WARRANT AGREEMENT dated as of October _, 1996 between PROTOSOURCE CORP., a
California corporation (the "Company"), and ANDREW, ALEXANDER, WISE & COMPANY,
INCORPORATED or its designees (hereinafter referred to variously as the "Holder"
or the "Underwriter" or the "Placement Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter or its designees
110,000 warrants ("Warrant") to purchase up to ________ shares of Common Stock
of the Company (as hereinafter defined in Article 1 hereof); and
WHEREAS, the underwriter has agreed, pursuant to the Placement Agent
Agreement (the "Placement Agent Agreement") dated October _, 1996 between the
Placement Agent and the Company, to act as the underwriter in connection with
the Company's proposed initial private offering of Common Stock at an offering
price of $.25 per Share; and
WHEREAS, the Warrants issued pursuant to this Agreement are being issued by
the Company to the Placement Agent or its designees in consideration for, and as
part of the Placement Agent's compensation in connection with the services
rendered by the Placement Agent;
NOW THEREFORE, in consideration of the premises, the payment by the
Placement Agent or its designees to the Company of________DOLLARS ($________ ),
the agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Placement Agent is granted the right to purchase, at any time
from October _, 1996 until 5:00 P.M., New York time, on October _, 200l (the
"Warrant Exercise Term") up to fully-paid and non assessable shares of the
Company's Common Stock, ("Common Stock") at an initial exercise price of $.25
per share ("Share").
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant. The Warrants initially are exercisable at a price
of $.25 per Share, payable ln cash or by check to the order of the Company, or
any combination or cash or check, subject to adjustment as provided in Article 8
hereof. Upon surrender of the Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Purchase Price
(as hereinafter defined) for the Shares purchased, at the Company's principal
offices (currently located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇) the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for shares
of Common Stock so purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder hereof, in whole or in
part (but not as to fractional shares of the Common Stock subject to the
Warrants). In the case of the purchase of less than all the Shares purchasable
under any Warrant Certificate, the Company shall cancel said Warrant Certificate
upon the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Shares purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock underlying the Warrants
shall be made forthwith (and in any event within three business days
thereafter)without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Article 5 hereof) be issued in
the name of, or in such names as may be directed by, the Holder thereof;
provided, however, that the Company shall not be required to pay any tax which
may be payable In respect of any transfer involved in the issuance and delivery
of any such certificates in a name other than that of the Holder and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
The Warrant Certificate and the certificates representing the shares of
Common Stock underlying each Warrant shall be executed on behalf of the Company
by the manual or facsimile signature of the present or any future Chairman or
Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the present or any future Senior Assistant Secretary
of the Company. Warrant Certificates and certificates representing the Shares
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the shares of Common Stock underlying the Warrants (collectively,
the "Warrant Securities"), shall bear a legend substantially similar to the
following:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended
("Act"), and may not be offered or sold except (i) pursuant
to an effective registration statement under the Act, (ii)
to the extent applicable, pursuant to Rule 144 under the Act
(or any similar rule under such Act relating to the
disposition of securities), or (iii) upon the delivery by
the holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the issuer, stating
that an exemption from registration under such Act is
available."
5. Restriction on Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
6. Price.
6.1. Initial and Adjusted Purchase Price. The initial purchase price
of each Warrant shall be $.25 per Share. The adjusted purchase price shall be
the price which shall result from time to time from any and all adjustments of
the initial purchase price in accordance with the provisions of Article 8
hereof.
6.2. Purchase Price. The term "Purchase Price" herein shall mean the
initial purchase price or the adjusted purchase price, depending upon the
context.
7. Registration Rights.
7.1. Registration Under the Securities Act of 1933. The Warrants and
the shares of Common Stock have not been registered for purposes of public
distribution under the Securities Act of 1933, as amended (the "Act").
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7.2. Piggyback Registration. If, at any time during the seven years
following the date of this Agreement, the Company proposes to register any of
its securities under the Act (other than in connection with a merger,
acquisition or pursuant to Form S-8 or successor form), it will give written
notice by registered mail, at least thirty (30) business days prior to the
filing of each such registration statement, to the Holder or Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the Holder
or Holders of the Warrants and/or Warrant Securities notify the Company within
twenty (20) business days after receipt of any such notice of its or their
desire to include any such securities in such proposed registration statement,
the Company shall afford the Holder or Holders of the Warrants and/or Warrant
Securities the opportunity to have any such securities registered under such
registration statement at the Company's sole cost and expense and at no cost or
expense to the Holder or Holders; provided, however, that if, in the written
opinion of the Company's managing underwriter, if any, for such offering, the
inclusion of all or a portion of the Warrants and/or Warrant Securities
requested to be registered, when added to the securities being registered by the
Company or the selling shareholder(s), will exceed the maximum amount of the
Company's securities which can be marketed (i) at a price reasonably related to
their then current market value, or (ii) without otherwise materially adversely
affecting the entire offering, then the Company may exclude from such offering
all or a portion of the Warrants and/or Warrant Securities requested to be
registered.
