (or issuance date, as the case may be)
by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding on such record date (or
issuance date, as the case may be) plus the number of shares of
Common Stock which the aggregate offering price of the total
number of shares of such Common Stock so to be offered (or the
aggregate initial exchange or conversion price of the
exchangeable or convertible securities so to be offered) would
purchase at such fair market value on such record date (or
issuance date, as the case may be) and (ii) the denominator of
which shall be the number of shares of Common Stock
outstanding on such record date (or issuance date, as the case may
be) plus the number of additional shares of Common Stock to be
offered for subscription or purchase (or into which the
convertible securities to be offered are initially
exchangeable or convertible). In case such purchase or
subscription price may be paid in part or in whole in a form other
than cash, the fair value of such consideration shall be
determined by the Board of Directors of the Company in
good faith as set forth in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary. Such
adjustment shall be made successively whenever such an issuance
occurs; and in the event that such rights, options, warrants, or
convertible or exchangeable securities are not so issued or expire
or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then
the Warrant Price shall again be adjusted to be the Warrant Price
that would then be in effect if such issuance had not occurred,
provided however, the Company shall adjust the number of Warrant
Shares issued upon any exercise of this Warrant after the
adjustment required pursuant to this Section 4(f) but
prior to the date such subsequent adjustment is made, in order to
equitably reflect the fact that such rights, options, warrants, or
convertible or exchangeable securities were not so issued or
expired or ceased to be convertible or exchangeable before they
were exercised, converted, or exchanged (as the case may be).
g. Special Distributions. In case the Company shall fix a
record date for the making of a distribution to all holders of
shares of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is
the surviving corporation) or evidences of indebtedness or assets
(other than dividends and distributions referred to in Sections
4(c) and 4(d) above and other than cash dividends) or of
subscription rights, options, warrants, or exchangeable or
convertible securities containing the right to subscribe for or
purchase shares of any class of equity securities of the Company
(excluding those referred to in Section 4(e) above), the Warrant
Price to be in effect on and after such record date shall be
adjusted by multiplying the Warrant Price in effect immediately
prior to such record date by a fraction (i) the numerator of
which shall be the fair market value per share of Common Stock on
such record date, less the fair value (as determined by the Board
of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or
Assistant Secretary) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights,
options, warrants, or exchangeable or convertible securities
applicable to one (1) share of the Common Stock outstanding as of
such record date, and (ii) the denominator of which shall be such
fair market value per share of Common Stock. Such adjustment
shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the
Warrant Price shall again be adjusted to be the Warrant Price
which would then be in effect if such record date had not been
fixed, but such subsequent adjustment shall not affect the number
of Warrant Shares issued upon any exercise of this Warrant prior
to the date such subsequent adjustment was made.
h. Other Issuances of Securities. In case the Company or any
Subsidiary shall, at any time after the Date of Grant, issue
shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding (i)
shares, rights, options, warrants, or convertible or
exchangeable securities or issued in any of the transactions
described in Sections 4(b), 4(c), 4(d), 4(e), 4(f) or 4(g) above,
(ii) shares issued upon the exercise of such rights, options or
warrants or upon conversion or exchange of such convertible or
exchangeable securities, (iii) this Warrant and any shares issued
upon exercise thereof, (iv) shares or options issued to
employees or directors of the Company, (v) warrants issued as
compensation or in lieu of payment in connection with legitimate
business arrangements, (vi) shares issues upon conversion of
the shares of the Company's preferred stock outstanding on the
date of this Warrant, (vii) shares issued upon the exercise of warrants to
purchase 8,908,030 shares of Common Stock issued in connection with the
Securities Purchase Agreement and (viii) shares, rights, options, warrants, or
convertible or exchangeable securities issued in connection with the
contemplated financing by JMP Securities LLC and shares issued upon the
exercise of such rights, options or warrants or upon conversion or exchange of
such convertible or exchangeable securities), at a price per share of Common
Stock (determined in the case of such rights, options, warrants, or
convertible or exchangeable securities by dividing (x) the total
amount receivable by the Company in consideration of the sale and
issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration
payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock
covered by such rights, options, warrants, or convertible or
exchangeable securities) lower than the fair market value per
share of Common Stock on the date the Company fixes the offering
price of such shares, rights, options, warrants, or convertible or
exchangeable securities, then the Warrant Price shall be
adjusted so that it shall equal the price determined by
multiplying the Warrant Price in effect immediately prior thereto
by a fraction (i) the numerator of which shall be the sum of (A)
the number of shares of Common Stock outstanding immediately prior
to such sale and issuance plus (B) the number of shares of Common
Stock which the aggregate consideration received (determined as
provided below) for such sale or issuance would purchase at such
fair market value per share, and (ii) the denominator of which
shall be the total number of shares of Common Stock outstanding
immediately after such sale and issuance. Such adjustment shall
be made successively whenever such an issuance is made. For the
purposes of such adjustment, the maximum number of shares of
Common Stock which the holder of any such rights, options,
warrants or convertible or exchangeable securities shall be
entitled to subscribe for or purchase shall be deemed to be issued
and outstanding as of the date of such sale and 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 or exchangeable securities, plus
the minimum consideration or premium stated in such rights,
options, warrants, or convertible or exchangeable securities
to be paid for the shares of Common Stock covered thereby. In
case the Company shall sell and issue shares of Common Stock, or
rights, options, warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase
shares of 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 Section 4(h), the Board of Directors
of the Company shall determine, in good faith, the fair value of
said property, and such determination shall be described
in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary. In case the Company shall sell
and issue rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock together with one (1) or more
other securities as a part of a unit at a price per unit,
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 Section 4(h), the Board of Directors of the
Company shall determine, in good faith, which determination shall
be described in a duly adopted board resolution certified by the
Company's Secretary or Assistant Secretary, the fair value of
the rights, options, warrants, or convertible or exchangeable
securities then being sold as part of such unit. Such adjustment
shall be made successively whenever such an issuance occurs, and
in the event that such rights, options, warrants, or convertible
or exchangeable securities expire or cease to be convertible or
exchangeable before they are exercised, converted, or exchanged
(as the case may be), then the Warrant Price shall again be
adjusted to the Warrant Price that would then be in effect if such
sale and issuance had not occurred, but such subsequent adjustment
shall not affect the number of Warrant Shares issued upon any
exercise of the Warrant prior to the date such subsequent
adjustment is made.
i. Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Warrant Shares purchasable hereunder
shall be adjusted, to the nearest whole share, to the product
obtained by multiplying the number of Warrant Shares purchasable
immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
j. Determination of Fair Market Value. For purposes of this
Section 4, "fair market value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean (i) if
shares of Common Stock are traded on a national securities
exchange (an "Exchange"), the weighted average of the closing
prices of a share of the Common Stock of the Company on the last
five (5) trading days prior to the Determination Date reported
on such Exchange as reported in The Wall Street Journal (weighted
with respect to the trading volume with respect to each such day),
(ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on
the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), (A) the average of the last sale
prices reported on NASDAQ or (B) if such shares are an issue for
which last sale prices are not reported on NASDAQ, the
average of the closing bid and ask prices, in each case on the
last five (5) trading days (or if the relevant price or quotation
did not exist on any of such days, the relevant price or quotation
on the next preceding business day on which there was such a price
or quotation) prior to the Determination Date as reported in The
Wall Street Journal, or (iii) if no price can be determined on
the basis of the above methods of valuation, then the judgment of
valuation shall be determined in good faith by the Board of
Directors of the Company, which determination shall be described
in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary. If the Board of Directors of
the Company is unable to determine any Valuation (as defined
below), or if the holders of at least fifty percent (50%) of all
of the Warrant Shares then issuable hereunder (collectively, the
"Requesting Holders") disagree with the Board's determination of
any Valuation by written notice delivered to the Company within
five (5) business days after the determination thereof by the
Board of Directors of the Company is communicated to holders of
the Warrants affected thereby, which notice specifies a majority-
in-interest of the Requesting Holders' determination of such
Valuation, then the Company and a majority-in-interest of the
Requesting Holders shall select a mutually acceptable investment
banking firm of national reputation which has not had a
material relationship with the Company or any officer of the
Company within the preceding two (2) years, which shall determine
such Valuation. Such investment banking firm's determination of
such Valuation shall be final, binding and conclusive on the
Company and the holders of all of the Warrants issued
hereunder and then outstanding. Any and all costs and fees of
such investment banking firm shall be borne equally by the
Company and the Requesting Holders, however, if the Valuation is
within 90% of either party's valuation, then the other party shall
pay all of the costs and fees of such investment banking firm.
For purposes of this Section 4(j), the term "Valuation" shall mean
the determination, to be made initially by the Board of Directors
of the Company, of the fair market value per share of Common Stock
pursuant to clause (iii) above.
k. Subsequent Changes. If, at any time after any adjustment of
the Warrant Price shall have been made hereunder as the result of
any issuance, sale or grant of any rights, options, warrants or
convertible or exchangeable securities, any of such rights,
options or warrants or the rights of conversion or exchange
associated with such convertible or exchangeable securities shall
expire by their terms or any of such rights, options, warrants or
convertible or exchangeable securities shall be repurchased by the
Company or a Subsidiary for a consideration per underlying share
of Common Stock not exceeding the amount of such consideration
received by the Company in connection with the issuance, sale
or grant of such rights, options, warrants or convertible or
exchangeable securities, the Warrant Price then in effect shall
forthwith be increased to the Warrant Price that would have been
in effect if such expiring right, option or warrant or rights of
conversion or exchange or such repurchased rights, options,
warrants or convertible or exchangeable securities had never been
issued. Similarly, if at any time after any such adjustment of
the Warrant Price shall have been made pursuant to Section 4(h)
above (i) any additional aggregate consideration is received or
becomes receivable by the Company in connection with the issuance
of exercise of such rights, options, warrants or convertible
or exchangeable securities or (ii) there is a reduction in the
conversion or exchange ratio applicable to such convertible or
exchangeable securities so that fewer shares of Common Stock will
be issuable upon the conversion or exchange thereof or there is a
decrease in the number of shares of Common Stock issuable
upon exercise of such rights, options or warrants (except where
such reduction or decrease results from a combination of shares
described in Section 4(c) above), the Warrant Price then in effect
shall be forthwith readjusted to the Warrant Price that would have
been in effect had such changes taken place at the time that such
rights, options, warrants or convertible or exchangeable
securities were initially issued, granted or sold. In no event
shall any readjustment under this Section 4(k) affect the validity
of any Warrant Shares issued upon any exercise of this Warrant
prior to such readjustment.
5. Notice of Adjustments. Whenever the Warrant Price or the
number of Warrant Shares purchasable hereunder shall be adjusted
pursuant to Section 4 hereof, the Company shall deliver to the
holder of this Warrant a certificate signed by its chief financial
officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price and
the number of Warrant Shares purchasable hereunder after giving
effect to such adjustment.
6. Dividends. The Company shall not make any dividend or
distribution to its shareholders prior to the Initial Exercise
Date. After the Initial Exercise Date, in the event that the
Company shall fix a record date for the making of any dividend or
distribution to holders of shares of Common Stock, the Company
shall notify the holder of the Warrants, in writing, at least 30
days in advance of the record date for the proposed dividend or
distribution.
7. Fractional Shares. No fractional shares of Common Stock
will be issued in connection with any exercise hereunder, but in
lieu of such fractional shares the Company shall make a cash
payment therefor based on the fair market value (as determined in
accordance with Section 4(j) above) of a share of Common Stock
on the date of exercise.
8. Compliance with Securities Act; Disposition of Warrant or
Warrant Shares.
a. Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant and the shares of
Common Stock to be issued upon exercise hereof are being acquired
for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Common
Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act. Upon
exercise of this Warrant, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to Exhibit A
hereto, that the shares of Common Stock so purchased are
being acquired for investment and not with a view toward
distribution or resale.
