1
Exhibit 4.1
WARRANT AGREEMENT
Dated as of
April 29, 1998
between
SPINCYCLE, INC.
and
Norwest Bank Minnesota, N.A.,
as the Warrant Agent
Warrants for
Common Stock of
SpinCycle, Inc.
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TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................................1
SECTION 1.02. Other Definitions..........................................3
SECTION 1.03. Rules of Construction......................................3
ARTICLE 2
WARRANT CERTIFICATES
SECTION 2.01. Form and Dating............................................4
SECTION 2.02. Legends....................................................4
SECTION 2.03. Execution and Countersignature.............................6
SECTION 2.04. Certificate Register.......................................6
SECTION 2.05. Separation of Warrants and Notes...........................6
SECTION 2.06. Transfer and Exchange......................................6
SECTION 2.07. Replacement Certificates...................................7
SECTION 2.08. Temporary Certificates.....................................7
SECTION 2.09. Cancellation...............................................7
ARTICLE 3
EXERCISE TERMS
SECTION 3.01. Exercise Price.............................................7
SECTION 3.02. Exercise Periods...........................................7
SECTION 3.03. Expiration.................................................8
SECTION 3.04. Manner of Exercise.........................................8
SECTION 3.05. Issuance of Warrant Shares.................................8
SECTION 3.06. Fractional Warrant Shares..................................9
SECTION 3.07. Reservation of Warrant Shares..............................9
ARTICLE 4
ANTIDILUTION PROVISIONS
SECTION 4.01. Changes in Common Stock...................................10
SECTION 4.02. Cash Dividends and Other Distributions....................10
SECTION 4.03. Rights Issue..............................................11
SECTION 4.04. Issuance of Common Stock or Rights........................11
SECTION 4.05. Combination; Liquidation..................................12
SECTION 4.06. Other Events..............................................12
SECTION 4.07. Superseding Adjustment....................................12
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SECTION 4.08. Minimum Adjustment........................................13
SECTION 4.09. Notice of Adjustment......................................13
SECTION 4.10. Notice of Certain Transactions............................13
SECTION 4.11. Adjustment to Warrant Certificate.........................14
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Effectiveness of Registration Statement...................14
SECTION 5.02. Suspension................................................15
SECTION 5.03. Blue Sky..................................................15
SECTION 5.04. Accuracy of Disclosure....................................16
SECTION 5.05. Indemnification...........................................16
SECTION 5.06. Additional Acts...........................................18
SECTION 5.07. Expenses..................................................18
ARTICLE 6
WARRANT AGENT
SECTION 6.01. Appointment of Warrant Agent..............................19
SECTION 6.02. Rights and Duties of Warrant Agent........................19
SECTION 6.03. Individual Rights of Warrant Agent........................20
SECTION 6.04. Warrant Agent's Disclaimer................................20
SECTION 6.05. Compensation and Indemnity................................20
SECTION 6.06. Successor Warrant Agent...................................20
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. SEC Reports and Other Information.........................22
SECTION 7.02. Persons Benefiting........................................22
SECTION 7.03. Rights of Holders.........................................22
SECTION 7.04. Amendment.................................................22
SECTION 7.05. Notices...................................................22
SECTION 7.06. Governing Law.............................................23
SECTION 7.07. Successors................................................23
SECTION 7.08. Multiple Originals........................................23
SECTION 7.09. Table of Contents.........................................23
SECTION 7.10. Severability..............................................24
Signatures...................................................................S-1
EXHIBIT A Form of Face of Warrant
Certificate
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4
EXHIBIT B Certificate to be Delivered upon Exchange or
Registration of Transfer of Warrants
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WARRANT AGREEMENT dated as of April 29, 1998 (this
"Agreement"), between SPINCYCLE, INC., a Delaware corporation (the "Company"),
and Norwest Bank Minnesota, N.A., as Warrant Agent (the "Warrant Agent").
The Company desires to issue the warrants (the "Warrants")
described herein. Each Warrant will initially entitle the holders thereof (the
"Holders") to purchase in the aggregate 26,661 shares of common stock, par value
$.01 per share, of the Company (the "Common Stock") in connection with an
offering by the Company (the "Units Offering") of 144,990 units (the "Units").
Each Unit will consist of (i) 12 3/4% Senior Discount Notes Due 2005 with a
principal amount at maturity of $1,000 (collectively, the "Notes") and (ii) one
Warrant. Each Warrant will entitle the Holder to purchase .1839 shares of Common
Stock, subject to adjustment as provided herein. In connection with the sale of
the Units, Warrants will be issued to the purchasers of the Units.
The Warrants will not trade separately from the Notes until
(i) the commencement of an exchange offer or the effectiveness of a shelf
registration statement for the Notes, July 29, 1998 or (ii) such earlier date as
Credit Suisse First Boston Corporation shall determine (the "Separation Date").
The Company further desires the Warrant Agent to act on behalf
of the Company in connection with the issuance of the Warrants as provided
herein and the Warrant Agent is willing to so act.
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the holders of Warrants:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.
"Affiliate" of any Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person, or (ii) any other Person who is a director or
executive officer (A) of such Person, (B) of any subsidiary of such Person or
(C) of any Person described in clause (i) above.
For purposes hereof, (a) "control" of a Person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such Person whether by contract or otherwise and (b) beneficial
ownership of 5% or more of the voting common equity (on a fully diluted basis)
or warrants to purchase such equity (whether or not currently exercisable) of a
Person shall be deemed to be in control of such Person; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Board" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day that is not a Saturday, a Sunday
or a day on which banking institutions are not required to be open in the State
of New York.
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"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
Exercise Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
"Combination" means an event in which the Company consolidates
with, merges with or into, or sells all or substantially all of its assets to
another Person.
