EXHIBIT 4.1
-----------
WARRANT AGREEMENT
-----------------
AGREEMENT, dated as of _______________, 1997, by and between Ciatti's, Inc.
a Minnesota corporation (the "Company"), and Norwest Bank Minnesota, N.A., as
Warrant Agent (the "Warrant Agent").
W I T N E S E T H
-----------------
WHEREAS, in connection with a public offering pursuant to a registration
statement (the "Registration Statement") on Form S-2 declared effective by the
Securities and Exchange Commission on _________, 19__, of 3,000,000 units
("Units"), each Unit consisting of one share of the Company's Common Stock, $.01
par value ("Common Stock") and one Redeemable Common Stock Purchase Warrant (the
"Warrants"), the Company will issue a minimum of 888,889 and a maximum of
3,000,000 Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. Definitions
-----------
As used herein, the following terms shall have the following meanings,
unless the context shall otherwise require:
(a) "Common Stock" shall mean the authorized stock of the Company of
any class, whether now or hereafter authorized, which has the right to
participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage, which at the date hereof consists
of 10,000,000 shares of Common Stock, $.01 par value,
(b) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business
shall be administered, which office is located on the date hereof at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (i) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by
the Registered Holder thereof or such Holder's attorney duly authorized in
writing, and (ii) payment in cash, official bank or certified check or wire
transfer made payable to the Company, of an amount in lawful money of the
United States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean, as to each Warrant,
the original issuance date of the Warrants.
(e) "Purchase Price" shall mean the price to be paid upon exercise
of each Warrant in accordance with the terms hereof, which price shall be
$5.00, subject to adjustment from time to time pursuant to the provisions
of Section 9 hereof, and subject to the Company's right to reduce the
Purchase Price upon notice to all Warrantholders.
(f) "Redemption Price" shall mean the price at which the Company
may, at its option, redeem the Warrants, in accordance with the terms
hereof, which price shall be $0.05 per Warrant, subject to adjustment from
time to time pursuant to the provisions of Section 8 hereof.
(g) "Registered Holder" shall mean the person in whose name any
certificate representing a Warrant shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Norwest Bank Minnesota, N.A., as the
Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 p.m. (Minneapolis
time) on December 31, 2002, or the Redemption Date as defined in Section 8,
whichever is earlier; provided that if such date shall in the State of
Minnesota be a holiday or a day on which banks are authorized to close,
then 5:00 p.m. (Minneapolis time) on the next following day which in the
State of Minnesota is not a holiday or a day on which banks are authorized
to close. Upon notice to all Warrantholders, the Company shall have the
right to extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
---------------------------------------------
(a) Each Warrant shall initially entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase one share of
Common Stock upon the exercise thereof, in accordance with the terms
hereof, subject to modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement and designation to the Warrant
Agent that the Company has sold the minimum number of Units, Warrant
Certificates representing the number of Warrants sold shall be executed by
the Company and delivered to the Warrant Agent. Upon written order of the
Company signed by its President or a Vice President and by its Secretary or
an Assistant Secretary, the Warrant Certificates shall be countersigned,
issued and delivered by the Warrant Agent as part of the Units. Upon
designation to the Warrant Agent by the Company that it has sold additional
Units, additional Warrants shall be executed by the Company and delivered
by the Warrant Agent. Upon written order of the Company signed by its
President or a Vice President and by its Secretary or an Assistant
Secretary, the Warrant Certificates shall be countersigned, issued and
delivered by the Warrant Agent as part of the Units.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 3,000,000
shares of Common Stock, subject to adjustment as described herein, upon the
exercise of warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in
required whole number denominations to the persons entitled thereto in
connection with any transfer or exchange permitted under this Agreement;
provided that no Warrant Certificates shall be issued except (i) those
initially issued hereunder or pursuant to Company instructions; (ii) those
issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all Warrants represented by any Warrant Certificate, to evidence
any unexercised Warrants held by the exercising Registered Holder; (iii)
those issued upon any transfer or exchange pursuant to Section 6; (iv)
those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7; and (v) at the option of the Company,
in such form as may be approved by its Board of Directors, to reflect any
adjustment or change in the Purchase Price, the number of shares of Common
Stock purchasable upon exercise of the Warrants or the Redemption Price
therefor made pursuant to Section 9 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
------------------------------------------
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A and may have such letters, numbers or other
marks of identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the warrants may be listed, or to conform to usage.
