EXHIBIT 1.2
HAT WORLD CORPORATION
EBI SECURITIES CORPORATION
REPRESENTATIVE'S WARRANT AGREEMENT
DATED AS OF _______, 1999
TABLE OF CONTENTS
Section Title Page Number
------- ----- -----------
1 Definitions 1
2 Warrants and Issuance of Warrant
Certificates 5
3 Form of Warrant Certificate 5
4 Term of Warrants; Exercise of Warrants 6
5 Reservation of Warrant Securities 8
6 Payment of Taxes 9
7 Warrant Securities to be Fully Paid 9
8 Limitation on Transfer 9
9 Adjustment of Exercise Price and
Number of Shares 9
10 Merger or Consolidation of the Company 14
11 Modification of Agreement 14
12 Notice to Holders 15
13 Registration Rights 16
14 Restrictions on Transfer 20
15 No Rights as Stockholder 21
16 Notices 21
17 Arbitration 22
18 Miscellaneous Provisions 22
REPRESENTATIVE'S WARRANT AGREEMENT
THIS REPRESENTATIVE'S WARRANT AGREEMENT (the "Agreement"), dated as of
__________________, 1999, is made and entered into by and between HAT WORLD
CORPORATION, a Minnesota corporation (the "Company"), and EBI SECURITIES
CORPORATION ("EBI").
The Company agrees to issue and sell, and EBI agrees to purchase, for
the price of $115, Warrants to purchase up to an aggregate 115,000 shares
("Shares") of the Company's Common Stock, subject to the terms and conditions
set forth below.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and EBI, for value received, hereby agree as follows:
SECTION 1. DEFINITIONS
The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein).
THE "ACT" The Securities Act of 1933, as amended.
THE "COMMISSION" The United States Securities and Exchange Commission.
THE "COMPANY" Hat World Corporation, a Minnesota corporation.
"COMMON STOCK" The Common Stock, $.01 par value per share, of the
Company, whether now or hereafter authorized, holders of which have the right to
participate in the distribution of earnings and assets of the Company without
limit as to the amount or percentage.
"CURRENT MARKET PRICE" The Current Market Price shall be determined as
follows:
(a) if the security at issue is listed on a national
securities exchange or admitted to unlisted trading privileges on such
an exchange or quoted on either the NASDAQ National Market System or
the NASDAQ Small Cap Market, the Current Market Price shall be the
average of the reported sale price of that security on such exchange or
system for twenty (20) consecutive trading days commencing twenty-one
(21) trading days before such Conversion Date as defined in Section
4.6(b); calculated; or, if no such sale is made on such day, the
average of the highest closing bid and lowest asked price for such day
on such exchange or system; or
(b) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the Current Market Price shall
be the last reported sale price of that security on the OTC Bulletin
Board on the day for which the Current Market
Price is to be calculated; or if no such sale is made on such day, the
average of the last reported highest bid and lowest asked prices quoted
on the OTC Bulletin Board on the last business day on such day; or
(c) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked prices are
not reported, the Current Market Price shall be determined in such
reasonable manner as may be prescribed from time to time by the Board
of Directors of the Company, subject to the objection and arbitration
procedure as described in Section 9.9 below.
"EFFECTIVE DATE"________________, 1999.
"EXERCISE DATE" 8:00 a.m. Denver, Colorado, local time, on ___________,
2004.
"EXERCISE PERIOD" The period commencing on the Exercise Date and
extending to and through the Expiration Date.
"EXERCISE PRICE" $______________ per Share, as adjusted in accordance
with Section 9, below.
"EXPIRATION DATE" 5:00 p.m. Denver, Colorado, local time on __________,
2003; provided, however, if such date shall be a holiday or a day on which banks
are authorized to close in the State of Colorado, the Expiration Date shall mean
5:00 p.m. Denver, Colorado, local time on the next following day which in the
State of Colorado is not a holiday or a day on which banks are authorized to
close.
"HOLDER" or "WARRANT HOLDER" The person to whom a Warrant Certificate
is issued, and any valid transferee thereof pursuant to Section 8 below.
"MAJORITY HOLDER" Any Holder, any holder of Warrant Securities, or any
combination of Holders and such holders of Warrant Securities; and any Warrant
Holder, any holder of Warrant Securities, or any combination of such Holders and
such holders of Warrant Securities, if they hold, in the aggregate, unexercised
Warrants plus issued and outstanding Warrant Securities equal to more than fifty
percent (50%) of the total of (i) all Warrant Securities issued and outstanding
as a result of the exercise of the Warrant, and (ii) all Warrant Securities that
may at that time be purchased by exercising the unexercised portion of the
Warrants. For purposes hereof, a Holder of a Warrant which entitles the Holder
to purchase more than one share or Warrant shall be deemed to hold Warrants
equal to the number of shares or Warrants which may be acquired pursuant to any
such Warrant.
"NASD" The National Association of Securities Dealers, Inc.
"NASDAQ" The Nasdaq Stock Market, Inc.
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"WARRANTS" The Warrants issued in accordance with the terms of this
Agreement and any Warrants issued in substitution for or replacement of such
Warrants, or any Warrants into which such Warrants may be divided or exchanged.
"WARRANT SECURITIES" The Common Stock receivable upon exercise or
conversion of a Warrant, and the Common Stock underlying the unexercised portion
of a Warrant.
"OTC BULLETIN BOARD" An electronic quotation medium operated by NASDAQ.
"PUBLIC OFFERING" The public offering by the Company of shares of
Common Stock pursuant to an underwriting agreement dated as of ________________,
1999, between the Company and EBI as Representative of the several Underwriters
named in the underwriting agreement.
"UNDERWRITER" A broker-dealer identified as an Underwriter in the Final
Prospectus for the Public Offering.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES
2.1 DESCRIPTION OF WARRANTS. Each Warrant shall initially entitle the
Warrant Holder to purchase one share of Common Stock on exercise thereof,
subject to modification and adjustment as hereinafter provided in Section 10.
Warrant Certificates representing up to 115,000 Warrants and evidencing the
right to purchase an aggregate of up to 115,000 shares of Common Stock of the
Company shall be executed by the proper officers of the Company. The Company
shall deliver Warrant Certificates in required whole number denominations to the
person entitled thereto in connection with the original issuance of Warrant
Certificates or any transfer or exchange permitted under this Agreement.
2.2 WARRANT SECURITIES. Certificates representing the Warrant
Securities shall be issued only on or after the Exercise Date upon exercise or
conversion of the Warrants or upon transfer or exchange of the Warrant
Securities following exercise of the Warrants.
SECTION 3. FORM OF WARRANT CERTIFICATE
3.1 FORM OF CERTIFICATES. The Warrant Certificates shall be
substantially in the form attached hereto as Exhibit A and may have such
letters, numbers or other marks of identification 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.
The Warrant Certificates shall be dated as of the date of issuance, whether on
initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates.