"Current Market Value" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
Board and certified in a board resolution, based on the most recently completed
arm's-length transaction between the Company and a Person other than an
Affiliate of the Company and the closing of which occurs on such date or shall
have occurred within the six-month period preceding such date, or (b) if no such
transaction shall have occurred on such date or within such six-month period,
the value of the security as determined by an independent financial expert or
(ii) if the security is registered under the Exchange Act, the average of the
daily closing bid prices (or the equivalent in an over-the-counter market) for
each Business Day during the period commencing 15 Business Days before such date
and ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 15 consecutive Business Days
before such date, the average of the daily closing bid prices (or such
equivalent) for all of the Business Days before such date for which daily
closing bid prices are available; provided, however, that if the closing bid
price is not determinable for at least ten Business Days in such period, the
Current Market Value of the security shall be determined as if the security were
not registered under the Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Date" means, for a given Warrant, the day on which
such Warrant is exercised pursuant to Section 3.04.
"Indenture" means the Indenture dated as of April 29, 1998,
from the Company to the Trustee, with respect to the Notes, as it may be amended
or supplemented from time to time.
"Issue Date" means the date on which Warrants are initially
issued.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission, or any
successor agency or body performing substantially similar functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Trustee" means Norwest Bank Minnesota, N.A., or any successor
trustee under the Indenture.
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"Warrant Certificates" mean the registered certificates
(including without limitation, the global certificates) issued by the Company
under this Agreement representing the Warrants.
"Warrant Shares" mean the shares of Common Stock (and any
other securities) for which the Warrants are exercisable.
SECTION 1.02. Other Definitions.
Defined in
Term Section
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"Agreement"................................................... Recitals
"Cashless Exercise"........................................... 3.04
"Certificate Register"........................................ 2.04
"Common Shelf Registration Statement"......................... 5.01
"Common Stock"................................................ Recitals
"Company"..................................................... Recitals
"Exercise Price".............................................. 3.01
"Expiration Date"............................................. 3.02(b)
"Holders"..................................................... Recitals
"Notes"....................................................... Recitals
"Registrar"................................................... 3.07
"Separability Legend"......................................... 2.02(b)
"Separation Date"............................................. Recitals
"Successor Company"........................................... 4.05(a)
"Transfer Agent".............................................. 3.05
"Units"....................................................... Recitals
"Units Offering".............................................. Recitals
"Warrant Agent"............................................... Recitals
"Warrants".................................................... Recitals
"Warrant Shelf Registration
Statement"................................................... 5.01
SECTION 1.03. Rules of Construction. Unless the text otherwise
requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
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ARTICLE 2
WARRANT CERTIFICATES
SECTION 2.01. Form and Dating. Each Warrant Certificate shall
be substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company) and
shall bear the legends required by Section 2.02. Each Warrant Certificate shall
be dated the date of its countersignature. The terms of the Warrant Certificate
set forth in Exhibit A are part of the terms of this Agreement.
SECTION 2.02. Legends. (a) Each Warrant Certificate shall bear
the following legend:
THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF THE COMPANY FOR WHICH
THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY,
NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY
TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND
DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE
OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
(b) Each Warrant Certificate issued prior to the Separation
Date shall bear the following legend (the "Separability Legend"):
THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000
PRINCIPAL AMOUNT AT MATURITY OF 12 3/4% SENIOR DISCOUNT NOTES DUE 2005
OF SPINCYCLE, INC. (THE "NOTES") AND ONE WARRANT. PRIOR TO (i) 5:00
P.M., NEW YORK CITY TIME, ON THE DATE OF THE COMMENCEMENT OF AN
EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT
FOR THE NOTES, (ii) JULY 29, 1998 OR (iii) SUCH EARLIER DATE AS CREDIT
SUISSE FIRST BOSTON CORPORATION MAY, IN ITS DISCRETION, DEEM
APPROPRIATE, THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES.
(c) Each Warrant Certificate issued prior to the second
anniversary of the original issuance of the Units, unless otherwise agreed by
the Company and the Holder thereof, shall bear the following legend:
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THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS
SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I)
INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) OUTSIDE THE UNITED STATES IN A TRANSACTION COMPLYING
WITH THE PROVISIONS OF RULE 904 UNDER THE SECURITIES ACT, (III)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
(d) Each Warrant Certificate issued in global form and
deposited with DTC shall bear the following legend:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE WARRANT AGREEMENT REFERRED TO HEREIN.
SECTION 2.03. Execution and Countersignature. Two Officers
shall sign the Warrant Certificates for the Company by manual or facsimile
signature. If an Officer whose signature is on a Warrant Cer-
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tificate no longer holds that office at the time the Warrant Agent countersigns
the Warrant Certificate, the Warrant Certificate shall nevertheless be valid. A
Warrant Certificate shall not be valid until an authorized signatory of the
Warrant Agent manually countersigns the Warrant Certificate. Such authorized
signature shall be conclusive evidence that the Warrant Certificate has been
countersigned under this Agreement.
The Warrant Agent shall initially countersign and deliver
Warrant Certificates entitling the Holders thereof to purchase in the aggregate
not more than 26,661 Warrant Shares upon a written order of the Company signed
by two Officers.
The Warrant Agent may appoint an agent reasonably acceptable
to the Company to countersign the Warrant Certificates. Unless limited by the
terms of such appointment, such agent may countersign Warrant Certificates
whenever the Warrant Agent may do so. Each reference in this Agreement to
countersignature by the Warrant Agent includes countersignature by such agent.
Such agent will have the same rights as the Warrant Agent for service of notices
and demands.