If securities are proposed to be offered for sale pursuant to such
registration statement by other security holders of the Company and the total
number of securities to be offered by the holders of the Warrants and/or Warrant
Securities and such other selling security holders is required to be reduced
pursuant to a request from he managing underwriter (which request shall be made
only for the reasons and in the manner set forth above) the aggregate number of
Warrants and/or Warrant Securities to be offered by the Holders pursuant to such
registration statement shall equal the number which bears the same ratio to the
maximum number of securities that the underwriter believes may be included for
all of the selling security holders (including the Holders) as the original
number of Warrants and/or Warrant Securities proposed to be sold by the Holders
bears to the total original number of securities proposed to be offered by the
Holders and the other selling security holders.
If, subsequent to exercise of the demand registration right referred to in
Section 7.3 below, any Warrants and/or Warrant Securities requested to be
included in such an offering are not so included because of the operation of the
provision of the first paragraph of this Section 7.2, then the holders of
Warrants and/or Warrant Securities shall have the right to require the Company,
at its expense, to prepare and file a Registration Statement under the Act
covering such Warrants and/or Warrant Securities, provided that if the
underwriter so requests, such Warrants and/or Warrant Securities shall not be
sold until the expiration of 90 days from the effective date of the offering
that gives rise to the piggyback registration rights that are the subject of the
Section 7.2. Nothing contained in the foregoing sentence shall require the
Company to undergo an audit, either than in the ordinary course of business.
Notwithstanding the provisions of this Section 7.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7.3. Demand Registration.
(a) At any time during the Warrant Exercise Term, the Holder or
Holders of the Warrants or the Warrant Securities representing a majority of
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such securities shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission, on one
occasion, at the sole expense of the Company, a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion of
both counsel for the Company and counsel for the Holder or Holders, in order to
comply with the provisions of the Act, so as to permit a public offering and
sale for nine (9) consecutive months by such Holder or Holders of the Warrants
and/or the Warrant Securities.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrant and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request. After
receiving notice from (the Company as provided in this section 7.3(b), any
Holder of the Warrant and/or Warrant Securities may request the Company to
include their respective Warrants and or Warrant Securities in the registration
statement to be filed pursuant to Section 7.3(a) hereof by notifying the Company
of their decision to include such securities within ten (10) days of their
receipt of the Company notice.
(c) In addition tv the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time during the Warrant Exercise
Term, any Holder or Holders of Warrants and/or Warrant Securities representing a
majority of such securities shall have the right, exercisable by written request
to the Company, to have the Company prepare and file, on one additional occasion
in respect of all Holders of Warrants or Warrant Securities, with the Commission
a registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such holder of its Warrants and/or Warrant Securities,
provided, however, that all costs incident thereto shall be at the expense of
the Holder or Holders making such request and the other Holders which desire to
include their Warrants and/or Warrant Securities in such registration statement.
If a Holder shall give notice to the Company at any time of its desire to
exercise the registration right granted pursuant to this Section 7.3(c), then
within ten (10) days after receipt of such notice, the Company shall give notice
to the other Holders of Warrants and Warrant Securities, advising the Company is
proceeding with such registration and offering to include therein the Warrants
and/or Warrant Securities of such other Holders, provided they furnish the
Company with such appropriate information in connection therewith as the Company
shall reasonably request in writing.
7.4 Covenants of the Company With Respect to Registration. The Company
covenants and agrees as follows:
(a) In connection with any registration under Section 7.3 hereof, the
Company shall file a registration statement within thirty (30) days of receipt
any demand therefor, shall use its best efforts to have any registration
statements declared effective at the earliest possible time, and shall furnish
each Holder such number of prospectuses as shall reasonably be requested.
(h) The Company shall pay all costs, fees and expenses in connection
with all registration statements filed pursuant to Sections 7.2 and 7.3(a)
hereof including, without limitation, the Company's legal and accounting fees,
printing expenses, blue sky fees and expenses. The Holder or holders will pay
all costs, fees and expenses in connection with any registration statement filed
pursuant to Section 7.3(c).
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
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states as are requested by the Holder or Holders, provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify any Holder of the Warrant Securities
to be sold pursuant to any registration statement and each person, if any, who
controls such Holder with in the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the, Act the Exchange
Act or otherwise, arising from such registration statement to the same extent
and with the same effect as the provisions pursuant to which the Company has
agreed to indemnify the Underwriter and to provide for just and equitable
contribution as set forth in Section 7 of the Purchase Contract.
(e) Any Holder of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify, the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holder, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions pursuant to which the Underwriter has agreed
to indemnify the Company and to provide for just and equitable contribution as
set forth in Section 7 of the Purchase Contract.
(f) Nothing contained in this Agreement shall be construed as requiring
any Holder to exercise their Warrant prior to the initial filing of any
registration statement or the effectiveness thereof; however, in the event of
the sale of a Warrant to the public pursuant to a registration statement and
prospectus, the person who purchases such Warrant from a Holder shall be
required to exercise such Warrant within 24 hours of the sale of such Warrant to
the purchaser thereof.
8. Adjustments of Purchase Price and Number of Shares.
8.1 Computation of Adjusted Price. Except as hereinafter provided, in
case the Company shall at any time after the date hereof issue or sell any
shares of Common Stock (other than the issuances or sales referred to in Section
8.6 hereof), including shares held in the Company's treasury and shares of
Common Stock issued upon the exercise of any options, rights or warrants to
subscribe for shares of Common Stock (other than the issuances or sales of
Common Stock pursuant to rights to subscribe for such Common Stock distributed
to all the shareholders of the Company and Holders of Warrants pursuant to
Section 8.8 hereof) and shares of Common Stock issued upon the direct or
indirect conversion or exchange of security for shares of Common Stock, for a
consideration per share less than the Purchase Price in effect immediately prior
to the issuance or sale of such shares or less than the "Market Price" (as
defined in Section 8.l (vi) hereof) per share of Common Stock, or without
consideration, then forthwith upon such issuance or sale, the Purchase Price
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) equal to the quotient derived by dividing (A) an
amount equal to the sum of (X) the product of (a) the total number of shares of
Common Stock outstanding immediately prior to such issuance or sale, multiplied
by (b) the lower of (i) the Purchase Price in effect immediately prior to such
issuance or sale or (ii) the Market Price per share of Common Stock on the date
immediately prior to the issuance of such shares, plus, (Y) the aggregate of the
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amount of all consideration, if any, received by the Company upon such issuance
or sale, by (B) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; provided, however, that in no event
shall the Purchase Price be adjusted pursuant to this computation to an amount
in excess of the Purchase Price in effect immediately prior to such computation,
except in the case of a combination of outstanding shares of Common Stock, as
provided by Section 8.3 hereof.
For the purposes of any computation to be made in accordance with this
Section 8.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for
a consideration part or all of which shall be cash, the amount of the cash
consideration there for shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if such securities shall
be sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price) before deducting there from any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (ii) of this Section 8.1.
(v) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable upon
the exercise of options, right, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
(vi) As used herein, the phrase "Market Price" at any date shall
be deemed to be the average of the last reported sale price, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the last three trading days, in either case as officially reported by
the principal securities exchange on which the Common Stock is listed or
admitted to trading or as reported in the NASDAQ National Market System, or, if
the Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on the NASDAQ National Market System, the closing bid price
as furnished by the National Association of Securities Dealers, Inc. through
NASDAQ or similar organization if NASDAQ is no longer reporting such information
or if the Common Stock is not quoted on NASDAQ, as determined in good faith by
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resolution of the Board of Directors of the Company, based on the best
information available to it for the day immediately preceding such issuance or
sale, the day of such issuance or sale and the day immediately after such
issuance or sale.