The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen, or destroyed Warrant Certificates) and issued in registered
form. Warrants shall be numbered serially with the letter W on the
Warrants.
(b) Warrant Certificates shall be executed on behalf of the Company
by its President or any Vice President and by its Secretary or an Assistant
Secretary, by manual signatures or by facsimile signature printed thereon.
Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company before the date
of issuance of the Warrant Certificates or before countersignature by the
Warrant Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered
with the
2
same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such officer of the Company. After
countersignature by the Warrant Agent, Warrant Certificates shall be delivered
by the Warrant Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Section 4(a) hereof.
SECTION 4. Exercise.
--------
(a) Each Warrant may be exercised by the Registered Holder thereof at
any time on or after the Initial Warrant Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set
forth herein and in the applicable Warrant Certificate. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on
the Exercise Date and the person entitled to receive the securities
deliverable upon such exercise shall be treated for all purposes as the holder
upon exercise thereof as of the close of business on the Exercise Date. As
soon as practicable on or after the Exercise Date the Warrant Agent shall
deposit the proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. The Warrant Agent, on
behalf of the Company, shall cause to be issued and delivered by the Transfer
Agent, to the person or persons entitled to receive the same, a certificate or
certificates for the securities deliverable upon such exercise, plus a Warrant
Certificate for any remaining unexercised Warrants of the Registered Holder,
unless prior to the date of issuance of such certificates the Company shall
instruct the Warrant Agent to refrain from causing such issuance of
certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Notwithstanding the foregoing, in the case of
payment made in the form of a check drawn on an account of such investment
banks and brokerage houses as the Company shall approve in writing to the
Warrant Agent, certificates shall immediately be issued without prior notice
to the Company or any delay. Upon the exercise of any warrant and clearance of
the funds received, the Warrant Agent shall promptly remit the payment
received for the Warrant to the Company or as the Company may direct in
writing.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
-----------------------------------------------------
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrants shall, at the time of delivery, be duly and validly
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof (other than those which the Company shall
promptly pay or discharge) and that upon issuance such shares shall be listed
on each national securities exchange, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably
possible, endeavor to secure such registration or approval. The Company will
use reasonable efforts to obtain appropriate approvals or registrations under
state "blue sky" securities laws with respect to any such securities. The
Company reserves the right not to accept exercise of warrants in any state in
which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if
any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock required upon exercise of the Warrants, and the Company
will authorize the Transfer Agent to comply with all such proper requisitions.
The Company will file with the Warrant Agent a statement setting forth the
name and address of the Transfer Agent of the Company for shares of Common
Stock issuable upon exercise of the Warrants, unless the Warrant Agent and the
Transfer Agent are the same entity.
3
SECTION 6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate
Office, and upon satisfaction of the terms and provisions hereof, the
Company shall execute and the Warrant Agent shall countersign, issue and
deliver in exchange therefor the Warrant Certificate or Certificates which
the Registered Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with
its regular practice. Upon due presentment for registration of transfer of
any Warrant Certificate at such office, the Company shall execute and the
Warrant Agent shall issue and deliver to the transferee or transferees a
new Warrant Certificate or Certificates representing an equal aggregate
number of Warrants of the same class.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription
form or the assignment form on the reverse thereof shall be duly endorsed,
or be accompanied by a written instrument or instruments of transfer and
subscription, in form satisfactory to the Company and the Warrant Agent,
duly executed by the Registered Holder or his attorney-in-fact duly
authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any
exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such holder of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly
canceled by the Warrant Agent and thereafter retained by the Warrant Agent
until termination of this Agreement or resignation as Warrant Agent, or, at
the direction of the Company.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder
of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by
any notice to the contrary. The Warrants, which are being publicly offered
in Units with shares of Common Stock pursuant to the Underwriting
Agreement, will be immediately detachable from the Common Stock and
transferable separately therefrom.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu thereof
a new Warrant Certificate of like tenor representing an equal aggregate number
of Warrants. Applicants for a substitute Warrant Certificate shall comply with
such other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. Redemption.