SECTION 2.04. Certificate Register. The Warrant Agent shall
keep a register ("Certificate Register") of the Warrant Certificates and of
their transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
represented on the face of each Warrant Certificate. The Company and the Warrant
Agent may deem and treat the Person in whose name a Warrant Certificate is
registered as the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
notice to the contrary.
SECTION 2.05. Separation of Warrants and Notes. (a) Prior to
the Separation Date no Warrant may be sold, assigned or otherwise transferred to
any Person unless, simultaneously with such transfer, the Warrant Agent receives
confirmation from the Trustee for the Notes that the Holder thereof has
requested a transfer of the related Notes to the same Person.
(b) On or after the Separation Date, the holder of a Warrant
Certificate containing a Separability Legend may surrender such Warrant
Certificate accompanied by a written application to the Warrant Agent, duly
executed by the Holder thereof, for a new Warrant Certificate or certificates
not containing the Separability Legend.
SECTION 2.06. Transfer and Exchange. The Warrant Certificates
shall be issued in registered form only and shall be transferable only upon the
surrender of such Warrant Certificate for registration of transfer. When a
Warrant Certificate is presented to the Warrant Agent with a request to register
a transfer, the Warrant Agent shall register the transfer as requested if the
requirements of the Warrant Agent are met; provided, however, that prior to the
Separation Date the Warrant Agent shall not register a transfer of a Warrant
Certificate and such transfer will be void and of no effect unless the Notes
that are a part of the same Unit as the Warrants represented by the Warrant
Certificate to be transferred are simultaneously transferred to the same
transferee. To permit the registration of transfers and exchanges, the Company
shall execute and the Warrant Agent shall countersign Warrant Certificates at
the Warrant Agent's request. All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates shall be valid
obligations of the Company, entitled to the same benefits under this Agreement
as the Warrant Certificates surrendered upon such registration of transfer or
exchange. No service charge will be made to a Holder for any registration of
transfer or exchange upon surrender of any Warrant Certificate at the office of
the Warrant Agent maintained for that purpose. However, the Company may require
payment of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Warrant Certificates but not for any exchange or original issuance
(not involving a transfer) pursuant to Section 2.08, 3.04 or 3.05.
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SECTION 2.07. Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue and the Warrant Agent shall
countersign a replacement Warrant Certificate if the requirements of the Warrant
Agent are met. If required by the Warrant Agent or the Company, such Holder
shall furnish an indemnity bond sufficient in the judgment of the Company and
the Warrant Agent to protect the Company and the Warrant Agent from any loss
which either of them may suffer if a Warrant Certificate is replaced. The
Company and the Warrant Agent may charge the Holder for their expenses in
replacing a Warrant Certificate. Every replacement Warrant Certificate is an
additional obligation of the Company.
SECTION 2.08. Temporary Certificates. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare and the Warrant
Agent shall countersign temporary Warrant Certificates. Temporary Warrant
Certificates shall be substantially in the form of definitive Warrant
Certificates but may have variations that the Company considers appropriate for
temporary Warrant Certificates. Without unreasonable delay, the Company shall
prepare and the Warrant Agent shall countersign definitive Warrant Certificates
and deliver them in exchange for temporary Warrant Certificates.
SECTION 2.09. Cancellation. (a) In the event the Company shall
purchase or otherwise acquire Warrant Certificates, the same shall thereupon be
delivered to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and destroy
all Warrant Certificates surrendered for transfer, exchange, replacement,
exercise or cancellation and deliver a certificate of such destruction to the
Company. The Company may not issue new Warrant Certificates to replace Warrant
Certificates to the extent they represent Warrants which have been exercised or
Warrants which the Company has purchased or otherwise acquired.
ARTICLE 3
EXERCISE TERMS
SECTION 3.01. Exercise Price. Each Warrant shall initially
entitle the Holder thereof, subject to adjustment pursuant to the terms of this
Agreement, to purchase 1,839 shares of Common Stock for a per share exercise
price (the "Exercise Price") of $.01.
SECTION 3.02. Exercise Periods. (a) Subject to the terms and
conditions set forth herein, the Warrants shall be exercisable at any time or on
or after the earlier of (x)April 29, 1999 and (y) 60 days after the consummation
of an initial public offering of the Company's Common Stock.
(b) Unless earlier exercised the Warrants will expire on after
May 1, 2005 (the "Expiration Date").
SECTION 3.03. Expiration. Each Warrant shall terminate and
become void as of the earlier of (i) the close of business on the Expiration
Date or (ii) the date such Warrant is exercised. The Company shall give notice
not less than 90 and not more than 120 days prior to the Expiration Date to the
Holders of all then outstanding Warrants to the effect that the Warrants will
terminate and become void as of the close of business
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on the Expiration Date; provided, however, that if the Company fails to give
notice as provided in this Section 3.03, the Warrants will nevertheless expire
and become void on the Expiration Date.