3.2 EXECUTION OF CERTIFICATES. The Warrant Certificates shall be
executed on behalf of the Company by its President and Secretary, by manual
signatures thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Any Warrant Certificate may be signed by any person
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who at the actual date of the preparation of such Warrant Certificate shall be a
proper officer of the Company to sign such Warrant Certificate even though such
person was not such an officer upon the date of this Agreement.
3.3 MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATE. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrant Holder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant Certificate
or Certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction of such Warrant and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
3.4 EXCHANGE OF CERTIFICATE. Any Warrant Certificate may be exchanged
for another certificate or certificates entitling the Warrant Holder to purchase
a like aggregate number of Shares as the certificate or certificates surrendered
then entitled such Warrant Holder to purchase. Any Warrant Holder desiring to
exchange a Warrant Certificate shall make such request in writing delivered to
the Company, and shall surrender, properly endorsed, with signatures guaranteed,
the certificate evidencing the Warrant to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new Warrant
Certificate as so requested.
SECTION 4. TERM OF WARRANTS; EXERCISE OF WARRANT
4.1 EXERCISE OF WARRANT. Subject to the terms of this Agreement, the
Warrant Holder shall have the right, at any time during the four-year period
commencing at 8:00 a.m., Denver Time, on the Exercise Date and ending at 5:00
p.m., Denver Time, on the Expiration Date to purchase from the Company up to the
number of fully paid and nonassessable Shares to which the Warrant Holder may at
the time be entitled to purchase pursuant to this Agreement, upon surrender to
the Company, at its principal office, of the certificate evidencing the Warrants
to be exercised, together with the purchase form on the reverse thereof, duly
filled in and signed, and upon payment to the Company of the Exercise Price for
the number of Shares in respect of which such Warrants are then exercised, but
in no event for less than 100 Shares (unless fewer than an aggregate of 100
Shares are then purchasable under all outstanding Warrants held by a Warrant
Holder).
4.2 PAYMENT OF EXERCISE PRICE. Except as otherwise provided in Section
4.6 hereof, payment of the aggregate Exercise Price shall be made in cash or by
check, or any combination thereof.
4.3 ISSUANCE OF SHARES. Subject to the provisions of Section 9, upon
receipt of a Warrant Certificate with the exercise form thereon duly executed,
together with payment in full of the Exercise Price for the Warrant Securities
being purchased by such exercise, or upon exercise of the Conversion Right
described in Section 4.6, the Company shall requisition from the Company's
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transfer agent certificates for Warrant Securities and upon receipt shall make
delivery of certificates evidencing the total number of whole Warrant Securities
for which Warrants are then being exercised or converted, together with cash as
provided in Section 4.7 hereof in respect of any fractional Warrant Securities
otherwise issuable upon such surrender. The certificates shall be in such names
and denominations as are required for delivery to, or in accordance with the
instructions of the Warrant Holder; provided that if fewer than all Warrant
Securities issuable on exercise of a Warrant Certificate are purchased, the
Company shall issue a Warrant Certificate for the balance of the Warrant
Securities. Such certificates for the Warrant Securities shall be deemed to be
issued, and the person to whom such Warrant Securities are issued of record
shall be deemed to have become a holder of record of such Warrant Securities, as
of the date of the surrender of such Warrant Certificate and payment of the
Exercise Price, whichever shall last occur; provided further that if the books
of the Company with respect to the Warrant Securities shall be closed as of such
date, the certificates for such Warrant Securities shall be deemed to be issued,
and the person to whom such Warrant Securities are issued of record shall be
deemed to have become a record holder of such Warrant Securities, as of the date
provided in Section 4.5 below, but at the Exercise Price and upon the other
conditions in effect upon the date of surrender of the Warrant Certificate and
payment of the Exercise Price, whichever shall have last occurred, to the
Company.
4.4 CANCELLATION OF CERTIFICATES. All Certificates surrendered upon
exercise or conversion of Warrants shall be cancelled.
4.5 STATUS AS SHAREHOLDER. Upon receipt of the Warrant Certificate by
the Company as described in Sections 4.1 or 4.3 above, the Holder shall be
deemed to be the holder of record of the Warrant Securities issuable upon such
exercise, notwithstanding that the transfer books of the Company may then be
closed or that certificates representing such Warrant Securities may not have
been prepared or actually delivered to the Holder.
4.6 CONVERSION RIGHT. In addition to and without limiting the rights of
the Holder under the terms of the Warrant Agreement, the Holder shall have the
right (the "Conversion Right") during the Exercise Period to convert the Warrant
evidenced by a certificate or any portion thereof into shares of Common Stock as
provided in this Section 4.6 at any time or from time to time prior to its
expiration.
(a) Upon exercise of the Conversion Right with respect to a
particular number of shares of Common Stock (the "Converted Shares"),
the Company shall deliver to the Holder, without payment by the Holder
of any Exercise Price or any cash or other consideration, that number
of Converted Shares equal to the quotient obtained by dividing the Net
Value (as hereinafter defined in this paragraph 4.6(a)) of the
Converted Shares by the Current Market Price of a single Share,
determined in each case as of the close of business on the Conversion
Date (as hereinafter defined). The "Net Value" of the Converted Shares
shall be determined by subtracting the aggregate Exercise Price of the
Converted Shares from the aggregate Current Market Price of the
Converted Shares on the Conversion Date. No fractional securities shall
be issuable upon exercise of the Conversion Right, and if the number of
securities to be issued in accordance with the foregoing formula is
other
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than a whole number, the Company shall pay to the Holder an amount in
cash equal to the Current Market Price of the resulting fractional
share as provided in Section 4.7.
(b) The Conversion Right may be exercised by the Holder by the
surrender of the Warrant Certificate at the principal office of the
Company or at the office of the Company's stock transfer agent, if any,
together with a written statement specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the number of
shares of Common Stock subject to the Warrants which are being
surrendered (referred to in subparagraph 4(a) above as the Converted
Shares), on the reverse side of the Warrant Certificate, in exercise of
the Conversion Right. Such conversion shall be effective upon receipt
by the Company of the Warrant Certificate, or on such later date as is
specified therein (the "Conversion Date"), but not later than the
Expiration Date. Certificates for the Converted Shares issuable upon
exercise of the Conversion Right, together with a check in payment of
any fractional Converted Share and, in the case of a partial exercise a
new Warrant evidencing the Warrant Securities remaining subject to the
Warrant, shall be issued as of the Conversion Date and shall be
delivered to the Holder within seven (7) days following the Conversion
Date.
4.7 FRACTIONAL SHARES. On exercise of the Warrants by the Warrant
Holders, the Company shall not be required to deliver fractions of shares of
Common Stock; provided, however, that the Company shall purchase such fraction
for an amount in cash equal to the Current Market Price of such fraction,
computed on the trading day immediately preceding the day upon which such
Warrant Certificate was surrendered for exercise. By accepting a Warrant
Certificate, the holder thereof expressly waives any right to receive a Warrant
Certificate evidencing any fraction of a Share or to receive any fractional
share of securities upon exercise of a Warrant, except as expressly provided in
this Section 4.7.