----------
(a) Commencing on not less than thirty (30) days' prior written
notice, the Warrants may be redeemed, at the option of the Company, at a
redemption price of $0.05 per Warrant, if the market price for the Common
Stock has exceeded $6.00 for at least twenty (20) consecutive trading days
within 15 calendar days of the date of notice. All Warrants must be
redeemed if any of the Warrants are redeemed. For purposes of this Section
8(a), "market price" shall have the meaning set forth in Section 10.
(b) In case the Company shall desire to exercise its right to so
redeem the Warrants, it shall request the Warrant Agent to mail a notice of
redemption to each of the Registered Holders of the Warrants to be
redeemed, first class, postage prepaid, not later than the twentieth day
before the date fixed for redemption, at their last address as shall appear
on the records of the Warrant Agent. Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given
whether or not the Registered Holder receives such notice.
4
(c) The notice of redemption shall specify (i) the redemption price,
(ii) the date fixed for redemption (the "Redemption Date"), (iii) the place
where the Warrant Certificates shall be delivered and the redemption price
paid, and (iv) that the right to exercise the Warrant shall terminate at
5:00 p.m. (Minneapolis time) on the business day immediately preceding the
date fixed for redemption. The date fixed for the redemption of the
Warrants that have been called for redemption shall be the Redemption Date.
No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceedings for such redemption
except as to a holder (a) to whom notice was not mailed or (b) whose notice
was defective. An affidavit of the Warrant Agent or of the Secretary or an
Assistant Secretary of the Company that notice of redemption has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(d) Any right to exercise a Warrant that has been called for
redemption shall terminate at 5:00 p.m. (Minneapolis time) on the business
day immediately preceding the Redemption Date on and after the Redemption
Date, Holders of the redeemed Warrants shall have no further rights except
to receive, upon surrender of the redeemed Warrant, the Redemption Price.
(e) From and after the date specified for redemption, the Company
shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrants to be redeemed, deliver or cause to
be delivered to or upon the written order of such Holder a sum in cash
equal to the Redemption Price of each such Warrant. From and after the date
fixed for redemption and upon the deposit or setting aside by the Company
of a sum sufficient to redeem all the Warrants called for redemption, such
Warrants shall expire and become void and all rights hereunder and under
the Warrant Certificates, except the right to receive payment of the
redemption price, shall cease.
SECTION 9. Adjustment of Exercise Price and Number of Shares of Common
-----------------------------------------------------------
Stock Warrants.
--------------
(a) Subject to the exceptions referred to in Section 9(g) below, in
the event the Company shall, at any time or from time to time after the
date hereof, issue any shares of Common Stock as stock dividend to the
holders of Common Stock, or subdivide or combine the outstanding shares of
Common Stock into a greater or lesser number of shares (any such sale,
issuance, subdivision or combination being herein called a "Change of
Shares"), then, and thereafter upon each further Change of Shares, the
applicable Purchase Price in effect immediately prior to such Change of
Shares shall be changed to a price (including any applicable fraction of a
cent) determined by multiplying the Purchase Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of (a)
the total number of shares of Common Stock outstanding immediately prior to
such Change of Shares and (b) the number of shares of Common Stock which
the aggregate consideration received by the Company upon such sale,
issuance, subdivision or combination (determined in accordance with
subsection (f) below) could have purchased at the then current Purchase
Price, and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such Change of Shares.