SECTION 3.04. Manner of Exercise. Warrants may be exercised
upon (i) surrender to the Warrant Agent at the office of the Warrant Agent of
the related Warrant Certificate, together with the form of election to purchase
Common Stock on the reverse thereof duly filled in and signed by the Holder
thereof, and (ii) payment to the Warrant Agent, for the account of the Company,
of the Exercise Price for each Warrant Share issuable upon the exercise of such
Warrants then exercised; provided that in the event of any Exercise contemplated
by Section 4.05(b) the Exercise Price shall not be paid. Such payment shall be
made (i) in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose or (ii) without the payment of cash, by reducing the number of
shares of Common Stock obtainable upon the exercise of a Warrant and payment of
the Exercise Price in cash so as to yield a number of shares of Common Stock
upon the exercise of such Warrant equal to the product of (a) the number of
shares of Common Stock issuable as of the Exercise Date upon the exercise of
such Warrant (if payment of the Exercise Price were being made in cash) and (b)
the Cashless Exercise Ratio. An exercise of a Warrant in accordance with the
immediately preceding sentence is herein called a "Cashless Exercise". Upon
surrender of a Warrant Certificate representing more than one Warrant in
connection with the holder's option to elect a Cashless Exercise, the number of
shares of Common Stock deliverable upon a Cashless Exercise shall be equal to
the number of shares of Common Stock issuable upon the exercise of Warrants that
the holder specifies are to be exercised pursuant to a Cashless Exercise
multiplied by the Cashless Exercise Ratio. All provisions of this Agreement
shall be applicable with respect to a surrender of a Warrant Certificate
pursuant to a Cashless Exercise for less than the full number of Warrants
represented thereby. Subject to Section 3.02, the rights represented by the
Warrants shall be exercisable at the election of the Holders thereof either in
full at any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise of less than all the Warrants
represented by such Warrant Certificate at any time prior to the Expiration
Date, a new Warrant Certificate representing the remaining Warrants shall be
issued. The Warrant Agent shall countersign and deliver the required new Warrant
Certificates, and the Company, at the Warrant Agent's request, shall supply the
Warrant Agent with Warrant Certificates duly signed on behalf of the Company for
such purpose.
SECTION 3.05. Issuance of Warrant Shares. Subject to Section
2.07, upon the surrender of Warrant Certificates and payment of the per share
Exercise Price, as set forth in Section 3.04, the Company shall issue and cause
the Warrant Agent or, if appointed, a transfer agent for the Common Stock
("Transfer Agent") to countersign and deliver to or upon the written order of
the Holder and in such name or names as the Holder may designate a certificate
or certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise, to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.06 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the per share Exercise Price; provided, however,
that if, at such date, the transfer books for the Warrant Shares shall be
closed, the certificates for the Warrant Shares in respect of which such
Warrants are then exercised shall be issuable as of the date on which such books
shall next be opened and until such date the Company shall be under no duty to
deliver any certificates for such Warrant Shares; provided further, however,
that such transfer books, unless otherwise required by law, shall not be closed
at any one time for a period longer than 20 calendar days.
SECTION 3.06. Fractional Warrant Shares. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise
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shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.06, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
equal to the Current Market Value per Warrant Share, as determined on the day
immediately preceding the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole cent.
SECTION 3.07. Reservation of Warrant Shares. The Company shall
at all times keep reserved out of its authorized shares of Common Stock a number
of shares of Common Stock sufficient to provide for the exercise of all
outstanding Warrants. The registrar for the Common Stock (the "Registrar") shall
at all times until the Expiration Date reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent. All Warrant Shares which may be
issued upon exercise of Warrants shall, upon issue, be fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issue thereof. The Company will
supply such Transfer Agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 3.06. The Company will furnish to such
Transfer Agent a copy of all notices of adjustments (and certificates related
thereto) transmitted to each Holder. Before taking any action which would cause
an adjustment pursuant to Article 4 to reduce the Exercise Price below the then
par value (if any) of the Common Stock, the Company shall take any and all
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
shares of Common Stock at the Exercise Price as so adjusted. The Company
covenants that all shares of Common Stock which may be issued upon exercise of
Warrants will, upon issue, be fully paid, nonassessable, free of preemptive
rights, free from all taxes and free from all liens, charges and security
interests, created by or through the Company, with respect to the issue thereof.
SECTION 3.08. Compliance with Laws. Notwithstanding anything
in this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective or (ii) in the opinion of counsel to the Company addressed to the
Warrant Agent the exercise of such Warrants is exempt from the registration
requirements of the Securities Act and such securities are qualified for sale or
exempt from qualification under the applicable securities laws of any of the
United States or other jurisdictions in which such Holder resides.
ARTICLE 4
ANTIDILUTION PROVISIONS
SECTION 4.01. Changes in Common Stock. In the event that at
any time or from time to time the Company shall (i) pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock or other shares
of its capital stock, (ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock or (iv) increase
or decrease the number of shares of Common Stock outstanding by reclassification
of its Common Stock, then the number of shares of Common Stock issuable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted to a number determined by multiplying the number of shares of Common
Stock that such holder would have owned or have been entitled to receive upon
exercise had such Warrants been exercised immediately prior to the happening of
the events described above (or, in the case of a dividend or distribution of
Common Stock or other shares of capital stock,
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immediately prior to the record date therefor) by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately after the happening of the events described above and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the happening of the events described above;
and subject to Section 4.08 the Exercise Price for each Warrant shall be
adjusted to a number determined by dividing the Exercise Price immediately prior
to such event by such fraction. An adjustment made pursuant to this Section 4.01
shall become effective immediately after the effective date of such event,
retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock or other shares of the Company's capital
stock.
SECTION 4.02. Cash Dividends and Other Distributions. In the
event that at any time or from time to time the Company shall distribute to all
holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other
properties or securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case, (w)
the issuance of any rights under a shareholder rights plan, (x) any dividend or
distribution described in Section 4.01, (y) any rights, options, warrants or
securities described in Section 4.03 and (z) any cash dividends or other cash
distributions from current or retained earnings), then the number of shares of
Common Stock issuable upon the exercise of each Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock issuable
upon the exercise of such Warrant immediately prior to the record date for any
such dividend or distribution by a fraction, the numerator of which shall be the
Current Market Value per share of Common Stock on the record date for such
dividend or distribution and the denominator of which shall be such Current
Market Value per share of Common Stock on the record date for such dividend or
distribution less the sum of (x) the amount of cash, if any, distributed per
share of Common Stock and (y) the fair value (as determined in good faith by the
Board, whose determination shall be evidenced by a board resolution filed with
the Warrant Agent, a copy of which will be sent to Holders upon request) of the
portion, if any, of the distribution applicable to one share of Common Stock
consisting of evidences of indebtedness, shares of stock, securities, other
property, warrants, options or subscription or purchase rights; and subject to
Section 4.08 the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such record date by the above
fraction. Such adjustments shall be made whenever any distribution is made and
shall become effective as of the date of distribution, retroactive to the record
date for any such distribution. No adjustment shall be made pursuant to this
Section 4.02 which shall have the effect of decreasing the number of shares of
Common Stock issuable upon exercise of each Warrant or increasing the Exercise
Price.