This Warrant and all shares of Common Stock issued upon exercise
of this Warrant (unless registered under the Securities Act) shall
be stamped or imprinted with a legend in substantially the
following form: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY
TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 8 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED DIRECTLY OR INDIRECTLY." In addition, in
connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this
Warrant as follows:
(1) The holder is aware of the Company's business affairs and
financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision
to acquire this Warrant. The holder has executed a confidentiality
agreement and will hold all information governed by that agreement
in accordance with the terms of such agreement. The holder is
acquiring this Warrant for its own account for investment purposes
only and not with a view to, or for the resale in connection with,
any "distribution" thereof for purposes of the Securities Act.
(2) The holder understands that this Warrant and the Warrant
Shares have not been registered under the Securities Act in
reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the
holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the SEC,
the statutory basis for such exemption may be unavailable if the
holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the
minimum capital gains period specified under applicable tax laws,
for a deferred sale, for or until an increase or decrease in the
market price of the Warrant and the Warrant Shares, or for a
period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and
the Warrant Shares must be held indefinitely unless subsequently
registered under the Securities Act and any applicable state
securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 and
144A, promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof (or from an
affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including,
among other things: the availability of certain public
information about the Company, the resale occurring not less than
one (1) year after the party has purchased and paid for the
securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities
being sold during any three-month period not exceeding the
specified limitations stated therein.
(5) The holder further understands that at the time it
wishes to sell this Warrant and the Warrant Shares there may be no
public market upon which to make such a sale, and that, even if
such a public market then exists, the Company may not be
satisfying the current public information requirements of
Rule 144 and 144A, and that, in such event, the holder may be
precluded from selling this Warrant and the Warrant Shares under
Rule 144 and 144A even if the one (1)-year minimum holding period
had been satisfied.
(6) The holder further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied,
registration under the Securities Act, compliance with Regulation
A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion
that persons proposing to sell private placement securities other
than in a registered offering and otherwise than pursuant to Rule
144 and 144A will have a substantial burden of proof in
establishing that an exemption from registration is available for
such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at
their own risk.
b. Exchange. This Warrant may be exchanged, without payment of
any service charge, for one (1) or more new Warrants of like tenor
exercisable for the same aggregate number of shares of Common
Stock upon surrender to the Company by the registered holder
hereof in person or by legal representative or by attorney duly
authorized in writing and, upon issuance of the new Warrant or
Warrants, the surrendered Warrant shall be cancelled and disposed
of by the Company.
c. Disposition of Warrant or Warrant Shares. With respect to
any offer, sale or other disposition of this Warrant, or any
Warrant Shares acquired pursuant to the exercise of this Warrant
prior to registration of such Warrant or Warrant Shares, the
holder hereof and each subsequent holder of this Warrant agrees to
give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of
such holder's counsel, if reasonably requested by the Company, to
the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the
Securities Act as then in effect or any federal or state law then
in effect) of this Warrant or such Warrant Shares and indicating
whether or not under the Securities Act certificates for this
Warrant or such Warrant Shares to be sold or otherwise disposed of
require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with applicable
law. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Warrant Shares, all in
accordance with the terms of the notice delivered to the Company.
If a determination has been made pursuant to this Section 8(c)
that the opinion of counsel for the holder is not reasonably
satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made and neither
this Warrant nor any Warrant shall be sold or otherwise disposed
of until such disagreement has been resolved. The foregoing
notwithstanding, this Warrant or such Warrant Shares may (i) as to
such federal laws, be offered, sold or otherwise disposed of in
accordance with Rule 144 and 144A under the Securities Act,
provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule 144 and 144A have
been satisfied and (ii) be offered, sold, distributed or otherwise
transferred to Affiliates of the LLC without regard to this
Section 8, but only if the Company is in receipt of an opinion of
counsel as to the permissibility of such transfer under federal
and state securities laws and an investor representation
letter from the transferee, in form and substance reasonably
satisfactory to the Company . Each certificate representing this
Warrant or the Warrant Shares thus transferred (except a transfer
pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance
with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance
with such laws. The Company may issue stop transfer instructions
to its transfer agent or, if acting as its own transfer agent, the
Company may stop transfer on its corporate books, in connection
with such restrictions. As used herein, "Affiliate of the LLC"
shall mean (x) any owner, shareholder, partner or member of the
LLC, and (y) any other Person that directly or indirectly, through
one or more intermediaries, Controls or is Controlled by or is
under common Control with the LLC.
9. Rights as Stockholders; Information. Except as otherwise set
forth in Section 6 above, no holder of this Warrant, as such,
shall be entitled or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of the directors or
upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, until this Warrant shall have
been exercised and the Warrant Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
The foregoing notwithstanding, the Company will transmit to the
holder of this Warrant such information, documents and reports as
are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution
thereof to the stockholders.
10. Registration Rights.
10.1 Demand Registration Rights.
a. The Company covenants and agrees that at any time after
January 1, 2003 and after receipt of a written request (a "Demand
Registration Request") from the holder(s) of Registrable
Securities (as defined below (together, the "Securityholders")
constituting at least fifty percent (50%) of the Registrable
Securities on such date and then eligible for inclusion in a
registration pursuant to this Section 10.1, stating that the
Initiating Securityholders (as defined below) desire and intend to
have the Company register (a "Demand Registration") all or a
portion of the Registrable Securities held by them under
such circumstances, the Company shall give notice (the
"Registration Notice") to all of the Securityholders within thirty
(30) days of the Company's receipt of such registration request,
and the Company shall cause to be included in such registration
all Registrable Securities requested to be included therein by
any such Securityholder by notice received by the Company within
fifteen (15) days after such Registration Notice is sent by the
Company (subject to the provisions of the final sentence of this
Section 10.1(a)). After such fifteen (15)-day period, the Company
shall file as promptly as practicable a registration statement and
use its reasonable best efforts to cause such registration
statement to become effective under the Securities Act and remain
effective for six (6) months or such shorter period as may be
required if all such Registrable Securities covered by such
registration statement are sold prior to the expiration of such
six (6)-month period; provided, however, that no request may be
made pursuant to this Section 10.1(a) if within six (6) months
prior to the date of such request a registration statement
pursuant to this Section 10.1(a) shall have been declared
effective by the SEC; provided, further, that, subject to the
following sentence, the Company shall not be obligated to effect
any such registration pursuant to this Section 10.1 after
the Company has effected one (1) such registration pursuant to
this Section 10.1; provided, further, that to the extent that any
Registrable Securities requested to be included in the initial
registration requested under this Section 10.1(a) are not so
included as a result of the provisions of the final sentence of
this Section 10.1(a), the Company shall be obligated to effect one
(1) additional registration pursuant to this Section 10.1.