SECTION 5. RESERVATION OF WARRANT SECURITIES
There has been reserved, and the Company shall at all times keep
reserved so long as the Warrants remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be subject
to purchase under the Warrants. Every transfer agent for the Common Stock and
other securities of the Company issuable upon the exercise of the Warrants will
be irrevocably authorized and directed at all times to reserve such number of
authorized shares and other securities as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with every transfer agent
for the Common Stock and other securities of the Company issuable upon the
exercise of the Warrants. The Company will supply every such transfer agent with
duly executed stock and other certificates, as appropriate, for such purpose and
will provide or otherwise make available any cash which may be payable as
provided in Section 4.7.
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SECTION 6. PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Warrants or the Warrant Securities and any tax
(except federal or state income tax) which may be payable in respect of any
transfer of the Warrants or the Warrant Securities.
SECTION 7. WARRANT SECURITIES TO BE FULLY PAID
The Company covenants that all Warrant Securities that may be issued
and delivered to a Holder of this Warrant upon the exercise of a Warrant and
payment of the Exercise Price, and all Converted Shares that may be issued and
delivered to a Holder upon a conversion of a Warrant, will be, upon such
delivery, validly and duly issued, fully paid and nonassessable.
SECTION 8. LIMITATION ON TRANSFER
This Warrant may not be sold, transferred, assigned, pledged or
hypothecated until the Exercise Date, except for (a) the sale, transfer, or
assignment, in whole or in part, to or among the officers of EBI and employees
who are also shareholders of EBI or, (b) the transfer by will, pursuant to the
laws of descent and distribution or operation of law as a result of the death of
any transferee to whom all or a portion of this Warrant may be transferred. All
sales, transfers, assignments or hypothecations of this Warrant must be in
compliance with this Section 8. Any assignment or transfer of this Warrant shall
be made by the presentation and surrender of this Warrant to the Company at its
principal office or the office of its transfer agent, if any, accompanied by a
duly executed Assignment Form, in the form attached to and by this reference
incorporated in this Warrant as Exhibit B. Upon the presentation and surrender
of these items to the Company, the Company, at its sole expense, shall execute
and deliver to the new Holder or Holders a new Warrant or Warrants, containing
the same terms and conditions as this Warrant, in the name of the new Holder or
Holders as named in the Assignment Form, and this Warrant shall at that time be
canceled.
SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES
9.1. ADJUSTMENTS. The number and kind of securities purchasable upon
the exercise of the Warrants and the Exercise Price shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
(a) In case the Company shall (i) pay a dividend in Common
Stock or make a distribution to its stockholders in Common Stock, (ii)
subdivide its outstanding Common Stock, (iii) combine its outstanding
Common Stock into a smaller number of shares of Common Stock, (iv)
allocate or reallocate among stockholders its Common Stock as a result
of a reclassification as provided under Section 9.1(b), or (v) issue by
reclassification of its Common Stock other securities of the Company,
the number of Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrant Holder
shall be entitled to receive the kind and number of Shares or other
securities of the
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Company which it would have owned or would have been entitled to
receive immediately after the happening of any of the events described
above, had the Warrants been exercised immediately prior to the
happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subsection 9.1(a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) If, prior to the expiration of the Warrants by exercise,
by their terms, or by redemption, the Company shall be recapitalized by
reclassifying its outstanding shares of Common Stock into shares with a
different par value, or by changing its outstanding shares of Common
Stock into shares without par value or in the event of any other
material change of the capital structure of the Company or of any
successor corporation by reason of any reclassification,
recapitalization, allocation, reallocation or conveyance, prompt,
proportionate, equitable, lawful and adequate provision shall be made
whereby any Warrant Holder shall thereafter have the right to purchase,
on the basis and the terms and conditions specified in this Agreement,
in lieu of the Warrant Securities theretofore purchasable on the
exercise of any Warrant, such securities or assets as may be issued or
payable with respect to or in exchange for the number of Warrant
Securities theretofore purchasable on exercise of the Warrant had such
reclassification, recapitalization, allocation, reallocation or
conveyance not taken place; and in any such event, the rights of any
Warrant Holder to any adjustment in the number of Warrant Securities
purchasable on exercise of such Warrant, as set forth above, shall
continue to be preserved in respect of any stock, securities or assets
which the Warrant Holder becomes entitled to purchase.
(c) In case the Company shall issue rights, options, warrants,
or convertible securities to all or substantially all holders of its
Common Stock, without any charge to such holders, entitling them to
subscribe for or purchase Common Stock at a price per share which is
lower at the record date mentioned below than the then Current Market
Price, the number of Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon exercise of the Warrants by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional shares
of Common Stock offered for subscription or purchase, and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options,
warrants, or convertible securities plus the number of shares which the
aggregate offering price of the total number of shares offered would
purchase at such Current Market Price. Such adjustment shall be made
whenever such rights, options, warrants, or convertible securities are
issued, and shall become effective immediately and retroactively to the
record date for the determination of stockholders entitled to receive
such rights, options, warrants, or convertible securities.
(d) In case the Company shall distribute to all or
substantially all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or distributions out
of earnings) or rights, options, warrants, or convertible securities
containing
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the right to subscribe for or purchase Common Stock (excluding those
referred to in subsection 9.1(b) above), then in each case the number
of Shares thereafter purchasable upon the exercise of the Warrants
shall be determined by multiplying the number of Shares theretofore
purchasable upon exercise of the Warrants by a fraction, the numerator
of which shall be the then Current Market Price on the date of such
distribution, and the denominator of which shall be such Current Market
Price on such date minus the then fair value (as determined by the
Company's independent public accountants qualifying under Section 9.6
or if determined by the Company as reviewed by such independent public
accountants) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights, options, warrants, or
convertible securities applicable to one share. Such adjustment shall
be made whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the record date
for the determination of stockholders entitled to receive such
distribution.
(e) No adjustment in the number of Shares purchasable pursuant
to the Warrants shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the number of
Shares then purchasable upon the exercise of the Warrants or, if the
Warrants are not then exercisable, the number of Shares purchasable
upon the exercise of the Warrants on the first date thereafter that the
Warrants become exercisable; provided, however, that any adjustments
which by reason of this subsection 9.1(e) are not required to be made
immediately shall be carried forward and taken into account in any
subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the
exercise of the Warrant is adjusted, as herein provided, the Exercise
Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Exercise Price immediately prior to such adjustment by
a fraction, the numerator of which shall be the number of Warrant
Shares purchasable upon the exercise of the Warrant immediately prior
to such adjustment, and the denominator of which shall be the number of
Warrant Shares so purchasable immediately thereafter.
(g) Whenever the number of Shares purchasable upon exercise of
the Warrants is adjusted as herein provided, the Company shall cause to
be promptly mailed to the Warrant Holder by first class mail, postage
prepaid, notice of such adjustment and a certificate of the chief
financial officer of the Company setting forth the number of Shares
purchasable upon the exercise of the Warrants after such adjustment, a
brief statement of the facts requiring such adjustment and the
computation by which such adjustment was made.