SECTION 4.03. Rights Issue. In the event that at any time or
from time to time the Company shall issue rights, options or warrants entitling
the holders thereof to subscribe for shares of Common Stock, or securities
convertible into or exchangeable or exercisable for Common Stock to all holders
of Common Stock without any charge, entitling such holders to subscribe for or
purchase shares of Common Stock at a price per share that is lower at the record
date for such issuance than the then Current Market Value per share of Common
Stock other than in connection with the adoption of a shareholder rights plan by
the Company, the number of shares of Common Stock issuable upon the exercise of
each Warrant shall be increased to a number determined by multiplying the number
of shares of Common Stock theretofore issuable upon exercise of each Warrant by
a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, warrants or
securities plus the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the number of shares of Common Stock outstanding on the date of issuance of
such rights, options, warrants or securities plus the total number of shares of
Common Stock which the aggregate consideration expected to be received by the
Company (assuming the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then Current Market Value per
share of Common Stock. Subject to Section 4.08, in the event of any such
adjustment, the Exercise
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Price shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants are
issued and shall become effective, retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities. No adjustment shall be made pursuant to this Section 4.03 which
shall have the effect of decreasing the number of shares of Common Stock
purchasable upon exercise of each Warrant or of increasing the Exercise Price.
SECTION 4.04. Issuance of Common Stock or Rights. In the event
that at any time or from time to time the Company shall issue (i) shares of
Common Stock (subject to the provisions below), (ii) rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock (provided,
however, that no adjustment shall be made upon the exercise of such rights,
options or warrants), or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (provided, however, that no adjustment shall be
made upon the conversion, exchange or exercise of such securities (other than
issuances specified in (i), (ii) or (iii) which are made as the result of
anti-dilution adjustments in such securities)), at a price per share at the
record date of such issuance that is less than the then Current Market Value per
share of Common Stock, the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of each Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such sale or
issuance plus the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
sale or issuance plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities, if
any) would purchase at the then Current Market Value per share of Common Stock;
and subject to Section 4.08 the Exercise Price shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such date of
issuance by the aforementioned fraction; provided, however, that no adjustment
to the number of Warrant Shares issuable upon the exercise of the Warrants or to
the Exercise Price shall be made as a result of (i) the issuance of shares of
Common Stock under any warrants, options or other rights existing on the date
hereof, (ii) the issuance of shares of Common Stock in bona fide public
offerings that are underwritten or in which a placement agent is retained by the
Company, (iii) the issuance of options, or shares of Common Stock pursuant to
any option, under any employee benefit plans approved by the Board of Directors
or (iv) the issuance of shares of Common Stock in connection with acquisitions
of products, technologies and businesses other than to Affiliates of the
Company. Such adjustments shall be made whenever such rights, options or
warrants or convertible securities are issued. No adjustment shall be made
pursuant to this Section 4.04 which shall have the effect of decreasing the
number of shares of Common Stock issuable upon exercise of each warrant or of
increasing the Exercise Price.
SECTION 4.05. Combination; Liquidation. (a) Except as provided
in Section 4.05(b), in the event of a Combination, each Holder shall have the
right to receive upon exercise of the Warrants the kind and amount of shares of
capital stock or other securities or property which such Holder would have been
entitled to receive upon or as a result of such Combination had such Warrant
been exercised immediately prior to such event. Unless paragraph (b) is
applicable to a Combination, the Company shall provide that the surviving or
acquiring Person (the "Successor Company") in such Combination will enter into
an agreement with the Warrant Agent confirming the Holders' rights pursuant to
this Section 4.05(a) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
4. The provisions of this Section 4.05(a) shall similarly apply to successive
Combinations involving any Successor Company.
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(b) In the event of (i) a Combination where consideration to
the holders of Common Stock in exchange for their shares is payable solely in
cash or (ii) the dissolution, liquidation or winding-up of the Company, the
Holders of the Warrants shall be entitled to receive, upon exercise of their
Warrants pursuant to Section 3.04, distributions on an equal basis with the
holders of Common Stock or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such event,
less the Exercise Price.
In case of any Combination described in this Section 4.05(b),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
is required to deliver a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrants.
SECTION 4.06. Other Events. If any event occurs as to which
the foregoing provisions of this Article 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then such Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such Board, to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Exercise Price or decreasing the number of shares of Common Stock issuable upon
exercise of any Warrant.
SECTION 4.07. Superseding Adjustment. Upon the expiration of
any rights, options, warrants or conversion or exchange privileges which
resulted in adjustments pursuant to this Article 4, if any thereof shall not
have been exercised, the number of Warrant Shares issuable upon the exercise of
each Warrant shall be readjusted pursuant to the applicable section of Article 4
as if (A) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) shares of Common Stock
actually issued, if any, were issuable for the consideration actually received
by the Company upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange privileges whether or not
exercised and the Exercise Price shall be readjusted inversely; provided,
however, that no such readjustment shall (except by reason of an intervening
adjustment under Section 4.01) have the effect of decreasing the number of
Warrant Shares purchasable upon the exercise of each Warrant or increase the
Exercise Price 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 or exchange privileges.