Upon each adjustment of the applicable Purchase Price pursuant to this
Section 9, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in
Section 9(b) hereof) be such number of shares (calculated to the nearest
tenth) purchasable at the applicable Purchase Price immediately prior to
such adjustment multiplied by a fraction, the numerator of which shall be
the applicable Purchase Price in effect immediately prior to such
adjustment and the denominator of which shall be the applicable Purchase
Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the applicable
Purchase Price hereunder, to adjust the number of Warrants outstanding, in
lieu of adjusting the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants (calculated
to the nearest tenth) determined by multiplying the number by a fraction,
the numerator of which shall be the applicable Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be
the applicable Purchase Price in effect immediately after such adjustment.
Upon each such adjustment of the number of Warrants, the Redemption Price
in effect immediately prior to such adjustment also shall be adjusted by
multiplying such Redemption Price by a fraction, the numerator of which
shall be the Purchase Price in effect immediately after such adjustment and
the denominator of which shall be the Purchase Price in effect immediately
prior to such adjustment. Upon each adjustment of the number of Warrants
pursuant to this Section 9, the Company shall, as promptly as practicable,
cause to be distributed to each Registered Holder of
5
Warrant Certificates on the date of such adjustment, Warrant Certificates
evidencing, subject to Section 10 hereof, the number of additional
Warrants, if any, to which such Holder shall be entitled as a result of
such adjustment or, at the option of the Company, cause to be distributed
to such Holder in substitution and replacement for the Warrant Certificates
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrant Certificates evidencing the number of
Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common
Stock), or in case of any sale or conveyance to another corporation of the
property of the Company as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the Company shall
cause effective provision to be made so that each holder of a Warrant then
outstanding shall have the right thereafter, by exercising such Warrant, to
purchase the kind and number of shares of stock or other securities or
property (including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance
by a holder of the number of shares of Common Stock that might have been
purchased upon exercise of such Warrant, immediately prior to such
reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassification, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) After each adjustment of the Purchase Price pursuant to this
Section 9, the Company will promptly prepare a certificate signed by the
President, and by the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the applicable Purchase Price as so adjusted, (ii) the
number of shares of Common Stock purchasable upon exercise of each Warrant
after such adjustment, and, if the Company shall have elected to adjust the
number of Warrants, the number of Warrants to which the registered holder
of each Warrant shall then be entitled, and the adjustment in Redemption
Price resulting therefrom, and (iii) a brief statement of the facts
accounting for such adjustment. The Company will promptly file such
certificate with the Warrant Agent and cause a brief summary thereof to be
sent by ordinary first class mail to ▇▇▇▇▇▇▇▇ and to each registered holder
of Warrants at his last address as it shall appear on the registry books of
the Warrant Agent. No failure to mail such notice nor any defect therein or
in the mailing thereof shall affect the validity thereof except as to the
holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the
Warrant Agent or the Secretary or an Assistant Secretary of the Company
that such notice has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
(e) For purposes of Section 9(a) and 9(b) hereof, the following
provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.05 in
such price; provided that any adjustments which by reason of this
clause (B) are not required 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(s) so carried forward,
shall require an increase or decrease of at least $.05 in the Purchase
Price then in effect hereunder.
(C) In case of (1) the sale by the Company solely for cash of any
rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or any securities convertible into or
exchangeable for Common Stock without the payment of any further
consideration other than cash, if any (such convertible or
exchangeable securities being herein called "Convertible Securities"),
or (2) the issuance by the Company, without the receipt by the Company
of any
6
consideration therefor, of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist solely of cash, whether or not such
rights, warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or
options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities issuable
upon the exercise of such rights, warrants or options) is less than
the then Purchase Price immediately prior to the date of the issuance
or sale of such rights, warrants or options, then the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares
of Common Stock for purposes of Sections 9(a) and 9(b) hereof and
shall be deemed to have been sold for cash in an amount equal to such
price per share.
(D) In case of the sale by the Company solely for cash of any
Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per
share for which Common Stock is issuable upon the conversion or
exchange of such Convertible Securities (determined by dividing (x)
the total amount of consideration received by the Company for the sale
of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than
the then Purchase Price immediately prior to the date of the sale of
such Convertible Securities, then the total maximum number of shares
of Common Stock issuable upon the conversion or exchange of such
Convertible Securities (as of the date of the sale of such Convertible
Securities) shall be deemed to be outstanding shares of Common Stock
for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to
have been sold for cash in an amount equal to such price per share.