Furthermore, at any time that the Company shall be eligible to
file a registration statement on Form S-3, each Securityholder
that then owns fifteen percent (15%) or more of the Registrable
Securities then outstanding (a "Substantial Holder") that shall
make a written request to the Company shall be entitled to have
all or any number of such Securityholder's Registrable Securities
included in a registration with the SEC in accordance with the
Securities Act for an offering on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act (a "Shelf
Registration" and such request a "Shelf Registration
Request"); provided, however, that the Company shall be obligated
to effect no more than such number of Shelf Registrations as may
be necessary to provide each and every Substantial Holder with the
right to request one (1) Shelf Registration. Each Securityholder
making a demand for registration under this Section 10.1 is
referred to herein as an "Initiating Securityholder." For
purposes of this Section 10, a registration shall not be deemed to
have been effected hereunder unless a registration statement
including at least eighty-five percent (85%) of the Registrable
Securities requested to be included therein has been declared
effective and, subject to Section 10.3(b) hereof, remained
effective (i) in the case of a Demand Registration for a period of
six (6) months (or such shorter period as is permitted in the
second sentence of this Section 10.1) and (ii) in the case of a
Shelf Registration, for a period of one (1) year or until all of
the Registrable Securities included in such registration statement
have been sold. In the event of an underwritten offering pursuant
to this Section 10.1, if the managing underwriter of such offering
shall advise the Securityholders in writing that, in its opinion,
the distribution of a specified portion of the securities
requested to be included in the registration would materially
adversely affect the distribution of such securities by increasing
the aggregate amount of the offering in excess of the maximum
amount of securities which such managing underwriter believes can
reasonably be sold in the contemplated distribution within a price
range acceptable to the Initiating Securityholders, then the
securities to be included in the registration shall be limited to
such number as can be sold within such price range and shall be
included in the following order: (i) first, pro rata among the
Registrable Securities requested to be included therein by the
Securityholders, according to the number of Registrable
Securities requested to be included by each such Securityholder
requesting inclusion therein, and (ii) then, such other securities
requested to be included therein by the Company and the holders of
such other securities holding registration rights, pro rata among
the Company and the holders of such other securities according to
the number of securities requested to be included by the Company
and each such holder requesting inclusion therein.
b. For purposes of this Section 10.1, the Securityholders who
have requested registration of Common Stock to be acquired upon
the exercise of Warrants not theretofore exercised shall furnish
the Company with an undertaking that they or the underwriters or
other persons to whom such Warrants will be transferred have
undertaken to execise such Warrants and to sell, transfer or
otherwise dispose of the Warrant Shares received upon exercise of
such Warrants in such registration.
c. [intentionally omitted]
d. As used in this Warrant, the term "Registrable Securities"
means the shares of Common Stock issued or issuable on exercise of
the Series Warrants; provided, however, that the Registrable
Securities shall not include any shares that as of the date in
question have theretofore been registered and sold pursuant to the
Securities Act or that have been sold to the public pursuant to
Rule 144 or any similar rule promulgated by the SEC pursuant to
the Securities Act, and, provided, further, the Company shall have
no obligation hereunder to register any Registrable Securities if
the Company shall deliver to the holders requesting such
registration an opinion of counsel reasonably satisfactory
to such holders and their counsel to the effect that the
proposed sale or disposition of all of the Registrable Securities
for which registration was requested does not require registration
under the Securities Act for a sale or disposition in a single
public sale, and offers to remove any and all legends restricting
transfer from the certificates evidencing such Registrable
Securities.