SECTION 4.08. Minimum Adjustment. The adjustments required by
the preceding Sections of this Article 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur, except that no
adjustment of the Exercise Price or the number of shares of Common Stock
issuable upon exercise of Warrants that would otherwise be required shall be
made unless and until such adjustment either by itself or with other adjustments
not previously made increases or decreases by at least 1% the Exercise Price or
the number of shares of Common Stock issuable upon exercise of Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Article 4 and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event
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shall be deemed to have occurred at the close of business on the date of its
occurrence. In computing adjustments under this Article 4, fractional interests
in Common Stock shall be taken into account to the nearest one-hundredth of a
share.
SECTION 4.09. Notice of Adjustment. Whenever the Exercise
Price or the number of shares of Common Stock and other property, if any,
issuable upon exercise of the Warrants is adjusted, as herein provided, the
Company shall deliver to the Warrant Agent a certificate of a firm of
independent accountants selected by the Board (who may be the regular
accountants employed by the Company) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which (i) the Board
determined the fair value of any evidences of indebtedness, other securities or
property or warrants, options or other subscription or purchase rights and (ii)
the Current Market Value of the Common Stock was determined, if either of such
determinations were required), and specifying the Exercise Price and the number
of shares of Common Stock issuable upon exercise of Warrants after giving effect
to such adjustment. The Company shall promptly cause the Warrant Agent to mail a
copy of such certificate to each Holder in accordance with Section 7.06. The
Warrant Agent shall be entitled to rely on such certificate and shall be under
no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time, to any Holder desiring an inspection thereof
during reasonable business hours. The Warrant Agent shall not at any time be
under any duty or responsibility to any Holder to determine whether any facts
exist which may require any adjustment of the Exercise Price or the number of
shares of Common Stock or other stock or property issuable on exercise of the
Warrants, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such adjustment or the
validity or value of any shares of Common Stock, evidences of indebtedness,
warrants, options, or other securities or property.
SECTION 4.10. Notice of Certain Transactions. In the event
that the Company shall propose to (a) pay any dividend payable in securities of
any class to the holders of its Common Stock or to make any other non-cash
dividend or distribution to the holders of its Common Stock, (b) offer the
holders of its Common Stock rights to subscribe for or to purchase any
securities convertible into shares of Common Stock or shares of stock of any
class or any other securities, rights or options, (c) issue any (i) shares of
Common Stock, (ii) rights, options or warrants entitling the holders thereof to
subscribe for shares of Common Stock, or (iii) securities convertible into or
exchangeable or exercisable for Common Stock (in the case of (i), (ii) and
(iii), if such issuance or adjustment would result in an adjustment hereunder),
(d) effect any capital reorganization, reclassification, consolidation or
merger, (e) effect the voluntary or involuntary dissolution, liquidation or
winding-up of the Company or (f) make a tender offer or exchange offer with
respect to the Common Stock, the Company shall within 5 days send to the Warrant
Agent and the Warrant Agent shall within 5 days send the Holders a notice (in
such form as shall be furnished to the Warrant Agent by the Company) of such
proposed action or offer. Such notice shall be mailed by the Warrant Agent to
the Holders at their addresses as they appear in the Certificate Register, which
shall specify the record date for the purposes of such dividend, distribution or
rights, or the date such issuance or event is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed, and shall briefly indicate the effect of such action on the Common Stock
and on the number and kind of any other shares of stock and on other property,
if any, and the number of shares of Common Stock and other property, if any,
issuable upon exercise of each Warrant and the Exercise Price after giving
effect to any adjustment pursuant to Article 4 which will be required as a
result of such action. Such notice shall be given as promptly as possible and
(x) in the case of any action covered by clause (a) or (b) above, at least 10
days prior to the record date for determining holders of the Common Stock for
purposes of such action or (y) in the case of any other such action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier.
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SECTION 4.11. Adjustment to Warrant Certificate. The form of
Warrant Certificate need not be changed because of any adjustment made pursuant
to this Article 4, and Warrant Certificates issued after such adjustment may
state the same Exercise Price and the same number of shares of Common Stock
issuable upon exercise of the Warrants as are stated in the Warrant Certificates
initially issued pursuant to this Agreement. The Company, however, may at any
time in its sole discretion make any change in the form of Warrant Certificate
that it may deem appropriate to give effect to such adjustments and that does
not affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Effectiveness of Registration Statement. Subject
to Section 5.02, the Company shall cause to be filed pursuant to Rule 415 (or
any successor provision) of the Securities Act within 60 days after the Issue
Date, a shelf registration statement relating to the offer and sale of the
Warrants by the Holders from time to time in accordance with the methods of
distribution elected by such holders and set forth in such registration
statement (the "Warrant Shelf Registration Statement"), and shall use its
reasonable best efforts to cause the Warrant Shelf Registration Statement to be
declared effective within 150 days after the Issue Date and a shelf registration
statement covering the issuance of Warrant Shares to the Holders upon exercise
of the Warrants by the Holders thereof (the "Common Shelf Registration
Statement", and together with the Warrant Shelf Registration Statement, the
"Registration Statements") and shall use its reasonable best efforts to cause
the Common Shelf Registration Statement to be declared effective on or before
365 days after the Issue Date, and to cause each of the Registration Statements
to remain effective until the earliest of (i) such time as all Warrants have
been sold or exercised, as the case may be, (ii) the Expiration Date and (iii)
in the case of the Warrant Shelf Registration Statement, until all Warrants can
be sold without restriction under the Securities Act. In connection with any
Registration Statement, (i) the Company shall furnish to the Warrant Agent,
prior to the filing with the Commission, a copy of any Registration Statement,
and each amendment thereof and each amendment or supplement, if any, to the
prospectus included therein and shall use its reasonable best efforts to reflect
in each such document, when filed with the Commission, such comments as the
Warrant Agent may reasonably propose, (ii) the Company shall furnish to each
Holder, without charge, at least one copy of any Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits thereto (including those
incorporated by reference), (iii) the Company shall, for so long as any