8.2 Options, Rights, Warrant and Convertible and Exchangeable
Securities. Except in the case of the Company issuing rights to subscribe for
shares of Common Stock distributed to all the shareholders of the Company and
Holders of Warrants pursuant to Section 8.8 hereof, if the Company shall at any
time after the date hereof issue options, rights or warrants to subscribe for
shares of Common Stock, or issue any securities convertible into or exchangeable
for shares of Common Stock, (i) for a consideration per share less than (a) the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants or such convertible or exchangeable securities, or (b) the
Market Price, or (ii) without consideration, the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable under all the outstanding options, rights or warrants
shall be deemed to be issued and outstanding at the time all the outstanding
options, rights or warrants were issued, and for a consideration equal to the
minimum purchase price per share provided for in the options, rights or warrants
at the time of issuance, plus the consideration (determined in the same manner
as consideration received on the issue or sale of shares in accordance with the
terms of the Warrants), if any, received by the Company for the options, rights
or warrants, and if no minimum price is provided in the options, rights or
warrants, then the consideration shall be equal to zero; provided, however, that
upon the expiration or other termination of the options, rights or warrants, if
any thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (a) (and for the
purposes of subsection (v) of Section 8.1 hereof) shall be reduced by such
number of shares as to which options, warrants and/or rights shall have expired
or terminated unexercised, and such number of shares shall no longer he deemed
to be issued and outstanding, and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not have expired or terminated unexercised.
(b) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale of
shares of Common Stock in accordance with the terms of the Warrants) received by
the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof; provided,
however, that upon the termination of the right to convert or exchange such
convertible or exchangeable securities (whether by reason of redemption or
otherwise), the number of shares deemed to be issued and outstanding pursuant to
this subsection (b) (and for the purpose of subsection (v) of Section 8.1
hereof) shall be reduced by such number of shares as to which the conversion or
exchange rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be issued and outstanding and the Purchase
Price then in effect shall forthwith be readjusted and thereafter be the price
which it would have been had adjustment been made on the basis of the issuance
only of the shares actually issued or issuable upon the conversion or exchange
of those convertible or exchangeable securities as to which the conversion or
exchange rights shall not have expired or terminated unexercised.
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(c) If any change shall occur in the price per share provided for
in any of the options, rights or warrants referred to in subsection (a) of this
Section 8.2, or in the price per share at which the securities referred to in
subsection (b) of this Section 8.2 are convertible or exchangeable, the options,
rights or warrants or conversion or exchange rights, as the case may be, shall
be deemed to have expired or terminated on the date when such price change
became effective in respect of shares not theretofore issued pursuant to the
exercise or conversion or exchange thereof, and the Company shall be deemed to
have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of then number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
8.3 Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock the Purchase Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.4 Adjustment in Number of Shares. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Article 8, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Purchase Price in effect
immediately prior to such adjustment by the number of Shares issuable upon
exercise of the Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Purchase Price.
8.5 Reclassification, Consolidation, Merger, etc, In case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in 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 the case of any consolidation
of the Company with or merger of the Company into, another corporation (other
than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivision or
combination of such shares or a change in par value, as aforesaid), or in the
case of a sale or conveyance to another corporation of the property of the
Company as an entirety, the Holder shall thereafter have the right to purchase
the kind and number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holder were the owner of the shares of Common Stock
underlying the Warrants immediately prior to any such event at a price equal to
the product of (x) the number of shares issuable upon exercise of the Warrants
and (y) the Purchase Price in effect immediately prior to the record date for
such reclassification, change, consolidation, merger, sale or conveyance as if
such Holder had exercised the Warrants.
8.6 No Adjustment of Purchase Price in Certain Cases. Notwithstanding
anything herein to the contrary, no adjustment of the Purchase Price shall be
made:
(a) Upon the issuance or sale of the Warrant, the Share Warrants
or the shares of Common Stock issuable upon the exercise of the Warrants;
(b) Upon the issuance or sale of shares of Common Stock issued by
the Company in the public offering of its Shares being purchased concurrently
herewith;
(c) Upon (i) the issuance of options pursuant to the Company's
employee stock option plan in effect on the date hereof or the sale by the
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Company of any shares of Common Stock pursuant to the exercise of any such
options, or (ii) the sale by the Company of any shares of Common Stock pursuant
to the exercise of any options or warrants previously issued and outstanding on
the date hereof.
(d) If the amount of said adjustment shall be less than two cents
(2 cents) per Share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least two
cents (2 cents) per Share.
8.8 Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend (other than a dividend consisting
solely of shares of Common Stock or a cash dividend or distribution payable out
of current or retained earnings) or otherwise distribute to its shareholders any
monies, assets, property, rights, evidences of indebtedness, securities (other
than shares of Common Stock), whether issued by the Company or by another person
or entity, or any other thing of value, the Holders of the unexercised Warrants
shall thereafter be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise thereof, to receive, upon the exercise
of such Warrants, the same monies, property, assets, rights, evidences of
indebtedness, securities or any other thing of value that they would have been
entitled to receive at the time of such dividend or distribution. At the time of
any such dividend or distribution, the Company shall make appropriate reserves
to ensure the timely performance of the provisions of this Subsection 8.7.