(h) For the purpose of this subsection 9.1, the term "Common
Stock" shall mean (i) the class of stock designated as the Common Stock
of the Company at the date of this Agreement, or (ii) any other class
of stock resulting from successive changes or reclassifications of such
Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the event
that at any time, as a result of an adjustment made pursuant to this
Section 9, the Warrant Holder shall become entitled to purchase any
securities of the Company other than Common Stock, (y) if the
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Warrant Holder's right to purchase is on any other basis than that
available to all holders of the Company's Common Stock, the Company
shall obtain an opinion of an independent investment banking firm
valuing such other securities; and (z) thereafter the number of such
other securities so purchasable upon exercise of the Warrants shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Shares contained in this Section 9.
(i) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the
number of Shares purchasable upon exercise of the Warrants, to the
extent the Warrants have not then been exercised, shall, upon such
expiration, be readjusted and shall thereafter be such as they would
have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) on the basis of (i)
the fact that the only shares of Common Stock so issued were the shares
of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants, or conversion privileges, and (ii) the
fact that such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise
plus the consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options, warrants, or
conversion privileges whether or not exercised; provided, however, that
no such readjustment shall have the effect of decreasing the number of
Shares purchasable upon exercise of the Warrants by an amount in excess
of the amount of the adjustment initially made in respect of the
issuance, sale, or grant of such rights, options, warrants, or
conversion rights.
9.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection 9.1,
no adjustment in respect of any dividends or distributions out of earnings shall
be made during the term of the Warrants or upon the exercise or conversion of
the Warrants.
9.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made
pursuant to Section 9 hereof in connection with the issuance of the Common Stock
sold as part of the public sale pursuant to the Underwriting Agreement or the
issuance of shares of Common Stock upon exercise of the Warrants. No adjustments
shall be made pursuant to Section 9 hereof in connection with the grant or
exercise of presently authorized or outstanding options to purchase, or the
issuance of shares of Common Stock under the Company's director or employee
benefit plans disclosed in the Registration Statement relating to the Public
Offering.
9.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation, or in case of any sale or conveyance to
another corporation of the property, assets, or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Warrant
Holder an agreement that the Warrant Holder shall have the right thereafter upon
payment of the Exercise Price in effect immediately prior to such action to
purchase, upon exercise of the Warrants, the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, or conveyance
had the Warrants been
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exercised immediately prior to such action. In the event of a merger described
in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which the
Company is the surviving corporation, the right to purchase Shares under the
Warrants shall terminate on the date of such merger and thereupon the Warrants
shall become null and void, but only if the controlling corporation shall agree
to substitute for the Warrants, its Warrants which entitle the holder thereof to
purchase upon their exercise the kind and amount of shares and other securities
and property which it would have owned or been entitled to receive had the
Warrants been exercised immediately prior to such merger. Any such agreements
referred to in this subsection 9.4 shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
Section 9 hereof. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales, or conveyances.
9.5 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action which
would cause an adjustment effectively reducing the portion of the Exercise Price
allocable to each Share below the par value per share of the Common Stock
issuable upon exercise of the Warrants, the Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Common Stock
upon exercise of the Warrants.
9.6 INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly employed by the Company) to make any computation required
under this Section 9, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 9.
9.7 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments
in the number of securities issuable upon exercise of the Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement and shall automatically be deemed to include
the number of securities as so adjusted even though not stated on such Warrant
Certificates. However, the Company may, at any time in its sole discretion
(which shall be conclusive), make any change in the form of Warrant certificate
that it may deem appropriate and that does not affect the substance thereof; and
any Warrant certificate thereafter issued, whether upon registration of transfer
of, or in exchange or substitution for, an outstanding Warrant certificate, may
be in the form so changed.
9.8 TREASURY STOCK. For purposes of this Section 9, shares of Common
Stock owned or held at any relevant time by, or for the account of, the Company,
in its treasury or otherwise, shall not be deemed to be outstanding for purposes
of the calculations and adjustments described.
9.9 OFFICERS' CERTIFICATE REGARDING ADJUSTMENTS. Whenever the Exercise
Price or the aggregate number of Warrant Securities purchasable pursuant to this
Warrant shall be adjusted as required by the provisions of this Section 9, the
Company shall promptly file with its Secretary or an Assistant Secretary at its
principal office, and with its transfer agent, if any, an officers' certificate
13
executed by the Company's President and Secretary or Assistant Secretary,
describing the adjustment and setting forth, in reasonable detail, the facts
requiring such adjustment and the basis for and calculation of such adjustment
in accordance with the provisions of this Warrant. Each such officers'
certificate shall be made available to the Holder or Holders of this Warrant for
inspection at all reasonable times, and the Company, after each such adjustment,
shall promptly deliver a copy of the officers' certificate relating to that
adjustment to the Holder or Holders of this Warrant. If the officers'
certificate is not accompanied by the certificate described in Section 9.1, the
officers' certificate described in this Section 9.9 shall be deemed to be
conclusive as to the correctness of the adjustment reflected therein if, and
only if, no Holder of this Warrant delivers written notice to the Company of an
objection to the adjustment within thirty (30) days after the officers'
certificate is delivered to the Holder or Holders of this Warrant. The Company
will make its books and records available for inspection and copying during
normal business hours by the Holder so as to permit a determination as to the
correctness of the adjustment. If written notice of an objection is delivered by
a Holder to the Company and the parties cannot reconcile the dispute, the Holder
and the Company shall submit the dispute to arbitration pursuant to the
provisions of Section 17 below. Failure to prepare or provide the officers'
certificate shall not modify the parties' rights hereunder.
SECTION 10. MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless it has complied with the provisions of Section 9.4.
SECTION 11. MODIFICATION OF AGREEMENT.
The Company may by supplemental agreement make any changes or
corrections in this Agreement it shall deem appropriate to cure any ambiguity or
to correct any defective or inconsistent provision or mistake or error herein
contained. Additionally, the Company may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the Holders, which
adverse affects to the interests of the Holders would not include either the
lowering the Exercise Price or extending the Exercise Period of the Warrants;
provided, however, this Agreement shall not otherwise be modified, supplemented
or altered in any respect except with the consent in writing of the Holders who
hold not less than a majority of the Warrants then outstanding and provided
further that no such amendment shall accelerate the Warrant Expiration Date or
increase the Exercise Price without the approval of all the holders of all
outstanding Warrants.