Registration Statement is effective, deliver to each Holder, without charge, as
many copies of the prospectus (including each preliminary prospectus) included
in such Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request, and the Company consents to the proper use of the
prospectus therein and any amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Warrants or the
Warrant Shares, as the case may be, covered by such prospectus and any amendment
or supplement thereto, (iv) the Company may require each Holder of Warrants to
be sold pursuant to the Warrant Shelf Registration Statement or to be exercised
in connection with the Common Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of such
Warrants or Warrant Shares as the Company may from time to time reasonably
request for inclusion in such Registration Statement, (v) the Company shall, if
requested, promptly incorporate in a prospectus supplement or post-effective
amendment to such Registration Statement such information as a majority in
interest of the Holders reasonably agree should be included therein and shall
make all required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
prospectus
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supplement or post-effective amendment, (vi) the Company shall enter into such
agreements (including underwriting agreements) as are appropriate, customary and
reasonably necessary in connection with any such Registration Statement and
(vii) the Company shall (A) make available all material customary for reasonable
due diligence examinations in connection with such Registration Statements, (B)
make such representations and warranties to the Holders of Warrants and the
underwriters, if any, as are customary and reasonable in connection with such
Registration Statements, (C) obtain such opinions of counsel to the Company
addressed to and reasonably satisfactory to the Holders as are customary and
reasonable in connection with such Registration Statements and (D) obtain such
"comfort" letters and updates thereof from the independent certified public
accountants of the Company addressed to the Holders as are customary and
reasonable in connection with such Registration Statements. The Company will
furnish the Warrant Agent with current prospectuses meeting the requirements of
the Securities Act in sufficient quantity to permit the Warrant Agent to
deliver, at the Company's expense, a prospectus to each holder of a Warrant upon
the exercise thereof. The Company shall promptly inform the Warrant Agent of any
change in the status of the effectiveness or availability of any Registration
Statement.
SECTION 5.02. Suspension. During any consecutive 365-day
period, the Company shall be entitled to suspend the availability of each of the
Warrant Shelf Registration Statement and the Common Shelf Registration Statement
for up to two 60 consecutive-day periods (except during the 60 consecutive-day
period immediately prior to the Expiration Date) if the Company's Board
determines in the exercise of its reasonable judgment that there is a valid
business purpose for such suspension and provides notice that such determination
was made by the Company's board to the holders of the Warrants; provided,
however, that in no event shall the Company be required to disclose the business
purpose for such suspension if the Company determines in good faith that such
business purpose must remain confidential.
SECTION 5.03. Blue Sky. The Company shall use its reasonable
best efforts to register or qualify the Warrants and the Warrant Shares under
all applicable securities laws, blue sky laws or similar laws of all
jurisdictions in the United States and Canada in which any holder of Warrants
may or may be deemed to purchase Warrants or Warrant Shares upon the exercise of
Warrants and shall use its reasonable best efforts to maintain such registration
or qualification through the earliest of (i) such time as all Warrants have been
exercised, (ii) the Expiration Date and (iii) in the case of the Warrant Shelf
Registration Statement, until all Warrants can be sold without restriction under
the Securities Act; provided, however, that the Company shall not be required to
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5.03 or to take any action
which would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
SECTION 5.04. Accuracy of Disclosure. The Company represents
and warrants to each Holder and agrees for the benefit of each Holder that (i)
each of the Warrant Shelf Registration Statement and the Common Shelf
Registration Statement and any amendment thereto will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading; and (ii) each of the prospectus furnished to such Holder for
delivery in connection with the sale of Warrants and the prospectus delivered to
such Holder upon the exercise of Warrants and the documents incorporated by
reference therein will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the Company shall have no
liability under clauses (i) or (ii) of this Section 5.04 with respect to any
such untrue statement or omission made in any Registration Statement in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Holders specifically for inclusion therein.
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SECTION 5.05. Indemnification. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of the Warrants and each person, if any, who controls such Holder within
the meaning of the Securities Act or the Exchange Act (each Holder and such
controlling persons being referred to collectively as the "Indemnified Parties")
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including but not limited to any losses,
claims, damages, liabilities or actions relating to purchases and sales of the
Warrants or the Warrant Shares) to which each Indemnified Party may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement or prospectus or in any amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and shall reimburse, as incurred, the Indemnified Parties
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action in
respect thereof; provided, however, that (i) the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement or any
preliminary or final prospectus or in any amendment or supplement thereto in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein, (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any prospectus relating to such
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any person as to which there is a prospectus
delivery requirement (a "Delivering Seller") that sold the Securities to the
person asserting any such losses, claims, damages or liabilities to the extent
that any such loss, claim, damage or liability of such Delivering Seller results
from the fact that there was not sent or given to such person, on or prior to
the written confirmation of such sale, a copy of the relevant prospectus, as
amended and supplemented, provided that (I) the Company shall have previously
furnished copies thereof to such Delivering Seller in accordance with this
Agreement and (II) such furnished prospectus, as amended and supplemented, would
have corrected any such untrue statement or omission or alleged untrue statement
or omission, and (iii) this indemnity agreement will be in addition to any
liability which the Company may otherwise have to such Indemnified Party. The
Company shall also indemnify underwriters, selling brokers, dealer-managers and
similar securities industry professionals participating in the distribution (in
each case as described in such Registration Statement), their officers and
directors and each person who controls such persons within the meaning of the
Securities Act or the Exchange Act to the same extent as provided above with
respect to the indemnification of the Holders of the Securities if requested by
such Holders.