8.7 Subscription Rights for Shares of Common Stock or Other
Securities. In the case that the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of all the Warrants
issue any rights to subscribe for shares of Common Stock or any other securities
of the Company or of such affiliate to all the shareholders of the Company, the
Holders of the unexercised Warrants shall be entitled, in addition to the shares
of Common Stock or other securities receivable upon the exercise of the
Warrants, to receive such rights at the time such rights are distributed to the
other shareholders of the Company.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender hereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interest. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of the Warrants, nor shall it be required to issue scrip or pay cash in
lieu of Factional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up to the
nearest whole number of shares of Common Stock.
-9-
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock as shall be issuable upon the exercise thereof. The
Company covenants and agrees that, upon exercise of the Warrants and payment of
the Purchase Price therefor, all shares of Common Stock issuable upon such
exercise shall be duly and validly issued, fully paid, nonassessable and not
subject to the preemptive rights of any shareholder. As long as the Warrants
shall be outstanding, the Company shall use its best efforts to cause all shares
of Common Stock issuable upon the exercise of the Warrants to be listed on or
quoted by NASDAQ or listed on such national securities exchanges as the Common
Stock held by public shareholders is so listed.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall
be construed as conferring upon the Holder or Holders the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Company shall give written notice
to the Holder or Holders of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validly of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options, or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of this
Agreement or to such other address as the Company may designate by notice
to the Holders.
-10-
14. Supplements and Amendments. The Company and ANDREW, ALEXANDER, WISE &
COMPANY, INCORPORATED may from time to time supplement or amend this Agreement
in writing without the approval of any Holders of the Warrants and/or Warrant
Securities in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and ANDREW, ALEXANDER, WISE &
COMPANY, INCORPORATED may deem necessary or desirable and which the Company and
ANDREW, ALEXANDER, WISE & COMPANY, INCORPORATED deem not to adversely affect
the interests of the Holders of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
16. Termination, This Agreement shall terminate at the close of business on
October _, 2004. Notwithstanding the foregoing, this Agreement will terminate on
any earlier date when all Warrants have been exercised and all Warrant
Securities have been resold to the public; provided, however, that the
provisions of Section 7 shall survive such termination until the close of
business on October_, 2007
17. Governing Law. This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be construed in accordance with the laws of
said State.
18. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holder or Holders of the Warrant
Certificates or Warrant Securities any legal or equitable right, remedy or claim
under this Agreement: and this Agreement shall be for the sole and exclusive
benefit of the Company and the Underwriter and any other Holder or Holders of
the Warrant Certificates or Warrant Securities.
19. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
-11-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] PROTOSOURCE CORPORATED
By:
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Attest:
----------------------------------
ANDREW, ALEXANDER, WISE & COMPANY, INC.
By:
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-12-
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, OCTOBER_, 2001
No. W - Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that-------- or registered assigns is
the registered holder of ------- ( ) Warrants to purchase, at any time from
October _, 1997 until 5:00 P.M. New York City time on October _, 2001
("Expiration Date"), up to ------- ( ) fully-paid and non-assessable shares of
common stock ("Common Stock") of PROTOSOURCE CORP., a California corporation
(the "Company") at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $.25 per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of October _, 1996 between the Company and the Placement
Agent (the "Warrant Agreement"). Payment of the Exercise Price may be made in
cash, or by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M, New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
Holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
-13-
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: October , 1996 PROTOSOURCE CORP.
--
[Seal By:
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Attest:
-----------------------------------
-14-
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase______ Shares and herewith
tenders in payment for such Shares cash or a certified or official bank check
payable in New York Clearing House Funds to the order of__________ in the amount
of $________all in accordance with the terms hereof. The undersigned requests
that a certificate for such Shares be registered in the name of______________ ,
whose address is _________________________, that such Certificate be delivered
to____________________________ whose address is __________________________.
Dated: Signature:
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
-----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
-15-
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED
-------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ------------------------,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature:
---------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of
the Warrant Certificate)
--------------------------------
--------------------------------
(Insert Social Security or other
Identifying Number of Assignee)
-16-