10.2 Incidental Registration.
a. The Company covenants and agrees with the Securityholders
that in the event that the Company proposes after the Date of
Grant to file a registration statement under the Securities Act
with respect to any of its equity securities (other than pursuant
to registration statements on Form S-4 or Form S-8 or any
successor or similar forms), whether or not for its own account,
then the Company shall give written notice of such proposed filing
to all Securityholders promptly (and in any event at least twenty
(20) days before the anticipated filing date). Such notice shall
offer to such Securityholders, together with others who have
similar rights, the opportunity to include in such registration
statement such number of Registrable Securities as they may
request. The Company shall consult with, and to the
extent determined to be nondetrimental use its reasonable good
faith efforts to cause the managing underwriter of a proposed
underwritten offering (unless the offering is an underwritten
offering of a class of the Company's equity securities other than
Common Stock and the managing underwriter has advised the Company
in writing that, in its view, the inclusion in such offering of
Common Stock could materially adversely affect such offering) to
permit the holders of Registrable Securities requested to be
included in the registration to include such Registrable
Securities in the proposed offering and the Company shall use its
reasonable best efforts to include such Registrable Securities in
such proposed offering on the same terms and conditions
as any similar securities of the Company included therein. All
Securityholders proposing to distribute Registrable Securities
through such underwriting shall enter into an underwriting
agreement in customary form with the representative of the
underwriter or underwriters. The foregoing notwithstanding, in
the case of a firm commitment offering on underwriting terms
appropriate for such a transaction, other than a registration
requested by Securityholders pursuant to Section 10.1, if
any such managing underwriter of recognized standing shall advise
the Company and the Securityholders in writing that, in its view,
the distribution of all or a specified portion of the Registrable
Securities requested to be included in the registration
concurrently with the securities being registered by the Company
could materially adversely affect the distribution of such
securities by increasing the aggregate amount of the offering in
excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated
distribution at a price acceptable to the Company or the
securityholders initiating such registration, then the securities
to be included in a registration which is a primary underwritten
offering on behalf of the Company shall be included in the
following order: (i) first, the securities the Company proposes
to include therein, and (ii) second, Registrable Securities
requested to be included in such registration by Securityholders
pursuant to this Section 10.2 together with all other
securities requested to be included therein by holders having
registration rights, pro rata among the holders of such securities
according to the number of securities requested to be included by
each such holder requesting inclusion therein.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders)
requests, pursuant to rights granted to such holder or holders,
that the Company file a registration statement for the public
offering of securities and the Company and the other holders of
the Company's securities (including the Securityholders) who have
rights to be included in such registration, request to be included
in such registration and the managing underwriter of such
offering shall advise the Company and the holders requesting
inclusion in the offering that, in its opinion, the distribution
of a specified portion of the securities requested to be included
in the registration could materially adversely affect the
distribution of such securities by increasing the aggregate amount
of the offering in excess of the maximum amount of securities
which such managing underwriter believes can reasonably be sold in
the contemplated distribution then, the securities to be included
in the registration shall be included in the following order: (i)
first, the securities the Company proposes to include therein;
(ii) second, all of the securities requested to be included
therein by the holder or holders making the initial request for
the registration, and (iii) third, Registrable Securities
requested to be included in such registration by Securityholders
pursuant to this Section 10.2 together with all other securities
requested to be included therein by holders having registration
rights, pro rata among the holders of such securities according to
the number of securities requested to be included by each such
holder requesting inclusion therein. For purposes of this Section
10.2(b), the Company agrees to request for inclusion in the
registration only that number of securities that the Company
intends, in good faith, to sell, if all such securities so
requested by the Company were permitted to be included by the
managing underwriter in such registration and sold pursuant
thereto.
10.3 Company's Obligations.
a. In connection with the registration of Registrable Securities
on behalf of the holders thereof (such Securityholders being
referred to herein as "Sellers") in accordance with Section 10.1
or Section 10.2 above, the Company agrees to:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such
registration statement to become and remain effective as provided
herein;
(ii) enter into a cross-indemnity agreement, in customary form,
with each underwriter, if any;
(iii) subject to the provisions of Section 10.1 and Section
10.2 regarding reductions in Registrable Securities to be included
in a registration, include in the registration statement filed
with the SEC, the Registrable Securities for which requests for
registration have been made; and promptly after filing of such a
registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to each Seller
copies of all such documents so filed including, if requested,
documents incorporated by reference in the registration statement;
and notify each Seller of any stop order issued or threatened by
the SEC and use its best efforts to prevent the entry of such stop
order or to remove it if entered;
(iv) prepare and file with the SEC such amendments of and
supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such
registration statement effective for such period as required
herein, and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the Sellers set forth in such
registration statement;
(v) furnish to each Seller and each underwriter, if any, without
charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents as such Seller may reasonably request in order to
facilitate the disposition of the Registrable Securities proposed
to be sold by such Seller;
(vi) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or Blue Sky
laws of such jurisdictions as any Seller or any such underwriter
reasonably requests in writing and keep such registrations or
qualifications in effect for so long as such registration
statement remains in effect and do any and all acts and things
which may be reasonably necessary or advisable to enable such
Seller to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such Seller; provided,
however, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify, or subject itself to taxes, in
all instances, but for this Section 10.3(a)(vi), or (B) consent to
general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when a prospectus
relating to such Seller's Registrable Securities is required to be
delivered under the Securities Act, of the occurrence of any event
as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits
to state any material fact necessary to make the statements
therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the
statements therein not misleading;
(viii)cause all such Registrable Securities to be listed on
any Exchange or NASDAQ on which similar securities issued by the
Company are then listed;
(ix) provide a transfer agent, registrar and CUSIP number for all
such Registrable Securities not later than the effective date of
such registration statement;
(x) to the extent of an underwritten offering, enter into an
underwriting agreement in customary form and take all such other
actions that the Sellers or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities;
(xi) make available for inspection by the Sellers and one (1)
counsel acting for them, any underwriter participating in any
disposition pursuant to such registration statement, and any
counsel retained by any such underwriter, all pertinent financial
and other information and corporate documents of the Company
reasonably requested, and cause the Company's officers, directors
and employees to supply all information reasonably requested by
any such Seller, underwriter or counsel in connection with such
registration statement;
(xii) with respect to any underwritten offering, use its
reasonable good faith efforts to obtain a "cold comfort" letter
from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by
"cold comfort" letters as the Sellers or any underwriter may
reasonably request;
(xiii)with respect to an underwritten offering, use its
reasonable good faith efforts to obtain an opinion of counsel to
the Company, addressed to the Sellers and any underwriter, in
customary form and including such matters as are customarily
covered by such opinions in underwritten registered offerings of
equity securities as the Sellers or any underwriter may reasonably
request, such opinion to be reasonably satisfactory in form and
substance to a majority in interest of the Sellers; and
(xiv) otherwise use its commercially reasonable good faith
efforts to comply with all applicable rules and regulations of the
SEC, and make available to its securityholders, as soon as
reasonably practicable, an earnings statement covering the period
of at least twelve (12) months subsequent to the effective date of
the registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
b. Any other provisions of this Section 10 notwithstanding, upon
receipt by the Securityholders of a written notice signed by the
chief executive officer or chief financial officer of the Company
to the effect set forth below, the Company shall not be obligated
during a reasonable period of time (not to exceed one hundred
twenty (120) days) thereafter to effect any registrations pursuant
to this Section 10, at any time at which, in the Company's
reasonable judgment, (i) there is a development involving
the Company or any of its affiliates which is material but which
has not yet been publicly disclosed or (ii) sales pursuant to the
registration statement would materially and adversely affect an
underwritten public offering for the account of the Company or any
other material financing project or a proposed or pending material
merger or other material acquisition or material business
combination or material disposition of the Company's assets, to
which the Company or any of its affiliates is, or is expected to
be, a party. In the event a registration is postponed in
accordance with this Section 10.3(b), (x) the Company must (unless
otherwise instructed by those holders who requested such
registration) file the requested registration within six (6)
months from the date the Company first received the request of the
holders, (y) the Company may not defer the filing of a requested
registration pursuant to this Section 10.3(b) more than once in
any twelve (12)-month period, and (z) there shall be added to the
period during which the Company is obligated to keep a
registration effective the number of days for which the
registration was postponed pursuant to this Section 10.3(b).
c. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant
hereto, furnish the Company with such information regarding such
Seller, the number of the Registrable Securities owned by it, and
the intended method of distribution of the Registrable Securities
proposed to be sold by such Seller as the Company may from time to
time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in
Section 10.3(a)(vii) above, such Seller shall forthwith
discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities
until such Seller's receipt of copies of the supplemented or
amended prospectus contemplated by Section 10.3(a)(vii) above and,
if so directed by the Company, such Seller will deliver to the
Company (at the Company's expense) all copies, other than
permanent file copies in such Seller's possession, of the
prospectus covering such Registrable Securities current at the
time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 10.3(a)(iv)
above shall be extended by the number of days during the period
from and including the date of giving of such notice to and
including the date when each Seller shall have received the copies
of the supplemented or amended prospectus contemplated by Section
10.3(a)(vii) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by
name or otherwise as the Seller of any securities of the Company
unless such reference to such Seller is required by the Securities
Act or any similar federal statute then in force.
10.4 All expenses incident to the Company's performance of or
compliance with this Warrant, including without limitation all
registration and filing fees, fees and expenses relating to
filings with any Exchange, fees and expenses of compliance with
securities or Blue Sky laws in jurisdictions reasonably
requested by any Seller or underwriter pursuant to Section
10.3(a)(vi) (including reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the
Registrable Securities), all word processing, duplicating and
printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Company and one (1) counsel for
the Sellers (selected by those Sellers owning a majority of the
Registrable Securities included in such registration), independent
public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incident to such
performance) and underwriters (excluding discounts, commissions or
fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals attributable to the securities
being registered, which discounts, commissions or fees with
respect to any Seller's respective shares shall be paid
by such Seller, and legal expenses of any person other than the
Company and the Sellers, but including liability insurance if the
Company so desires), all the Company's internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties),
the expense of any annual audit, the expense of any liability
insurance (if the Company determines to obtain such insurance) and
the fees and expenses incurred in connection with the listing of
the securities to be registered on any Exchange and/or NASDAQ on
which such securities issued by the Company are then listed, the
reasonable fees and expenses of any special experts (including
attorneys) retained by the Company (if it so desires) in
connection with such registration and fees and expenses of other
persons retained by the Company (all such expenses being herein
called "Registration Expenses"), shall be borne by the Company.
10.5 In connection with the preparation and filing of each
registration statement under the Securities Act pursuant to this
Section 10, the Company shall give the Sellers under such
registration statement, their underwriters, if any, and their
respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each
amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities
to discuss the business of the Company with its officers and
the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such
Sellers' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act,
subject to execution of a confidentiality agreement reasonably
acceptable to the Company.
10.6 Indemnification
a. In the event of any registration of any securities of the
Company under the Securities Act, the Company shall, and hereby
does, indemnify and hold harmless, to the extent permitted by
applicable law, in the case of any registration statement filed
pursuant to Section 10.1 or Section 10.2, the Seller of any
Registrable Securities covered by such registration statement, its
directors, officers, employees and agents, each other person who
participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls
such Seller or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages, or
liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which such
Seller or any such director or officer or employee or agent or
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which
such Registrable Securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which
they were made not misleading, and the Company shall
reimburse such Seller and each such director, officer, employee,
agent, underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability,
action, or proceeding; provided, however, that the
Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding,
whether commenced or threatened in respect thereof), or expense
arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment, or supplement in
reliance upon and in conformity with written information furnished
to the Company by the indemnified party for the express purpose of
use in the preparation thereof and, provided, further, that the
Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof),
or expense arises out of such person's failure to send or give a
copy of the final prospectus, as the same may be then supplemented
or amended, within the time required by the Securities Act
to the person asserting an untrue statement or alleged untrue
statement or omission or alleged omission if such statement or
omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or any such
director, officer, employee, agent, underwriter or controlling
person and shall survive the transfer of such Registrable
Securities by such Seller.
b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement
filed pursuant to Section 10.3, such prospective Seller shall, and
hereby does, indemnify and hold harmless the Company, its
directors, officers, employees and agents, each other person who
participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls
the Company or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages, or liabilities
(or actions or proceedings whether commenced or threatened in
respect thereof), joint or several, to which the Company or any
such director or officer or employee or underwriter or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or
actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in any registration statement under which such
Registrable Securities were registered under the Securities Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, 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 such prospective Seller shall
reimburse the Company and any such director, officer, employee,
agent, underwriter or controlling person for any legal or any
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability,
action, or proceeding if, and only if, such statement or alleged
statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the
Company through an instrument duly executed by such Seller
specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment, or supplement. In no event shall
the liability of any Seller hereunder be greater in amount than
the dollar amount of the proceeds received by such Seller upon
the sale of the Registrable Securities giving rise to such
indemnification obligation. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, employee,
agent, underwriter or controlling person and shall survive the
transfer of such Registrable Securities by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar
securities industry professionals participating in the
distribution to the same extent as provided above with
respect to information so furnished in writing by such persons
specifically for inclusion in any prospectus or registration
statement.
d. Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim
referred to in this Section 10.6, such indemnified party shall, if
a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 10.6, except to the extent
that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying
party similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof.