(E) If the exercise or purchase price provided for in any right,
warrant or option referred to in (C) above, or the rate at which any
Convertible Securities referred to in (C) or (D) above are convertible
into or exchangeable for Common Stock, shall change at any time (other
than under or by reason of provisions designed to protect against
dilution), the Purchase Price then in effect hereunder shall forthwith
be readjusted to such Purchase Price as would have been obtained (1)
had the adjustments made upon the issuance or sale of such rights,
warrants, options or Convertible Securities been made upon the basis
of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities, (2)
had adjustments been made on the basis of the Purchase Price as
adjusted under clause (1) for all transactions (which would have
affected such adjusted Purchase Price) made after the issuance or sale
of such rights, warrants, options or Convertible Securities, and (3)
had any such rights, warrants, options or Convertible Securities then
still outstanding been originally issued or sold at the time of such
change on the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect hereunder
shall forthwith be readjusted to such Purchase Price as would have
been obtained (a) had the adjustments made upon the issuance or sale
of such rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of Common
Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible
Securities and (b) had adjustments been made on the basis of the
Purchase Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Purchase Price) made after
the issuance or sale of such rights, warrants, options or Convertible
Securities.
7
(F) In case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, the consideration received by the Company
therefore shall be deemed to be the gross sales price therefor without
deducting therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or allowed
by the Company in connection therewith.
(f) No adjustment to the Purchase Price of the Warrants or to the
number of shares of Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the grant or exercise of any other options which may
hereafter be granted or exercised under any employee benefit plan of
the Company as described in the Registration Statement; or
(ii) upon the sale or exercise of the Warrants; or
(iii) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(iv) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, whether or not any
adjustment in the Purchase Price was made or required to be made upon
the issuance or sale of such Convertible Securities and whether or not
such Convertible Securities were outstanding on the date of the
original sale of the Warrants or were thereafter issued or sold; or
(v) upon any amendment to or change in the terms of any rights
or warrants to subscribe for or purchase, or options for the purchase
of, Common Stock or Convertible Securities or in the terms of any
Convertible Securities, including, but not limited to, any extension
of any expiration date of any such right, warrant or option, any
change in any exercise or purchase price provided for in any such
right, warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable for Common
Stock or any change in the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than
rights, warrants, options or Convertible Securities issued or sold
after the close of business on the date of the original issuance of
the Units (i) for which an adjustment in the Purchase Price then in
effect was theretofore made or required to be made, upon the issuance
or sale thereof, or (ii) for which such an adjustment would have been
required had the exercise or purchase price of such rights, warrants
or options at the time of the issuance or sale thereof or the rate of
conversion or exchange of such Convertible Securities, at the time of
the sale of such Convertible Securities, or the issuance or sale of
rights or warrants to subscribe for or purchase, or options for the
purchase of, such Convertible Securities, been the price or rate as
changed, in which case the provisions of Section 9(f)(E) hereof shall
be applicable if, but only if, the exercise or purchase price thereof,
as changed or the rate of conversion or exchange thereof, as changed,
consists solely of cash or requires the payment of additional
consideration, if any, consisting solely of cash and the Company did
not receive any consideration other than cash, if any, in connection
with such change).
(g) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original
issue of the Units and shall also include any capital stock of any class of
the Company thereafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the
voluntary liquidation, dissolution or winding up of the Company; provided,
however, that the shares issuable upon exercise of the Warrants shall
include only shares of such class designated in the Company's Articles of
Incorporation as Common Stock on the date of the original issue of the
Units or (i), in the case of any reclassification, change, consolidation,
merger, sale or conveyance of the character referred to in Section 9(c)
hereof, the stock, securities or property provided for in such section or
(ii), in the case of any reclassification or change in the outstanding
shares of Common Stock issuable upon exercise of the Warrants as a result
of a subdivision or combination or consisting of a change in par value, or
from par value to no par value, or from no par value to par value, such
shares of Common Stock as so reclassified or changed.
8
(h) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the
amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board
of Directors of the Company.
(i) If and whenever the Company shall grant to the holders of Common
Stock, as such, rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each of the then
Registered Holders of the Warrants all of such rights, warrants or options
to which each such holder would have been entitled if, on the date of
determination of stockholders entitled to the rights, warrants or options
being granted by the Company, such holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise
(assuming, for purposes of this Section 9(i), that exercise of Warrants is
permissible during periods prior to the Initial Warrant Exercise Date) of
his Warrants. Such grant by the Company to the holders of the Warrants
shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
SECTION 10. Fractional Warrants and Shares.
------------------------------
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company shall nevertheless not be required to issue fractions of shares,
upon exercise of the Warrants or otherwise, or to distribute certificates
that evidence fractional shares. With respect to any fraction of a share
called for upon any exercise hereof, the Company shall pay to the Holder an
amount in cash equal to such fraction multiplied by the market price of
such fractional share, determined as follows:
(1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq National Market or SmallCap
Market, the market price shall be the last reported sale price of the
Common Stock on such exchange on the last business day prior to the
date of exercise of the Warrant or if no such sale is made on such
day, the average of the closing bid and asked prices for such day on
such exchange; or
(2) If the Common Stock is not listed or admitted to unlisted
trading privileges or traded on the Nasdaq system, the market price
shall be the mean of the last reported bid and asked prices reported
by the Nasdaq Bulletin Board on the last business day prior to the
date of the exercise of the Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
market price shall be an amount determined in such reasonable manner
as may be prescribed by the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificates and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a Warrant, by
his acceptance thereof, consents and agrees with the Company, the Warrant Agent
and every other holder of a Warrant that:
9
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney
duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent and the Company in their sole discretion,
together with payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice or knowledge to the contrary, except as otherwise expressly
provided in Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and canceled by it and retired. The Warrant Agent shall also cancel Common
Stock following exercise of any or all of the Warrants represented thereby or
delivered to it for transfer, split-up, combination or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of Warrant Certificates to make or cause to be made any adjustment
of the Purchase Price or the Redemption Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of facts contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by the
President, any Vice President, its Secretary, or Assistant Secretary, (unless
other evidence in respect thereof is herein specifically prescribed). The
Warrant Agent shall not be liable for any action taken, suffered or omitted by
it in accordance with such notice, statement, instruction, request, direction,
order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse it for its reasonable expenses hereunder; it
further agrees to indemnify the Warrant Agent and save it harmless against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for anything done or omitted by the Warrant Agent in the execution of its
duties and powers hereunder except losses, expenses and liabilities arising as a
result of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of the
Warrant Agent's own negligence or wilful misconduct), after giving 30 days'
prior written notice to the Company. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of such
notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 15 days after it has been notified in writing of such
resignation by the resigning warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
10
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court shall be a bank or trust company having a capital
and surplus as shown by its last published report to its stockholders, of not
less than $10,000,000, or a stock transfer company. After acceptance in writing
of such appointment by the new warrant agent is received by the Company, such
new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or their
officers or directors, may buy and hold or sell Warrants or other securities of
the Company and otherwise deal with the Company in the same manner and to the
same extent and with like effects as though it were not Warrant Agent. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of
Section 4(b), the Warrant Agent and the Company may by supplemental agreement
make any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; or (ii) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders of Warrant Certificates
representing not less than 50% of the Warrants then outstanding; and provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or the Purchase Price therefor, or the
acceleration of the Warrant Expiration Date, shall be made without the consent
in writing of the Registered Holder of the Warrant Certificate representing such
Warrant, other than such changes as are specifically prescribed by this
Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention: President, or at such other address as may have been furnished to the
Warrant Agent in writing by the Company; if to the Warrant Agent, at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close of
business on the Expiration Date of all the Warrants or such earlier date upon
which all Warrants have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section, 15
hereof shall survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CIATTI'S, INC.
By:
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
NORWEST BANK MINNESOTA, N.A.
By:
-------------------------------
12