SECTION 12. NOTICE TO HOLDERS
If, prior to the expiration of this Warrant either by its terms or by
its exercise in full, any of the following shall occur:
(i) the Company shall declare a dividend or authorize any
other distribution on its Common Stock; or
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(ii) the Company shall authorize the granting to the
shareholders of its Common Stock of rights to
subscribe for or purchase any securities or any other
similar rights; or
(iii) any reclassification, reorganization, allocation,
reallocation or similar change of the Common Stock,
or any consolidation or merger to which the Company
is a party, or the sale, lease, or exchange of any
significant portion of the assets of the Company; or
(iv) the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(v) any purchase, retirement or redemption by the Company
of its Common Stock;
then, and in any such case, the Company shall deliver to the Holder or Holders
written notice thereof at least thirty (30) days prior to the earliest
applicable date specified below with respect to which notice is to be given,
which notice shall state the following:
(a) the purpose for which a record of stockholders is to be taken;
(b) the number, amount, price and nature of the shares of Common
Stock or other stock, securities, or assets which will be
deliverable on Warrant Securities following exercise of the
Warrants if such exercise occurs prior to the record date for
such action;
(c) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not
to be taken, the date as of which the shareholders of Common
Stock of record to be entitled to such dividend, distribution
or rights are to be determined;
(d) the date on which such reclassification, reorganization,
allocation, reallocation, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or purchase,
retirement or redemption is expected to become effective, and
the date, if any, as of which the Company's shareholders of
Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property deliverable upon
such reclassification, reorganization, allocation,
reallocation, consolidation, merger, sale, transfer,
dissolution, liquidation, winding up, purchase, retirement or
redemption; and
(e) if any matters referred to in the foregoing clauses are to be
voted upon by shareholders of Common Stock, the date as of
which those shareholders to be entitled to vote are to be
determined.
15
SECTION 13. REGISTRATION RIGHTS
13.1 DEMAND REGISTRATION RIGHT. Upon the written request of a Majority
Holder, made at any time after the Exercise Date, but before the Expiration
Date, the Company shall file within ninety (90) days of such written request a
registration statement or Regulation A offering statement pursuant to the Act,
and all necessary amendments thereto, to register or qualify the Warrant,
Warrant Securities and the Warrant Securities underlying the unexercised portion
of this Warrant. The Company may use the Regulation A exemption if available,
but the Company must file a registration statement if the securities that are to
be covered cannot be sold pursuant to Regulation A because of the limitations
applicable to the use of the Regulation A exemption. The Company agrees to use
its best efforts to cause this registration or qualification to become effective
as promptly as practicable and to keep such registration effective for a period
expiring on the earlier of one hundred eighty (180) days after the Effective
Date or the date of completion of the distribution described in the Registration
Statement; and its officers, directors, consultants, auditors and counsel shall
cooperate in all matters necessary or advisable to pursue this objective. All of
the expenses of this registration or qualification shall be borne by the
Company, including, but not limited to, legal, accounting, consulting, printing,
filing and NASD fees, out-of-pocket expenses incurred by counsel, accountants,
and consultants retained by the Company and miscellaneous expenses directly
related to the registration statement or offering statement and the offering,
and the underwriter's accountable and nonaccountable expense allowances and
fees; but the Company shall not pay any expense allowance, brokerage fees,
commissions or underwriting discounts except to the extent they are attributable
to other securities that the Company has registered or qualified in conjunction
with the registration and qualification of the Warrant, Warrant Securities or
the Warrant Securities underlying the unexercised portion of this Warrant.
Notwithstanding the foregoing, if, as a qualification of any offering in any
state or jurisdiction in which the Company (by vote of its Board of Directors)
or any underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above. The Majority Holder shall be entitled to exercise the rights
described in this subsection 13.1 one (1) time only.
Within ten (10) days after the delivery by the Majority Holder to the
Company of the notice described above, the Company shall deliver written notice
to all other Holders of this Warrant and holders of the Warrant Securities, if
any, advising them that the Company is proceeding with a registration statement
or offering statement and offering them the right to include the Warrant and
Warrant Securities of those Holders or holders therein. If any Holder of a
Warrant and Warrant Securities delivers written acceptance of that offer to the
Company within thirty (30) days after the delivery of the Company's notice, the
Company shall be obligated to include that holder's Warrant and that holder's
Warrant Securities in the contemplated registration statement or offering
statement.
13.2 PIGGY-BACK REGISTRATION RIGHT. If at any time prior to the
Expiration Date the Company files a registration statement with the Commission
pursuant to the Act, or pursuant to any other act passed after the date of this
Agreement, which filing provides for the sale of securities by the Company to
the public, or files a Regulation A offering statement under the Act, the
Company
16
shall offer to the Holder or Holders of this Warrant and the holders of any
Warrant Securities the opportunity to register or qualify the Warrant Securities
and any Warrant Securities underlying the unexercised portion of this Warrant,
if any, at the Company's sole expense, regardless of whether the Holder or
Holders of this Warrant or the holders of Warrant Securities or both may have
previously availed themselves of any of the registration rights described in
this Section 13; provided, however, that in the case of a Regulation A offering,
the opportunity to qualify shall be limited to the amount of the available
exemption after taking into account the securities that the Company wishes to
qualify. Notwithstanding anything to the contrary, this subsection 13.2 shall
not be applicable to a registration statement registering securities issued
pursuant to an employee benefit plan or as to a transaction subject to Rule 145
promulgated under the Act or for which a form S-4 registration statement could
be used.
The Company shall deliver written notice to the Holder or Holders of
this Warrant and to any holders of the Warrant Securities of its intention to
file a registration statement or Regulation A offering statement under the Act
at least sixty (60) days prior to the filing of such registration statement or
offering statement, and the Holder or Holders and holders of Warrant Securities
shall have thirty (30) days thereafter to request in writing that the Company
register or qualify the Warrant Securities or the Warrant Securities underlying
the unexercised portion of this Warrant in accordance with this subsection 13.2.
Upon the delivery of such a written request within the specified time, the
Company shall be obligated to include in its contemplated registration statement
or offering statement all information necessary or advisable to register or
qualify the Warrant Securities or Warrant Securities underlying the unexercised
portion of this Warrant for a public offering, if the Company does file the
contemplated registration statement or offering statement; provided, however,
that neither the delivery of the notice by the Company nor the delivery of a
request by a Holder or by a holder of Warrant Securities shall in any way
obligate the Company to file a registration statement or offering statement.
Furthermore, notwithstanding the filing of a registration statement or offering
statement, the Company may, at any time prior to the effective date thereof,
determine not to offer the securities to which the registration statement or
offering statement relates, other than the Warrant, Warrant Securities and
Warrant Securities underlying the unexercised portion of this Warrant.
Notwithstanding the foregoing, if, as a qualification of any offering in any
state or jurisdiction in which the Company (by vote of its Board of Directors)
or any underwriter determines in good faith that it wishes to offer securities
registered in the offering, it is required that offering expenses be allocated
in a manner different from that provided above, then the offering expenses shall
be allocated in whatever manner is most nearly in compliance with the provisions
set out above. The Company shall comply with the requirements to this subsection
13.2 and the related requirements of subsection 13.7 at its own expense. That
expense shall include, but not be limited to, legal, accounting, consulting,
printing, federal and state filing fees, NASD fees, out-of-pocket expenses
incurred by counsel, accountants and consultants retained by the Company, and
miscellaneous expenses directly related to the registration statement or
offering statement and the offering. However, this expense shall not include the
portion of any underwriting commissions, transfer taxes and the underwriter's
accountable and nonaccountable expense allowances attributable to the offer and
sale of the Warrant, Warrant Securities and the Warrant Securities underlying
the unexercised portion of this Warrant, all of which expenses shall be borne by
the Holder or Holders of this Warrant and the holders of the Warrant Securities
registered or qualified.
17
13.3 INCLUSION OF INFORMATION. In the event that the Company registers
or qualifies the Warrant, Warrant Securities or the Warrant Securities
underlying the unexercised portion of this Warrant pursuant to subsections 13.1
or 13.2 above, the Company shall include in the registration statement or
qualification, and the prospectus included therein, all information and
materials necessary or advisable to comply with the applicable statutes and
regulations so as to permit the public sale of the Warrant Securities or the
Warrant Securities underlying the unexercised portion of this Warrant. As used
in subsections 13.1 and 13.2 above, reference to the Company's securities shall
include, but not be limited to, any class or type of the Company's securities or
the securities of any of the Company's subsidiaries or affiliates.
13.4 REGISTRATION STATEMENT FILED BY HOLDER. In addition to the
registration rights described in subsections 13.1 and 13.2 above, upon the
written request of any Majority Holder, the Company, as promptly as possible
after delivery of such request, shall cooperate with the requesting Majority
Holder or holders in preparing and signing any registration statement or
offering statement that the Holder or holders may desire to file in order to
sell or transfer the Warrant and Warrant Securities. Within ten (10) days after
the delivery of the written request described above, the Company shall deliver
written notice to all other Holders of this Warrant and holders of Warrant
Securities, if any, advising them that the Company is proceeding with a
registration statement or offering statement and that their Warrant and Warrant
Securities will be included therein if they so desire and agree to pay their pro
rata share of the cost of registration or qualification and provided that the
Holder or holder delivers written notice to the Company of their desire to be
included and their agreement to pay their pro rata share of the cost within
thirty (30) days after the delivery of the Company's notice to them. The Company
will supply all information necessary or advisable for any such registration
statements or offering statements; provided, however, that all the costs and
expenses of such registration statements or offering statements shall be borne,
in a manner proportionate to the number of securities for which they indicate a
desire to register, by the Holders of this Warrant and the holders of Warrant
Securities who seek the registration or qualification of their Warrant, Warrant
Securities or Warrant Securities underlying the unexercised portion of their
Warrant. In determining the amount of costs and expenses to be borne by those
Holders or holders, the only costs and expenses of the Company to be included
are the additional costs and expenses that would not have otherwise been
incurred by the Company if those Holders or holders had not desired to file a
registration statement or offering statement. As an example, and without
limitation, audit fees would not be charged to those Holders or holders if or to
the extent that the Company would have incurred the same audit fees for its
year-end or other use in the absence of the registration statement or offering
statement. The Holders or holders responsible for the costs and expenses shall
reimburse the Company for those reimbursable costs and expenses reasonably
incurred by the Company within thirty (30) days after the initial effective date
of the registration statement or qualification at issue.
13.5 PAYMENT OF EXERCISE PRICE FROM PROCEEDS. In the event that any
such registration statement is utilized for a public offering of any of the
shares of Common Stock or other securities to be received upon exercise of the
Warrants pursuant to this Section 13, the Warrant Holder may elect to pay the
Exercise Price of the Warrants to the Company out of the proceeds of the sale of
the
18
shares of Common Stock or such other securities pursuant to the registration
statement concurrently with the closing of such sale of such shares or
securities; provided that if such sale is not closed within ninety (90) days of
the effective date of such registration statement, then the Warrant Holder shall
be obligated to pay the Exercise Price of the Warrants to the Company on such
ninetieth (90th) day.
13.6 CONDITION OF COMPANY'S OBLIGATIONS. As to each registration
statement or offering statement, the Company's obligations contained in this
Section 13 shall be conditioned upon a timely receipt by the Company in writing
of the following:
(a) Information as to the terms of the contemplated public
offering furnished by and on behalf of each Holder or holder intending
to make a public distribution of the Warrant Securities or Warrant
Securities underlying the unexercised portion of the Warrant; and
(b) Such other information as the Company may reasonably
require from such Holders or holders, or any underwriter for any of
them, for inclusion in the registration statement or offering
statement.
13.7 ADDITIONAL REQUIREMENTS. In each instance in which the Company
shall take any action to register or qualify the Warrant Securities or the
Warrant Securities underlying the unexercised portion of this Warrant, if any,
pursuant to this Section 13, the Company shall do the following:
(a) supply to EBI, as the representative of the Holders of the
Warrant and the holders of Warrant Securities whose Warrant Securities
are being registered or qualified, two (2) manually signed copies of
each registration statement or offering statement, and all amendments
thereto, and a reasonable number of copies of the preliminary, final or
other prospectus or offering circular, all prepared in conformity with
the requirements of the Act and the rules and regulations promulgated
thereunder, and such other documents as EBI shall reasonably request;
(b) cooperate with respect to (i) all necessary or advisable
actions relating to the preparation and the filing of any registration
statements or offering statements, and all amendments thereto, arising
from the provisions of this Section 13, (ii) all reasonable efforts to
establish an exemption from the provisions of the Act or any other
federal or state securities statutes, (iii) all necessary or advisable
actions to register or qualify the public offering at issue pursuant to
federal securities statutes and the state "blue sky" securities
statutes of each jurisdiction that the Holders of the Warrant or
holders of Warrant Securities shall reasonably request, and (iv) all
other necessary or advisable actions to enable the Holders of the
Warrant Securities to complete the contemplated disposition of their
securities in each reasonably requested jurisdiction; and
(c) keep all registration statements or offering statements to
which this Section 13 applies, and all amendments thereto, effective
under the Act for a period of at least one
19
hundred eighty (180) days after their initial effective date and
cooperate with respect to all necessary or advisable actions to permit
the completion of the public sale or other disposition of the
securities subject to a registration statement or offering statement.
13.8 RECIPROCAL INDEMNIFICATION. In each instance in which pursuant to
this Section 13 the Company shall take any action to register or qualify the
Securities or the Warrant Securities underlying the unexercised portion of this
Warrant, prior to the effective date of any registration statement or offering
statement, the Company and each Holder or holder of Warrants or Warrant
Securities being registered or qualified shall enter into reciprocal
indemnification and contribution agreements, in the form customarily used by
reputable investment bankers with respect to public offerings of securities.
13.9 EBI AS REPRESENTATIVE. For purposes of subsection 13.6 (a) above,
by the receipt of this Warrant or any Warrant Securities, all Holders and all
holders of Warrant Securities acknowledge and agree that EBI is and shall be
their representative.
13.10 SURVIVAL. The Company's obligations described in this Section 13
shall continue in full force and effect regardless of the exercise, surrender,
cancellation or expiration of this Warrant.