If, in the indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnified party may assume
the defense of such claim, jointly with any other indemnified
party that reasonably determines such conflict of interest to
exist, and the indemnifying party shall be liable to such
indemnified parties for the reasonable legal fees and expenses of
one counsel for all such indemnified parties and for other
expenses reasonably incurred in connection with the
defense thereof incurred by the indemnified party. No
indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any
settlement of any such action which 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, or a
covenant not to ▇▇▇, in respect of such claim or litigation. No
indemnified party shall consent to entry of any judgment or
enterinto any settlement of any such action the defense
of which has been assumed by an indemnifying party without the
consent of such indemnifying party.
e. Indemnification and contribution similar to that specified in
this Section 10.6 (with appropriate modifications) shall be given
by the Company and each Seller with respect to any required
registration or other qualification of Registrable Securities
under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
f. The indemnification required by this Section 10.6 shall be
made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
g. If the indemnification provided for in this Section 10.6 from
the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities,
or expenses referred to herein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result
of losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the
actions which resulted in such losses, claims, damages,
liabilities, or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities, and expenses referred to above shall
be deemed to include any unreimbursed legal or other fees or
expenses reasonably incurred by such party in connection with
any investigation or proceeding. In no event shall the liability
of any Seller hereunder be greater in amount than the dollar
amount of the proceeds received by such Seller upon the sale of
the Registrable Securities giving rise to such contribution
obligation. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 10.6(g)
were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in this Section 10.6(g). No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
10.7 Market Stand-Off Agreement. If requested by the managing
underwriter of an offering for which securities of such
Securityholder have been registered, a Securityholder shall not
sell or otherwise transfer or dispose of any Registrable
Securities held by such Securityholder (other than those included
in the registration) during such period following the effective
date of such registration as is usual and customary at such time
in similar public offerings of similar securities as determined by
such managing underwriter and set forth in a letter delivered to
such Securityholder, so long as the officers, directors
and all holders of five percent (5%) or more of the shares of
Common Stock or any securities convertible into or exchangeable
for shares of Common Stock of the Company are also required to so
withhold their shares for such period. The obligations described
in this Section 10.7 shall not apply to offerings pursuant
to a registration statement on Form S-4 or Form S-8 or any
successor or similar form.
10.8 Assignment of Rights; Termination. The rights granted under
this Section 10 shall be deemed assigned to the transferee of any
of the Registrable Securities and, in all instances, will
terminate on the three (3) year anniversary of the Expiration
Date.
11. Additional Rights.
11.1 Mergers. In the event that the Company undertakes to (i)
sell, lease, exchange, convey or otherwise dispose of all or
substantially all of its property or business, or (ii) merge into
or consolidate with any other corporation (other than a wholly-
owned Subsidiary), or effect any transaction (including a merger
or other reorganization) or series of related transactions,
in which more than fifty percent (50%) of the voting power of the
Company is disposed of, the Company will use its best efforts to
provide at least thirty (30) days notice of the terms and
conditions of the proposed transaction. The Company shall
cooperate with the holder in consummating the sale of this Warrant
in connection with any such transaction.
11.2 Right to Convert Warrant into Common Stock; Net Issuance.
a. Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion
thereof (the "Conversion Right") into shares of Common Stock as
provided in this Section 11.2 at any time or from time to
time during the term of this Warrant. Upon exercise of the
Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the
Company shall deliver to the holder (without payment by the holder
of any exercise price or any cash or other consideration)
that number of shares of fully paid and nonassessable Common Stock
equal to the quotient obtained by dividing (i) the value of this
Warrant (or the specified portion hereof) on the Conversion Date
(as defined in Section 11(b) hereof), which value shall be equal
to (A) the aggregate fair market value of the Converted Warrant
Shares issuable upon exercise of this Warrant (or the specified
portion hereof) on the Conversion Date less (B) the aggregate
Warrant Price of the Converted Warrant Shares immediately prior to
the exercise of the Conversion Right by (ii) the fair market value
of one (1) share of Common Stock on the Conversion Date. Expressed
as a formula, such conversion shall be computed as follows:
X= A - BY
Where: X = the number of shares of Common Stock that may be
issued to holder
Y = the fair market value (FMV) of one (1) share of Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)No fractional shares shall be issuable upon exercise
of the Conversion Right, and, if the number of shares to be issued
determined in accordance with the foregoing formula is other than
a whole number, the Company shall pay to the holder an amount in
cash equal to the fair market value of the resulting fractional
share on the Conversion Date.
b. Method of Exercise. The Conversion Right may be exercised by
the holder by the surrender of this Warrant at the principal
office of the Company together with a written statement specifying
that the holder thereby intends to exercise the Conversion Right
and indicating the number of shares subject to this Warrant which
are being surrendered (referred to in Section 11(a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right.
Such conversion shall be effective upon receipt by the Company of
this Warrant together with the aforesaid written statement, or on
such later date as is specified therein (the "Conversion Date").
Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the
balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the
holder within thirty (30) days following the Conversion Date.
c. Determination of Fair Market Value. For purposes of this
Section 11.2, "fair market value" of a share of Common Stock shall
have the meaning set forth in Section 4(j) above, provided
however, if the shares of Common Stock are traded, then "fair
market value" shall be determined by the closing price, the
last sales price or the average of the closing bid and ask prices,
as applicable, on the date of exercise.
12. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows:
a. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and
has all required power and authority to own and operate its
properties and assets, to carry on its business as now conducted
and proposed to be conducted, to issue this Warrant, and to carry
out the transactions contemplated hereby and thereby.
b. The Company is in good standing wherever necessary to carry
on its present business and operations, except in jurisdictions in
which the failure to be in good standing has not had and
reasonably could not be expected to have a Material Adverse
Effect.
c. As of the closing Date, The Company has no Subsidiaries other
than as set forth on Schedule 4.1(c) to the Securities Purchase
Agreement.
d. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and the rules of law or principles at equity
governing specific performance, injunctive relief and other
equitable remedies;
e. The Warrant Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and
nonassessable;
f. The rights, preferences, privileges and restrictions granted
to or imposed upon the Common Stock and the holders thereof are as
set forth in the certificate of incorporation of the Company, as
amended to the Date of Grant (as so amended, the "Charter"), a
true and complete copy of which has been delivered to the original
holder of this Warrant;
g. The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be, inconsistent with
the Charter or by-laws of the Company, do not and will not
contravene, in any material respect, any governmental rule or
regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision
of, or constitute a default under, any indenture, mortgage,
contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the
giving of notice to, the registration or filing with or the taking
of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for
the filing of notices pursuant to federal and state securities
laws, which filings will be effected by the time required thereby;
h. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any
governmental commission, board or authority which, if adversely
determined, will have a material adverse effect on the ability of
the Company to perform its obligations under this Warrant;
i. The authorized capital stock of the Company, and the number
of such shares issued and outstanding, are set forth on Schedule
4.1(d) of the Securities Purchase Agreement immediately prior to
the Date of Grant. All such outstanding shares have been validly
issued and are fully paid, nonassessable shares free of preemptive
rights;
j. Except as set forth on Schedule 4.1(d) of the Stock Purchase
Agreement, there are no subscriptions, rights, options, warrants,
or calls relating to any shares of the Company's capital stock,
including any right of conversion or exchange under any
outstanding security or other instrument; and
k. The Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its capital stock or any security convertible into or exchangeable for
any of its capital stock.
13. Modification and Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which
enforcement of the same is sought, except that the provisions of
Section 10 hereof may be amended with the consent of the
Company and the holders of Registrable Securities constituting a
majority of the Registrable Securities then outstanding. For
purposes of Section 10 and this Section 13, "Registrable
Securities then outstanding" shall mean, with respect to a
specified determination date, the Registrable Securities owned
(beneficially or of record) by all Securityholders on such date.
14. Notices. Unless otherwise specifically provided herein, all
communications under this Warrant shall be in writing and shall be
deemed to have been duly given (i) on the date of service if
served personally on the party to whom notice is to be given, (ii)
on the day of transmission if sent by facsimile transmission to
the number shown on the books of the Company, and telephonic
confirmation of receipt is obtained promptly after completion of
transmission, (iii) on the day after delivery to Federal Express
or similar overnight courier, or (iv) on the fifth day after
mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and
properly addressed, return receipt requested, to each such holder
at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature
page of this Warrant. Any party hereto may change its address for
purposes of this Section 15 by giving the other party written
notice of the new address in the manner set forth herein.
15. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the
Company's assets, and all of the obligations of the Company
relating to the Common Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and
agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof. The Company will, at
the time of the exercise or conversion of this Warrant, in whole
or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing
obligation to the holder hereof in respect of any rights to which
the holder hereof shall continue to be entitled after such
exercise or conversion in accordance with this Warrant; provided,
that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
16. Lost Warrants or Stock Certificates. The Company covenants
to the holder hereof that, upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate and, in the
case of any loss, theft or destruction, upon receipt of
an executed lost securities bond or indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or
stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
17. Descriptive Headings. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant.
18. Governing Law. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Delaware.
19. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder
hereof contained herein shall survive the Date of Grant, the
exercise or conversion of this Warrant (or any part hereof) and
the termination or expiration of rights hereunder and shall
terminate three years after the date of this Agreement. All
agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they
are no longer operative.
20. Remedies. In case any one (1) or more of the covenants and
agreements contained in this Warrant shall have been breached, the
holders hereof (in the case of a breach by the Company), or the
Company (in the case of a breach by a holder), may proceed to
protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained
in this Warrant.
21. Acceptance. Receipt of this Warrant by the holder hereof
shall constitute acceptance of and agreement to the foregoing
terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment
of its Charter or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly
authorized.
SHELLS SEAFOOD RESTAURANTS, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President and Chief Executive Officer
Address: ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Dated: August 4, 2004
NOTICE TO FLORIDA RESIDENTS:
WHERE SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA (EXCLUDING
CERTAIN INSTITUTIONAL PURCHASERS DESCRIBED IN SECTION 517.061(7)
OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT) (THE
"ACT"), ANY SUCH SALE MADE PURSUANT TO SECTION 517.061(11) OF THE
ACT SHALL BE VOIDABLE BY THE PURCHASER EITHER WITHIN THREE DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER
TO THE ISSUER, OR AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR
WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS
COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
EXHIBIT A
NOTICE OF EXERCISE
To: SHELLS SEAFOOD RESTAURANTS, INC.
1. The undersigned hereby elects to purchase shares of
Common Stock of SHELLS SEAFOOD RESTAURANTS, INC. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or
names as are specified below:
_______________________________
(Name)
_______________________________
_______________________________
(Address)
3. The undersigned represents that the aforesaid shares are
being acquired for the account of the undersigned for investment
and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present
intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment
Representation Statement attached hereto as Schedule 1.
__________________________________
(Signature)
_____________________
(Date)
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: SHELLS SEAFOOD RESTAURANTS, INC.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities
(the "Securities"), the undersigned (the "Purchaser") represents
to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to
acquire the Securities. The Purchaser is purchasing the
Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933,
as amended (the "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of the Purchaser's investment intent
as expressed herein. In this connection, the Purchaser
understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated
solely upon a present intention to hold these Securities for the
minimum capital gains period specified under applicable tax laws,
for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any
other fixed period in the future.
(c) The Purchaser further understands that the Securities must be
held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from registration is
otherwise available. In addition, the Purchaser understands that
the certificate evidencing the Securities will be imprinted with
the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and
144A, promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof (or from an
affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable,
including, among other things: The availability of certain public
information about the Company, the resale occurring not less than
one (1) year after the party has purchased and paid for the
securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities
Exchange Act of 1934, as amended) and the amount of securities
being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes
to sell the Securities there may be no public market upon which to
make such a sale, and that, even if such a public market then
exists, the Company may not be satisfying the current public
information requirements of Rule 144 and 144A, and that, in such
event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the one-year minimum holding
period had been satisfied.
(f) The Purchaser further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied,
registration under the Securities Act, compliance with Regulation
A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a
substantial burden or proof in establishing that an exemption from
registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such
transactions do so at their own risk.
Purchaser:
Date: