EXHIBIT 4.6
WARRANT AGREEMENT
BETWEEN
ADVANTAGE MARKETING SYSTEMS, INC.
AND
U.S. STOCK TRANSFER CORP.
DATED AS OF , 1997
THIS WARRANT AGREEMENT, dated as of , 1997 is between Advantage
Marketing Systems, Inc., an Oklahoma corporation (the "Company"), and U.S.
Stock Transfer Corp. (the "Warrant Agent").
WHEREAS, the Company, at or about the time that it is entering into this
Agreement, proposes to (i) offer, issue and sell to the holders of Class A
Common Stock Purchase Warrants and Class B Common Stock Purchase Warrants (the
"Public Warrants") pursuant to modification of the terms of the Public Warrants
(the "Warrant Modification Offering") up to 1,050,470 units (each referred to
herein as the "Unit" and collectively as the "Units"), each consisting of one
share of Common Stock, $.0001 par value (the "Common Stock") and one 1997-A
Warrant (each referred to herein as the "Warrant," or collectively as the
"Warrants") and (i) offer, issue and distribute to the Company's shareholders
non-transferable rights (the "Rights") entitling the holders of the Rights to
purchase 2,148,191 Units (the "Rights Offering"). The Warrant Modification
Offering and the Rights Offering are collectively referred to herein as the
"Offering." In connection with the Offering, the Company proposes to offer,
issue and sell 3,198,661 Warrants, each Warrant represents the right to purchase
one share of Common Stock for $12.00 per share, upon the terms and conditions
and subject to adjustment in certain circumstances (the "Purchase Price"), all
as set forth in this Agreement;
WHEREAS, the Company desires to retain the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with the
issuance, transfer, exchange and replacement of the certificates evidencing the
Warrants to be issued under this Agreement (the "Warrant Certificates") and the
exercise of the Warrants; and
WHEREAS, the Company desires to enter into this Agreement to set forth the
terms and conditions of the Warrants and the rights of the holders thereof and
to set forth the respective rights and obligations of the Company and the
Warrant Agent.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions in
this Agreement, and the Warrant Agent accepts such appointment.
SECTION 2. DATE, DENOMINATION AND EXECUTION OF WARRANT CERTIFICATES. The
Warrant Certificates (and the Subscription Form and the Form of Assignment to be
printed on the reverse thereof) shall be in registered form only and shall be
substantially of the tenor and purport recited in Exhibit A hereto, 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
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pursuant thereto, or with any rule or regulation of any stock exchange on which
the Common Stock or Warrants may be listed, or to conform to usage. Each Warrant
Certificate shall entitle the registered holder thereof, subject to the
provisions of this Agreement and of the Warrant Certificate, to purchase after
, 1997 and on or before the close of business on January
31, 1999 (the "Expiration Date"), one fully paid and non-assessable share of
Common Stock for each Warrant evidenced by such Warrant Certificate, at a price
per share described in Section 6 hereof (the "Purchase Price"). At any time on
or before expiration of the Expiration Date, the previously established
Expiration Date may be extended without limitation and as many times as the
Company shall determine in its sole and absolute discretion. In the event the
Expiration Date is extended, the Company shall promptly provide written notice
to the holders of the Warrants of the extended Expiration Date. Each Warrant
Certificate issued as a part of the Offering shall be dated the date of the
Final Prospectus which forms a part of the Registration Statement on Form SB-2
pursuant to which the Units, shares of Common Stock and Warrants are registered
under the Securities Act of 1933, as amended; each other Warrant Certificate
shall be dated the date on which the Warrant Agent receives valid issuance
instructions from the Company or, if such instructions specify another date,
such other date.
For purposes of this Agreement, the term "close of business" on any given
date shall mean 5:00 p.m., Central Standard time, on such date; provided,
however, that if such date is not a business day, it shall mean 5:00 p.m.,
Central Standard time, on the next succeeding business day. For purposes of this
Agreement, the term "business day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York City, New York, are
authorized or obligated by law to be closed.
Each Warrant Certificate shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President or a Vice
President, either manually or by facsimile signature printed thereon, and shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. Each Warrant Certificate 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
Warrant Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issue and delivery thereof by the
Company, such Warrant Certificate, nevertheless, may be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as though the
person who signed such Warrant Certificate had not ceased to be such officer of
the Company.
SECTION 3. SUBSEQUENT ISSUE OF WARRANT CERTIFICATES. Subsequent to their
original issuance, no Warrant Certificates shall be reissued except (i) Warrant
Certificates issued upon transfer thereof in accordance with Section 4 hereof,
(ii) Warrant Certificates issued upon any combination, split-up, or exchange of
Warrant Certificates pursuant to Section 4 hereof, (iii) Warrant Certificates
issued in replacement of mutilated, destroyed, lost or stolen Warrant
Certificates pursuant to Section 5 hereof, (iv) Warrant Certificates issued upon
the partial exercise of Warrant Certificates pursuant to Section 7 hereof, and
(v) Warrant Certificates issued pursuant to Section 22 hereof to reflect any
adjustment or change in the Purchase Price or the number or kind of shares
purchasable thereunder. The Warrant Agent is hereby irrevocably authorized to
countersign and deliver, in accordance with the provisions of Sections 4, 5, 7
and 22, the new Warrant Certificates required for purposes thereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purposes.
SECTION 4. TRANSFERS AND EXCHANGES OF WARRANT CERTIFICATES. The Warrant Agent
shall keep or cause to be kept books for registration of ownership and transfer
of the Warrant Certificates issued in accordance with this Agreement. Such
registers shall show the names and addresses of the respective holders of the
Warrant Certificates and the number of Warrants evidenced by each such Warrant
Certificate.
The Warrant Agent shall, from time to time, register the transfer of any
outstanding Warrants upon the books to be maintained by the Warrant Agent for
that purpose, upon surrender of the Warrant Certificate evidencing such
Warrants, with the Form of Assignment duly filled in and executed, to the
Warrant Agent at its stock transfer office in Glendale, California, at any time
on or before the Expiration Date, and upon payment to the Warrant
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Agent for the account of the Company of an amount equal to any applicable
transfer tax. Payment of the amount of such tax may be made in cash or by check,
payable in lawful money of the United States of America to the order of the
Company.
Upon receipt of a Warrant Certificate, with the Form of Assignment duly
filled in and executed, accompanied by payment of an amount equal to any
transfer tax, the Warrant Agent shall promptly cancel the surrendered Warrant
Certificate and countersign and deliver to the transferee a new Warrant
Certificate for the number of full Warrants transferred to such transferee;
provided, however, that in case the registered holder of any Warrant Certificate
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shall elect to transfer fewer than all of the Warrants evidenced by such Warrant
Certificate, the Warrant Agent in addition shall promptly countersign and
deliver to such registered holder a new Warrant Certificate or Certificates for
the number of full Warrants not so transferred.
Any Warrant Certificate or Certificates may be exchanged at the option of
the holder thereof for another Warrant Certificate or Certificates of different
denominations, of like tenor and representing in the aggregate the same number
of Warrants, upon surrender of such Warrant Certificate or Certificates, with
the Form of Assignment duly filled in and executed, to the Warrant Agent, at any
time or from time to time after the close of business on the date hereof and
prior to the close of business on the Expiration Date. The Warrant Agent shall
promptly cancel the surrendered Warrant Certificate and deliver the new Warrant
Certificate pursuant to the provisions of this Section.
SECTION 5. MUTILATED, DESTROYED, LOST OR STOLEN WARRANT CERTIFICATES.
Upon receipt by the Company and the Warrant Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of any
Warrant Certificate, and in the case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to them of all
reasonable expenses incidental thereto, and in the case of mutilation, upon
surrender and cancellation of the Warrant Certificate, the Warrant Agent shall
countersign and deliver a new Warrant Certificate of like tenor for the same
number of Warrants.
SECTION 6. ADJUSTMENTS OF NUMBER AND KIND OF SHARES PURCHASABLE. The number
and kind of securities or other property purchasable upon exercise of a Warrant
shall be subject to adjustment from time to time upon the occurrence, after
the date hereof, of the following events:
6.1 In case the Company shall, other than in connection with the Offering,
(i) pay a dividend in, or make a distribution of, shares of Common Stock or of
capital stock convertible into Common Stock on its outstanding Common Stock
("Stock Dividend"), (ii) subdivide its outstanding shares of Common Stock into a
greater number of such shares ("Forward Split") or (iii) combine its outstanding
shares of Common Stock into a smaller number of such shares ("Reverse Split"),
the total number of shares of Common Stock and the number of shares of capital
stock convertible into Common Stock purchasable upon the exercise of each
Warrant outstanding immediately prior thereto shall be adjusted so that the
holder of any Warrant Certificate thereafter surrendered for exercise shall be
entitled to receive at the same aggregate Purchase Price the number of shares of
Common Stock and the number of shares of capital stock convertible into Common
Stock which such holder would have owned or have been entitled to receive
immediately following the happening of any of the events described above had
such Warrant been exercised in full immediately prior to the happening of such
event. Any adjustment made pursuant to this Subsection shall, in the case of a
Stock Dividend, become effective as of the record date therefor and, in the case
of a Forward Split or Reverse Split, be made as of the effective date thereof.
If, as a result of an adjustment made pursuant to this Subsection, the holder of
any Warrant thereafter surrendered for exercise shall become-entitled to receive
shares of two or more classes of capital stock of the Company, the Board of
Directors of the Company (whose determination shall be conclusive and shall be
evidenced by a Board resolution filed with the Warrant Agent) shall determine
the allocation of the adjusted Purchase Price between or among shares of such
classes of capital stock.
6.2 In the event of any adjustment of the total number of shares of Common
Stock purchasable upon the exercise of Warrants pursuant to Subsection 6.1, the
Purchase Price of each such Warrant shall remain
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unchanged, but the number of shares of capital stock obtainable on exercise of
each such Warrant shall be adjusted as provided in Subsection 6.1.
6.3 In the event of a capital reorganization or a reclassification of the
Common Stock (except as provided in Subsection 6.1 or Subsection 6.5), any
holder of Warrants, upon exercise thereof, shall be entitled to receive, in lieu
of the Common Stock to which he would have become entitled upon exercise
immediately prior to such reorganization or reclassification, the shares (of any
class or classes) or other securities or property of the Company (or cash) that
he would have been entitled to receive at the same aggregate Purchase Price upon
such reorganization or reclassification if the Warrants held had been exercised
immediately prior thereto; and in any such case, appropriate provision (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and shall be evidenced by a Board resolution filed with the
Warrant Agent) shall be made for the application of this Section 6 with respect
to the rights and interests thereafter of the holders of Warrants (including,
but not limited to, the allocation of the Purchase Price between or among shares
of classes of capital stock), to the end that this Section 6 (including the
adjustments of the number of shares of Common Stock or other securities
purchasable) shall thereafter be reflected, as nearly as reasonably practicable,
in all subsequent exercises of the Warrants for any shares or securities or
other property (or cash) thereafter deliverable upon the exercise of the
Warrants.
6.4 Whenever the number of shares of Common Stock or other securities
purchasable upon exercise of a Warrant is adjusted as provided in this Section
6, the Company will promptly file with the Warrant Agent a certificate signed by
the Chairman of the Board, Chief Executive Officer or the President, or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth (i) the number
and kind of shares purchasable, as so adjusted, (ii) stating that such
adjustments in the number or kind of shares or other securities conform to the
requirements of this Section 6, and (iii) setting forth a brief statement of the
facts accounting for such adjustments. Such certificates shall be conclusive
evidence of the correctness of such adjustments. Promptly after receipt of such
certificate, the Company, or the Warrant Agent at the Company's request, will
deliver, by first-class, postage prepaid mail, a brief summary thereof (to be
supplied by the Company) to the registered holders of the outstanding Warrant
Certificates; provided, however, that failure to file or to give any notice
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required under this Subsection, or any defect therein, shall not affect the
legality or validity of any such adjustments under this Section 6; and provided
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further, that, where appropriate, such notice may be given in advance and
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included as part of the notice required to be given pursuant to Section 12
hereof.
6.5 In case of any consolidation of the Company with, or merger of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the corporation formed by such consolidation or
merger or the corporation which shall have acquired such assets, as the case may
be, shall execute and deliver to the Warrant Agent a supplemental warrant
agreement providing that the holder of each Warrant then outstanding shall have
the right thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, solely the kind and amount of shares of stock and
other securities and property (or cash) receivable upon such consolidation,
merger, sale or transfer by a holder of the number of shares of Common Stock of
the Company for which such Warrant might have been exercised immediately prior
to such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided in this Section 6. The above
provision of this Subsection 6.5 shall similarly apply to successive
consolidations, mergers, sales or transfers.
The Warrant Agent shall not be under any responsibility to determine the
correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrant Certificates upon the
exercise of their Warrants after any such consolidation, merger, sale or
transfer or of any adjustment to be made with respect thereto, and (subject to
the provisions of Section 20 hereof) may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, a
certificate of a firm of independent certified public accountants with respect
thereto.
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6.6 Irrespective of any adjustments in the number or kind of shares issuable
upon exercise of Warrants, Warrant Certificates theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the similar Warrant Certificates initially issuable pursuant to this
Warrant Agreement.
6.7 The Company may retain a firm of independent public accountants of
recognized standing, which may be the firm regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board to make any computation required under this Section, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 6.
6.8 For the purpose of this Section, the term "Common Stock" shall mean (i)
the class of stock designated as Common Stock in the Certificate of
Incorporation of the Company, as amended, 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 no par
value to par value, or from par value to no par value. In the event that at any
time as a result of an adjustment made pursuant to this Section 6, the holder of
any Warrant thereafter surrendered for exercise shall become entitled to receive
any shares of capital stock of the Company other than shares of Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section, and all other provisions of this
Agreement, with respect to the Common Stock, shall apply on like terms to any
such other shares.
6.9 The Purchase Price may be reduced by the Company at any time, temporarily
or during the remaining period of exercise of the Warrants as determined in the
discretion of the Company, with respect to the Common Stock or any other
securities purchasable upon exercise of the Warrants. In the event the Purchase
Price is reduced in accordance with this Section 6.9, the Company shall promptly
provide written notice to the holders of the Warrants of the reduced Purchase
Price, the period that the Warrants will be exercisable at the reduced Purchase
Price, and the securities purchasable at the reduced Purchase Price.
SECTION 7. EXERCISE AND REDEMPTION OF WARRANTS. Unless the Warrants have been
redeemed as provided in this Section 7, the registered holder of any Warrant
Certificate may exercise the Warrants evidenced thereby, in whole at any time or
in part from time to time at or prior to the close of business, on the
Expiration Date, subject to the provisions of Section 9, at which time the
Warrant Certificates shall be and become wholly void and of no value. Warrants
may be exercised by their holders or redeemed by the Company as follows:
7.1 Exercise of Warrants shall be accomplished upon surrender of the Warrant
Certificate evidencing such Warrants, with the Subscription Form on the reverse
side thereof duly filled in and executed, to the Warrant Agent at its stock
transfer office in Glendale, California, together with payment to the Company of
the Purchase Price (as of the date of such surrender) of the Warrants then being
exercised and an amount equal to any applicable transfer tax and, if requested
by the Company, any other taxes or governmental charges which the Company may be
required by law to collect in respect of such exercise. Payment of the Purchase
Price and other amounts may be made in cash or by check, payable in lawful money
of the United States of America to the order of the Company. No adjustment shall
be made for any cash dividends, whether paid or declared, on any securities
issuable upon exercise of a Warrant.
7.2 Upon receipt of a Warrant Certificate, with the Subscription Form duly
filled in and executed, accompanied by payment of the Purchase Price of the
Warrants being exercised (and of an amount equal to any applicable taxes or
government charges as aforesaid), the Warrant Agent shall promptly request from
the Transfer Agent with respect to the securities to be issued and deliver to or
upon the order of the registered holder of such Warrant Certificate, in such
name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of the securities to be purchased,
together with cash made available by the Company pursuant to Section 8 hereof in
respect of any fraction of a share of such securities otherwise issuable upon
such exercise. If the Warrant is then exercisable to purchase property other
than securities, the Warrant Agent shall take appropriate steps
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to cause such property to be delivered to or upon the order of the registered
holder of such Warrant Certificate. In addition, if it is required by law, the
Warrant Agent will deliver to each warrant holder a prospectus which complies
with the provisions of Section 9 of the Securities Act of 1933, as amended, and
the Company agrees to supply the Warrant Agent with sufficient number of
prospectuses for that purpose.
7.3 In case the registered holder of any Warrant Certificate shall exercise
fewer than all of the Warrants evidenced by such Warrant Certificate, the
Warrant Agent shall promptly countersign and deliver to the registered holder of
such Warrant Certificate, or to his duly authorized assigns, a new Warrant
Certificate or Certificates evidencing the number of Warrants that were not so
exercised.
7.4 Each person in whose name any certificate for securities is issued upon
the exercise of Warrants shall for all purposes be deemed to have become the
holder of record of the securities represented thereby as of, and such
certificate shall be dated, the date upon which the Warrant Certificate was duly
surrendered in proper form and payment of the Purchase Price (and of any
applicable taxes or other governmental charges) was made; provided, however,
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that if the date of such surrender and payment is a date on which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares as of, and the certificate for such
shares shall be dated, the next succeeding business day on which the stock
transfer books of the Company are open (whether before, on or after the
Expiration Date), and the Warrant Agent shall be under no duty to deliver the
certificate for such shares until such date. The Company covenants and agrees
that it shall not cause its stock transfer books to be closed for a period of
more than 20 consecutive business days except upon consolidation, merger, sale
of all or substantially all of its assets, dissolution or liquidation or as
otherwise provided by law.
7.5 The Warrants outstanding at the time of a redemption may be redeemed at
the option of the Company, in its sole and absolute discretion and in whole but
not in part, at any time on not less than 30 days'(the "Notice Period") written
notice to the holders of such Warrants at a price equal to $.0001 per Warrant
(the "Redemption Price"). In the event the Company exercises its right to redeem
the Warrants, the Warrants will be exercisable until the close of business of
the business day immediately preceding the date fixed for redemption in such
notice (the "Redemption Date"). On the Redemption Date the holders of record of
the Warrants shall be entitled to payment of the Redemption Price upon surrender
of such redeemed Warrants to the Company at the stock transfer office of the
Warrant Agent in Glendale, California.
7.6 Notice of redemption of Warrants shall be given at least 30 days prior to
the Redemption Date by mailing, by registered or certified mail, return receipt
requested, a copy of such notice to all of the holders of record of Warrants at
their respective addresses appearing on the books or transfer records of the
Company or such other address designated in writing by the holder of record to
the Warrant Agent not less than 40 days prior to the Redemption Date. The notice
of redemption shall specify the Redemption Price to be paid, the name and
address of the Warrant Agent, the intention of the Company to deposit the
Redemption Price with the Warrant Agent on or before the Redemption Date, and
that the right to exercise the Warrants shall terminate at 5:00 p.m. Central
Standard City time on the business day immediately preceding the Redemption
Date.
7.7 From and after the Redemption Date, all rights of the holders of Warrants
(except the right to receive the Redemption Price) shall terminate, but only if
(i) on or prior to the Redemption Date the Company shall have irrevocably
deposited with the Warrant Agent as paying agent a sufficient amount to pay on
the Redemption Date the Redemption Price for all Warrants called for redemption
and (ii) the notice of redemption shall have stated the name and address of the
Warrant Agent and the intention of the Company to deposit such amount with the
Warrant Agent on or before the Redemption Date.
7.8 The Warrant Agent shall pay to the holders of record of redeemed Warrants
all moneys received by the Warrant Agent for the redemption of Warrants to which
the holders of record of such redeemed Warrants who shall have surrendered their
Warrants are entitled.
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7.9 Any amounts deposited with the Warrant Agent that are not required for
redemption of Warrants may be withdrawn by the Company. Any amounts deposited
with the Warrant Agent that shall be unclaimed during the six months following
the Redemption Date may be withdrawn by the Company, and thereafter the holders
of the Warrants called for redemption for which such funds were deposited shall
look solely to the Company for payment. The Company shall be entitled to the
interest, if any, on funds deposited with the Warrant Agent, and the holders of
redeemed Warrants shall have no right to any such interest.
7.10 If the Company fails to make a sufficient deposit with the Warrant Agent
as provided above, the holder of any Warrants called for redemption may at the
option of the holder (i) by notice to the Company declare the notice of
redemption a nullity as to such holder or (ii) proceed against the Company for
the Redemption Price. If the holder brings an action against the Company for the
Redemption Price, the Company will pay reasonable attorneys' fees of the holder.
If the holder fails to bring an action against the Company for the Redemption
Price within 60 days after the Redemption Date, the holder shall be deemed to
have elected to declare the notice of redemption to be a nullity as to such
holder, and such notice shall be without any force or effect as to such holder.
SECTION 8. FRACTIONAL INTERESTS. The Company shall not be required to issue
any Warrant Certificate evidencing a fraction of a Warrant or to issue fractions
of shares of securities on the exercise of the Warrants. If any fraction
(calculated to the nearest one-hundredth) of a Warrant or a share of securities
would, except for the provisions of this Section, be issuable on the exercise of
any Warrant, the Company shall purchase such fraction for an amount in cash
equal to the current value of such fraction computed on the basis of the quoted
closing high bid price on the trading day immediately preceding the day upon
which such Warrant Certificate was surrendered for exercise in accordance with
Section 7 hereof. By accepting a Warrant Certificate, the holder thereof
expressly waives any right to receive a Warrant Certificate evidencing any
fraction of a Warrant or to receive any fractional share of securities upon
exercise of a Warrant.
SECTION 9. RESERVATION OF SECURITIES AND PROPERTY; REGISTRATION OF SECURITIES.
The Company covenants that it will at all times, solely for the purpose of
issuance and delivery upon exercise of the Warrants, reserve and keep available,
free from preemptive and other rights, out of its authorized and unissued shares
of Common Stock, such number of shares of Common Stock as shall then be issuable
and all other securities and property as shall then be deliverable upon the
exercise of all outstanding Warrants. The Company covenants that all securities
which shall be so issuable shall, upon such issue, be duly authorized, validly
issued, fully paid and non-assessable.
The Company covenants that if any securities, required to be reserved for the
purpose of issue upon exercise of the Warrants hereunder, require registration
with or approval of any governmental authority under any federal or state law
before such securities may be issued upon exercise of Warrants, the Company will
in good faith and as expeditiously as possible endeavor to cause such securities
to be duly registered, or approved, as the case may be, and, to the extent
practicable, take all such action in anticipation of and prior to the exercise
of the Warrants, including, without limitation, filing a Registration Statement
on the appropriate form and all post-effective amendments to such Registration
Statement necessary to permit a public offering of the securities underlying the
Warrants at any and all times during the term of the Warrants; provided,
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however, that in no event shall such securities be issued, and the Company is
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authorized to refuse to honor the exercise of any Warrant, if such exercise
would result in the opinion of the Company's Board of Directors, upon advice of
counsel, in the violation of any law; and provided further that, in the case of
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a Warrant exercisable solely for securities listed on a securities exchange or
for which there are at least two independent market makers, in lieu of obtaining
such registration or approval, the Company may elect to redeem Warrants
submitted to the Warrant Agent for exercise for a price equal to the difference
between the aggregate low asked price, or closing price, as the case may be, of
the securities for which such Warrant is exercisable on the date of such
submission and the Purchase Price of such Warrants. In the event of such
redemption, the Company will pay to the holder of such Warrants the above-
described redemption price in cash within 10 business days after receipt of
notice from the Warrant Agent that such Warrants have been submitted for
exercise.
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SECTION 10. REDUCTION OF CONVERSION PRICE BELOW PAR VALUE. Before taking any
action that would cause an adjustment pursuant to Section 6 hereof reducing the
portion of the Purchase Price required to purchase one share of capital stock
below the then par value (if any) of a share of such capital stock, the Company
will use its best efforts to take any corporate action which, in the opinion of
its counsel, may be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such capital stock.
SECTION 11. PAYMENT OF TAXES. The Company covenants and agrees that it will
pay when due and payable any and all federal and state documentary stamp and
other original issue taxes which may be payable in respect of the original
issuance of the Warrant Certificates, or any shares of Common Stock or other
securities upon the exercise of Warrants. The Company shall not, however, be
required (i) to pay any tax which may be payable in respect of any transfer
involved in the transfer and delivery of Warrant Certificates or the issuance or
delivery of certificates for Common Stock or other securities in a name other
than that of the registered holder of the Warrant Certificate surrendered for
purchase or (ii) to issue or deliver any certificate for shares of Common Stock
or other securities upon the exercise of any Warrant Certificate until any such
tax shall have been paid, all such tax being payable by the holder of such
Warrant Certificate at the time of surrender.
SECTION 12. NOTICE OF CERTAIN CORPORATE ACTION. In case the Company after the
date hereof shall, other than in connection with the Offering, propose (i) to
offer to the holders of Common Stock rights to subscribe to or purchase any
additional shares of any class of its capital stock, any evidences of its
indebtedness or assets, or any other rights or options or (ii) to effect any
reclassification of Common Stock (other than a reclassification involving merely
the subdivision or combination of outstanding shares of Common Stock) or any
capital reorganization, or any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is required, or
any sale, transfer or other disposition of its property and assets substantially
as an entirety, or the liquidation, voluntary or involuntary dissolution or
winding-up of the Company, then, in each such case, the Company shall file with
the Warrant Agent and the Company (or the Warrant Agent on its behalf) shall
mail (by first-class, postage prepaid mail) to all registered holders of the
Warrant Certificates notice of such proposed action, which notice shall specify
the date on which the books of the Company shall close or a record be taken for
such offer of rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up shall take place
or commence, as the case may be, and which shall also specify any record date
for determination of holders of Common Stock entitled to vote thereon or
participate therein and shall set forth such facts with respect thereto as shall
be reasonably necessary to indicate any adjustments in the number or kind of
shares or other securities purchasable upon exercise of Warrants which will be
required as a result of such action. Such notice shall be filed and mailed in
the case of any action covered by clause (i) above, at least 10 days prior to
the record date for determining holders of the Common Stock for purposes of such
action or, if a record is not to be taken, the date as of which the holders of
shares of Common Stock of record are to be entitled to such offering; and, in
the case of any action covered by clause (ii) above, at least 20 days prior to
the earlier of the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition, liquidation, voluntary
or involuntary dissolution or winding-up is expected to become effective and the
date on which it is expected that holders of shares of Common Stock of record on
such date shall be entitled to exchange their shares for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, other disposition, liquidation, voluntary or involuntary
dissolution or winding-up.
Failure to give any such notice or any defect therein shall not affect the
legality or validity of any transaction listed in this Section 12.
SECTION 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANT CERTIFICATES, ETC.
Upon the exercise, or conversion of any Warrant, the Warrant Agent shall
promptly deposit the payment into an escrow account established by mutual
agreement of the Company and the Warrant Agent at a federally insured commercial
bank. All funds deposited in the escrow account will be disbursed on a weekly
basis to the Company once they have been determined by the Warrant Agent to be
collected funds. Once the funds are determined to be collected, the Warrant
Agent shall cause the share certificate(s) representing the exercised warrants
to be issued.
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The Warrant Agent shall keep copies of this Agreement available for inspection
by holders of Warrants during normal business hours at its stock transfer
office. Copies of this Agreement may be obtained upon written request addressed
to the Warrant Agent at its stock transfer office in Glendale, California.
SECTION 14. WARRANT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder, as
such, of any Warrant Certificate shall be entitled to vote, receive dividends or
be deemed the holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Warrants represented
thereby for any purpose whatever, nor shall anything contained herein or in any
Warrant Certificate be construed to confer upon the holder of any Warrant
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise), or to receive notice of
meetings or other actions affecting shareholders (except as provided in Section
12 hereof), or to receive dividend or subscription rights, or otherwise, until
such Warrant Certificate shall have been exercised in accordance with the
provisions hereof and the receipt of the Purchase Price and any other amounts
payable upon such exercise by the Warrant Agent.
SECTION 15. RIGHT OF ACTION. All rights of action in respect to this Agreement
are vested in the respective registered holders of the Warrant Certificates; and
any registered holder of any Warrant Certificate, without the consent of the
Warrant Agent or of the holder of any Warrant Certificate, may, on his own
behalf for his own benefit, enforce, and may institute and maintain any suit,
action or preceding against the Company suitable to enforce, or otherwise in
respect of, the holder's right to exercise the Warrants evidenced by such
Warrant Certificate, for the purchase of shares of the Common Stock and any
other securities and property of the Company in the manner provided in the
Warrant Certificate and in this Agreement.
SECTION 16. AGREEMENT OF HOLDERS OF WARRANT CERTIFICATES. Every holder of a
Warrant Certificate, by accepting the same, consents and agrees with the
Company, the Warrant Agent and every other holder of a Warrant Certificate that:
16.1 The Warrant Certificates are transferable on the registry books of the
Warrant Agent only upon the terms and conditions set forth in this Agreement;
and
16.2 The Company and the Warrant Agent may deem and treat the person in whose
name the Warrant Certificate is registered as the absolute owner of the Warrant
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes whatsoever,
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
SECTION 17. CANCELLATION OF WARRANT CERTIFICATES. In the event that the
Company shall purchase or otherwise acquire any Warrant Certificate or
Certificates after the issuance thereof, such Warrant Certificate or
Certificates shall thereupon be delivered to the Warrant Agent and be canceled
by it and retired. The Warrant Agent shall also cancel any Warrant Certificate
delivered to it for exercise, in whole or in part, or delivered to it for
transfer, split-up, combination or exchange. Warrant Certificates so canceled
shall be delivered by the Warrant Agent to the Company from time to time, or
disposed of in accordance with the instructions of the Company.
SECTION 18. CONCERNING THE WARRANT AGENT. The Company agrees to pay to the
Warrant Agent from time to time, on demand of the Warrant Agent, reasonable
compensation for all services rendered by it hereunder and also its reasonable
expenses and other reasonable disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Warrant Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Warrant Agent,
arising out of or in connection with the acceptance and administration of this
Agreement.
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SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 21 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, any of the
Warrant Certificates shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the original
Warrant Agent and deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and at such
time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrant Certificates so countersigned; and in case at that time any
of the Warrant Certificates shall not have been countersigned, the Warrant Agent
may countersign such Warrant Certificates either in its prior name or in its
changed name; and in such cases such Warrant Certificates shall have the full
force provided in the Warrant Certificates and in this Agreement.
SECTION 20. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrant Certificates,
by their acceptance thereof, shall be bound:
20.1 The Warrant Agent may consult with counsel satisfactory to it (who may be
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Warrant Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
opinion; provided, however that the Warrant Agent shall have exercised
-----------------
reasonable care in the selection of such counsel.
20.2 Whenever in the performance of its duties under this Agreement, the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, Chief
Executive Officer or the President or a Vice President or the Secretary of the
Company and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
20.3 The Warrant Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
20.4 The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature on the Warrant Certificates and such
statements or recitals as describe the Warrant Agent or action taken or to be
taken by it) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
20.5 The Warrant Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant Certificate;
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nor shall it be responsible for any change in the number of shares of Common
Stock required under the provisions of Section 6 or responsible for the manner,
method or amount of any such change or the ascertaining of the existence of
facts that would require any such adjustment or change; nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Warrant Certificate or as to whether any shares of
Common Stock will, when issued, be validly issued, fully paid and non-
assessable.
20.6 The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or take any other action likely to involve expense
unless the Company or one or more registered holders of Warrants shall furnish
the Warrant Agent with reasonable security and indemnity, as determined in the
sole discretion of the Warrant Agent, for any costs and expenses which may be
incurred. All rights of action under this Agreement or under any of the Warrants
may be enforced by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent, and any recovery of judgment
shall be for the ratable benefit of the registered holders of the Warrants, as
their respective rights or interests may appear.
20.7 The Warrant Agent and any shareholder, director, officer or employee of
the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
20.8 The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, Chief Executive Officer or President or a Vice President
or the Secretary of the Company, and to apply to such officers for advice or
instructions in connection with the Warrant Agent's duties, and it shall not be
liable for any action taken or suffered or omitted by it in good faith in
accordance with instructions of any such officer.
20.9 The Warrant Agent will not be responsible for any failure of the Company
to comply with any of the covenants contained in this Agreement or in the
Warrant Certificates to be complied with by the Company.
20.10 The Warrant Agent will not incur any liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken, or any
failure to take action, in reliance on any notice, resolution, waiver, consent,
order, certificate, or other paper, document or instrument reasonably believed
by the Warrant Agent to be genuine and to have been signed, sent or presented by
the proper party or parties.
20.11 The Warrant Agent will act hereunder solely as agent of the Company in
a ministerial capacity, and its duties will be determined solely by the
provisions hereof. The Warrant Agent will not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, bad faith or willful conduct.
SECTION 21. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement upon 30 days' prior notice in
writing mailed, by registered or certified mail, to the Company. The Company may
remove the Warrant Agent or any successor warrant agent upon 30 days' prior
notice in writing, mailed to the Warrant Agent or successor warrant agent, as
the case may be, by registered or certified mail. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Warrant Agent and shall, within 15 days
following such appointment, give notice thereof in writing to each registered
holder of the Warrant Certificates. If the Company shall fail to make such
appointment within a period of 15 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent, then the Company agrees to perform the
duties of the
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Warrant Agent hereunder until a successor Warrant Agent is appointed. After
appointment the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor Warrant Agent any property at the time
held by it pursuant to this Agreement, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Failure to give
any notice provided for in this Section, however, or any defect therein shall
not affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor warrant agent, as the case may be.
SECTION 22. ISSUANCE OF NEW WARRANT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or the Warrant Certificates to the contrary, the
Company may, at its option, issue new Warrant Certificates in such form as may
be approved by its Board of Directors to reflect any adjustment or change in the
number or kind of shares purchasable under the several Warrant Certificates made
in accordance with the provisions of this Agreement.
SECTION 23. NOTICES. Notice or demand pursuant to this Agreement to be given
or made on the Company by the Warrant Agent or by the registered holder of any
Warrant Certificate shall be sufficiently given or made if sent by first class
or registered mail, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent) as follows:
Advantage Marketing Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Subject to the provisions of Section 21, any notice pursuant to this Agreement
to be given or made by the Company or by the holder of any Warrant Certificate
to or on the Warrant Agent shall be sufficiently given or made if sent by first
class or registered mail, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company) as follows:
U.S. Stock Transfer Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Stock Transfer Department
Any notice or demand authorized to be given or made to the registered holder of
any Warrant Certificate under this Agreement shall be sufficiently given or made
if sent by first class or registered mail, postage prepaid, to the last address
of such holder as it shall appear on the registers maintained by the Warrant
Agent.
SECTION 24. MODIFICATION OF AGREEMENT. The Warrant Agent may, without the
consent or concurrence of the holders of the Warrant Certificates, by
supplemental agreement or otherwise, concur with the Company in making any
changes or corrections in this Agreement that the Warrant Agent shall have been
advised by counsel (who may be counsel for the Company) are necessary or
desirable to cure any ambiguity or to correct any defective or inconsistent
provision or clerical omission or mistake or manifest error herein contained, or
to make any other provisions in regard to matters or questions arising hereunder
and which shall not be inconsistent with the provisions of the Warrant
Certificates and which shall not adversely affect the interests of the holders
of Warrant Certificates. As of the date hereof, this Agreement contains the
entire and only agreement, understanding, representation, condition, warranty or
covenant between the parties hereto with respect to the matters herein,
supersedes any and all other agreements between the parties hereto relating to
such matters, and may be modified or amended only by a written agreement signed
by both parties hereto pursuant to the authority granted by the first sentence
of this Section.
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SECTION 25. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 26. GOVERNING LAW. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of
the State of Oklahoma and for all purposes shall be construed in accordance
with the laws of such state.
SECTION 27. 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 Warrant
Agent shall account to the Company pursuant to Section 4 as to all Warrants
outstanding and all cash held by it as of the close of business on the
Expiration Date.
SECTION 28. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement or in
the Warrant Certificates shall be construed to give to any person or
corporation other than the Company, the Warrant Agent, and their respective
successors and assigns hereunder and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Warrant Agent, their respective successors and assigns
hereunder and the registered holders of the Warrant Certificates.
SECTION 29. DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions
hereof.
SECTION 30. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
ADVANTAGE MARKETING SYSTEMS, INC.
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
U.S. STOCK TRANSFER CORP.
By:
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Name:
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Title:
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