SECTION 14. RESTRICTIONS ON TRANSFER
14.1 RESTRICTIONS ON TRANSFER. This Warrant, the Warrant Securities,
and all other securities issued or issuable upon exercise of this Warrant, may
not be offered, sold or transferred, in whole or in part, except in compliance
with the Act, and except in compliance with all applicable state securities
laws. The Warrant Holder agrees that prior to making any disposition of the
Warrants, to the persons as provided in Section 8, the Warrant Holder shall give
written notice to the Company describing briefly the manner in which any such
proposed disposition is to be made; and no such disposition shall be made if the
Company has notified the Warrant Holder that in the opinion of counsel
reasonably satisfactory to the Warrant Holder a registration statement or other
notification or post-effective amendment thereto (hereinafter collectively a
"Registration Statement") under the Act is required with respect to such
disposition and no such Registration Statement has been filed by the Company
with, and declared effective, if necessary, by the Commission.
14.2 RESTRICTIVE LEGEND. The Company may cause substantially the
following legends, or their equivalents, to be set forth on each certificate
representing the Warrants, the Warrant Securities, or any other security issued
or issuable upon exercise or conversion of a Warrant, not theretofore
distributed to the public or sold to underwriters, as defined by the Act:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR
TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE AGREEMENT
PURSUANT TO WHICH THEY WERE ISSUED."
20
(b) Any legend required by applicable state securities laws.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Act, or the securities represented thereby) shall also bear the above
legends unless, in the opinion of the Company's counsel, the securities
represented thereby need no longer be subject to such restrictions.
SECTION 15. NO RIGHTS AS STOCKHOLDER
Nothing contained in this Agreement or in the Warrants shall be
construed as conferring upon the Warrant Holder or its transferees any rights as
a stockholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a stockholder in respect to any meeting of
stockholders for the election of directors of the Company or any other matter.
The Company covenants, however, that for so long as this Warrant is at least
partially unexercised, it will furnish any Holder of this Warrant with copies of
all reports and communications furnished to the shareholders of the Company.
SECTION 16. NOTICES
16.1 THE COMPANY. All notices, demands, claims, elections, opinions,
requests or other communications hereunder (however characterized or described)
shall be in writing and shall be deemed duly given or made if (and then two (2)
business days after) sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to, in the case of the Company as
follows:
Hat World Corporation
ββββ βββββ βββββββββ ββββββ
βββββ βββββ, βββββ ββββββ βββββ
Attention: ββββββ β. ββββββ, Chairman of the Board
16.2 THE WARRANT HOLDERS. Any distribution, notice or demand required
or authorized by this Agreement to be given or made by the Company to or on the
Warrant Holders shall be sufficiently given or made if sent by mail, first
class, certified or registered, postage prepaid, addressed to the Warrant
Holders at their last known addresses as they shall appear on the registration
books for the Warrant Certificates maintained by the Company.
16.3 EFFECTIVENESS OF NOTICE. The Company may send any notice, demand,
claim, election, opinion, request or communication hereunder to the intended
recipient at the address set forth above using any other means (including
personal delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, demand, claim, election,
opinion, request or other communication shall be deemed to have been duly given
or made unless and until it actually is received by the intended recipient. The
Company may change the address to which
21
notices, demands, claims, elections, opinions, requests and other communications
hereunder are to be delivered by giving the Warrant Holders notice in the manner
herein set forth.
SECTION 17. ARBITRATION
The Company and the Holder, and by receipt of a Certificate or any
Warrant Securities, all subsequent Holders or holders of Warrant Securities,
agree to submit all controversies, claims, disputes and matters of difference
with respect to this Agreement and the Certificates, including, without
limitation, the application of this Section 17, to arbitration in Denver,
Colorado, according to the rules and practices of the American Arbitration
Association from time to time in force; provided, however, that if such rules
and practices conflict with the applicable procedures of Colorado courts of
general jurisdiction or any other provisions of Colorado law then in force,
those Colorado rules and provisions shall govern. This agreement to arbitrate
shall be specifically enforceable. Arbitration may proceed in the absence of any
party if notice of the proceeding has been given to that party. The parties
agree to abide by all awards rendered in any such proceeding. These awards shall
be final and binding on all parties to the extent and in the manner provided by
the rules of civil procedure enacted in Colorado. All awards may be filed, as a
basis of judgment and of the issuance of execution for its collection, with the
clerk of one or more courts, state or federal, having jurisdiction over either
the party against whom that award is rendered or its property. No party shall be
considered in default hereunder during the pendency of arbitration proceedings
relating to that default.
SECTION 18. MISCELLANEOUS PROVISIONS
18.1 PERSONS BENEFITING. This Agreement shall be binding upon and inure
to the benefit of the Company; the Holders, and their respective successors and
assigns. By his acceptance of a Warrant Certificate, the Holder accepts and
agrees to comply with all of the terms and provisions of this Agreement. Nothing
in this Agreement is intended or shall be construed to confer on any other
person any right, remedy or claim or to impose on any other person any duty,
liability or obligation.
18.2 SEVERABILITY. If any term contained herein shall be held, declared
or pronounced void, voidable, invalid, unenforceable or inoperative for any
reason by any court of competent jurisdiction, government authority or
otherwise, such holding, declaration or pronouncement shall not affect adversely
any other term, which shall otherwise remain in full force and effect, and the
effect of such holding, declaration or pronouncement shall be limited to the
territory or jurisdiction in which made.
18.3 TERMINATION. This Agreement shall terminate as of the close of
business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised or redeemed; except that the exercise of a Warrant in
full on the Expiration Date shall not terminate the provisions of this Agreement
as it relates to holders of Warrant Securities.
18.4 GOVERNING LAW. These terms and each Certificate issued hereunder
shall be deemed to be a contract under the laws of the State of Minnesota and
for all purposes shall be construed in
22
accordance with the laws of said state without giving effect to conflicts of
laws provisions of such state.
18.5 AGREEMENT AVAILABLE TO HOLDERS. A copy of these terms shall be
available at all reasonable times at the office of the Company for inspection by
any Holder. As a condition of such inspection, the Company may require any
Holder to submit a Certificate held of record for inspection.
18.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall together constitute one and the same instrument.
18.7 FAILURE TO PERFORM. If the Company fails to perform any of its
obligations hereunder, it shall be liable to the Holder for all damages, costs
and expenses resulting from the failure, including, but not limited to, all
reasonable attorney's fees and disbursements.
18.8 PARAGRAPH HEADINGS. Paragraph headings used in this Warrant
Agreement are for convenience only and shall not be taken or construed to define
or limit any of the terms or provisions of this Agreement. Unless otherwise
provided, or unless the context shall otherwise require, the use of the singular
shall include the plural and the use of any gender shall include all genders.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
HAT WORLD CORPORATION
By:
---------------------------------------
ββββββ β. ββββββ, Chairman of the Board
EBI SECURITIES CORPORATION
By:
---------------------------------------
23
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED,
HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH THE
AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED.
Warrant Certificate No. ______________
REPRESENTATIVE'S OPTIONS TO PURCHASE
____________ SHARES OF COMMON STOCK
HAT WORLD CORPORATION
INCORPORATED UNDER THE LAWS
OF THE STATE OF MINNESOTA
This Warrant Certificate certifies that _____________________ or
registered assigns (the "Holder") is the registered owner of the above-indicated
number of Warrants ("Warrants") expiring at 5:00 p.m. Denver, Colorado local
time, on ______________, 2004 (the "Expiration Date"). Each Warrant entitles the
Holder to purchase from Hat World Corporation (the "Company") a Minnesota
corporation, at any time during the period commencing at 8:00 a.m., Denver,
Colorado local time, on _________________, 2000, and expiring on the Expiration
Date, one fully paid and non-assessable share of Common Stock of the Company at
a purchase price per Share of $___________ (the "Exercise Price"), upon
surrender of this Certificate, with the exercise form hereon duly completed and
executed, with payment of the Exercise Price, at the principal office of the
Company, but only subject to the conditions set forth herein and in the
Representative's Warrant Agreement between the Company and EBI Securities
Corporation, dated _______________, 1999 (the "Warrant Agreement"). In addition,
the Holder has the right to convert Warrants evidenced by this Certificate into
shares of Common Stock as provided in Section 4.6 of the Warrant Agreement. The
Exercise Price, the Expiration Date, and the number of shares of Common Stock of
the Company purchasable upon exercise of the Warrants evidenced hereby shall be
subject to adjustment from time to time as set forth in the Warrant Agreement.
Reference is hereby made to the other provisions of the Warrant Agreement, all
of which are hereby incorporated by reference herein and made a part of this
Certificate and which shall for all purposes have the same effect as though
fully set forth at this place.
Upon due presentment for registration of transfer of this Certificate
at the office of the Company a new Certificate or Certificates of like tenor and
evidencing in the aggregate a like number of Warrants, subject to any
adjustments made in accordance with the Warrant Agreement, shall be issued to
the transferee in exchange for this Certificate, subject to the limitations
provided in the Warrant Agreement.
The Holder of the Warrants evidenced by this Certificate may exercise
or convert all or any whole number of such Warrants in the manner stated hereon
and in the Warrant Agreement. The Exercise Price shall be payable in lawful
money of the United States of America in cash or by certified or cashier's check
or bank draft payable to the order of the Company. Upon any partial exercise or
conversion of the Warrants evidenced hereby, there shall be signed and issued to
the Warrant Holder a new Warrant Certificate in respect of the shares of Common
Stock as to which the Warrants evidenced hereby shall not have been exercised or
converted. These Warrants may be exchanged at the office of the Company by
surrender of this Warrant Certificate properly endorsed for one or more new
Warrants of the same aggregate number of shares of Common Stock as evidenced by
the Warrant or so exchanged. No fractional shares of Common Stock will be issued
upon the exercise of rights to purchase hereunder, but the Company shall pay the
cash value of any fraction upon the exercise of one or more Warrants. These
Warrants are transferable at the office of the Company in the manner and subject
to the limitations set forth in the Warrant Agreement.
This Warrant Certificate does not entitle any Warrant Holder to any of
the rights of a stockholder of the Company.
HAT WORLD CORPORATION
By:
---------------------------------------
Dated:
---------------------------
[Seal]
Attest:
---------------------------
Secretary
2
NOTICE OF EXERCISE
(To be executed by a Holder desiring to exercise the right to purchase shares of
Common Stock ("Shares").
The undersigned Holder of a Warrant hereby
(a) irrevocably elects to exercise the Warrant to the extent
of purchasing ____________ Shares;
(b) makes payment in full of the aggregate Exercise Price for
those Shares in the amount of $___________ the delivery of certified
funds or a bank cashier's check in the amount of $____________;
(c) requests that certificates evidencing the securities
underlying such Shares be issued in the name of the undersigned, or, if
the name and address of some other person is specified below, in the
name of such other person:
(Name and address of person other than the undersigned in whose name
Shares are to be registered)
(d) requests, if the number of Shares purchased are not all
the Shares purchasable pursuant to the unexercised portion of the
Warrant, that a new Warrant of like tenor for the remaining Shares
purchasable pursuant to the Warrant be issued and delivered to the
undersigned at the address stated below.
Dated:
--------------------------- -----------------------------------------
Signature
(This signature must conform in all
respects to the name of the Holder as
specified on the face of the Warrant.)
Social Security Number Printed Name:
or Employer ID No. ----------------------------
Address:
---------------------- ---------------------------------
3
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, ________________________________ hereby
sells, assigns and transfers unto:
Name:
---------------------------------------------------------------
(Please type or print in block letters)
Address:
------------------------------------------------------------
------------------------------------------------------------
the right to purchase _______ shares of the $.01 par value Common Stock
("Shares") of Hat World Corporation (the "Company") pursuant to the terms and
conditions of the Warrant held by the undersigned. The undersigned hereby
authorizes and directs the Company (i) to issue and deliver to the above-named
assignee at the above address a new Warrant pursuant to which the rights to
purchase being assigned may be exercised, and (ii) if there are rights to
purchase Shares remaining pursuant to the undersigned's Warrant after the
assignment contemplated herein, to issue and deliver to the undersigned at the
address stated below a new Warrant evidencing the right to purchase the number
of Shares remaining after issuance and delivery of the Warrant to the
above-named assignee. Except for the number of Shares purchasable, the new
Warrants to be issued and delivered by the Company shall contain the same terms
and conditions as the undersigned's Warrant. To complete the assignment
contemplated by this Assignment Form, the undersigned hereby irrevocably
constitutes and appoints _________________________________ as the undersigned's
attorney-in-fact to transfer the Warrants and the rights thereunder on the books
of the Company with full power of substitution for these purposes.
Dated:
--------------------------- -----------------------------------------
Signature
(This signature must conform in all
respects to the name of the Holder as
specified on the face of the Warrant.)
Printed Name:
----------------------------
Address:
---------------------------------
---------------------------------
4
OPTION CONVERSION EXERCISE FORM
TO: Hat World Corporation
Pursuant to Section 4.6 of the Warrant Agreement, the Holder hereby
irrevocably elects to convert Warrants into __________ Shares of the Company. A
conversion calculation is attached hereto as Exhibit B-1.
The undersigned requests that certificates for such Shares be issued as
follows:
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
---------------------------------------------------------------
Deliver to:
------------------------------------------------------------
and that a new Certificate for the balance remaining of the Warrants, if any, be
registered in the name of, and delivered to, the undersigned at the address
stated above.
Signature Dated
----------------------------------------- --------------
5
CALCULATION OF OPTION CONVERSION
Converted Securities Net Value
---------
FMV
FMV $
---------------------
Net Value Aggregate FMV - Aggregate Exercise Price
$
---------------------
$
---------------------
Converted Shares
Fractional Converted Shares (1)
(1)___________ to pay for fractional Shares in cash @ $____________per Share.
6