(b) In connection with any Registration Statement, each Holder
of the Warrants, severally and not jointly, will indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act from and against any losses, claims,
damages or liabilities or any actions in respect thereof to which the Company or
any such controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement or
preliminary or final prospectus or in any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company by or on
behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or
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other expenses reasonably incurred by the Company or any such controlling person
in connection with investigating or defending any loss, claim, damage, liability
or action in respect thereof. This indemnity agreement will be in addition to
any liability which such Holder may otherwise have to the Company or any of its
controlling persons.
(c) Promptly after receipt by an indemnified party under this
section of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this section, notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above, except to the
extent that it is prejudiced or harmed in any material respect by failure to
give such prompt notice. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with one counsel (and local counsel as
necessary) reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof the indemnifying party will not
be liable to such indemnified party under this section for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof. No indemnifying
party shall, without the prior written consent of the indemnified party, not to
be unreasonably withheld, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party from
all liability on any claims that are the subject matter of such action. No
indemnifying party shall be liable for any amounts paid in settlement of any
action or claim without its written consent, which consent shall not be
unreasonably withheld.
(d) If the indemnification provided for in this section is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above for any reason other than as provided in subsection
(c) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified person, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders shall not be required to contribute any amount in
excess of the amount by which the net proceeds received by such Holders from the
sale of the Warrants pursuant to the Warrant Shelf Registration Statement or the
Warrant Shares pursuant to the Common Shelf
22
-18-
Registration Statement exceeds the amount of damages which such Holders would
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each officer,
director, employee, representative and agent of an indemnified party and each
person, if any, who controls such indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution as
such indemnified party, and each officer, director, employee, representative and
agent of the Company and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act shall have the same rights
to contribution as the Company.
(e) The agreements contained in this section shall survive the
sale of the Warrants pursuant to the Warrant Shelf Registration Statement and
the sale of the Warrant Shares pursuant to the Common Shelf Registration
Statement, as the case may be, and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
SECTION 5.06. Additional Acts. If the sale of Warrants or the
issuance or sale of any Common Stock or other securities issuable upon the
exercise of the Warrants requires registration or approval of any governmental
authority (other than the registration requirements under the Securities Act),
or the taking of any other action under the laws of the United States of America
or any political subdivision thereof before such securities may be validly
offered or sold in compliance with such laws, then the Company covenants that it
will, in good faith and as expeditiously as reasonably possible, endeavor to
secure and maintain such registration or approval or to take such other action,
as the case may be.
SECTION 5.07. Expenses. All expenses incident to the Company's
performance of or compliance with its obligations under this Article 5 will be
borne by the Company, including without limitation: (i) all SEC, stock exchange
or National Association of Securities Dealers, Inc. registration and filing
fees, (ii) all reasonable fees and expenses incurred in connection with
compliance with state securities or blue sky laws, (iii) all expenses of any
Persons incurred by or on behalf of the Company in preparing or assisting in
preparing, printing and distributing the Warrant Shelf Registration Statement,
the Common Shelf Registration Statement or any other registration statement,
prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Article 5, (iv) the fees and
disbursements of the Warrant Agent, (v) the fees and disbursements of counsel
for the Company and the Warrant Agent and (vi) the fees and disbursements of the
independent public accountants of the Company, including the expenses of any
special audits or comfort letters required by or incident to such performance
and compliance.
ARTICLE 6
WARRANT AGENT
SECTION 6.01. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the provisions of this Agreement and the Warrant Agent hereby accepts such
appointment.
SECTION 6.02. Rights and Duties of Warrant Agent. (a) Agent
for the Company. In acting under this Warrant Agreement and in connection with
the Warrant Certificates, the Warrant Agent is acting
23
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solely as agent of the Company and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.
(b) Counsel. The Warrant Agent may consult with counsel
satisfactory to it (who may be counsel to the Company), and the advice of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the advice of such counsel.
(c) Documents. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken or thing suffered by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper parties.
(d) No Implied Obligations. The Warrant Agent shall be
obligated to perform only such duties as are specifically set forth herein and
in the Warrant Certificates, and no implied duties or obligations of the Warrant
Agent shall be read into this Agreement or the Warrant Certificates. The Warrant
Agent shall not be under any obligation to take any action hereunder which may
tend to involve it in any expense or liability for which it does not receive
indemnity if such indemnity is reasonably requested. The Warrant Agent shall not
be accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates countersigned by the Warrant Agent and delivered
by it to the Holders or on behalf of the Holders pursuant to this Agreement or
for the application by the Company of the proceeds of the Warrants. The Warrant
Agent shall have no duty or responsibility in case of any default by the Company
in the performance of its covenants or agreements contained herein or in the
Warrant Certificates or in the case of the receipt of any written demand from a
Holder with respect to such default, including any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise.
(e) Not Responsible for Adjustments or Validity of Stock. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the number of shares of Common Stock issuable upon exercise of each Warrant or
the Exercise Price, or with respect to the nature or extent of any adjustment
when made or with respect to the method employed or provided to be employed
herein or in any supplemental agreement in making the same. The Warrant Agent
shall not be accountable with respect to the validity or value of any shares of
Common Stock or of any securities or property which may at any time be issued or
delivered upon the exercise of any Warrant or upon any adjustment pursuant to
Article 4, and it makes no representation with respect thereto. The Warrant
Agent shall not be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates upon the surrender of any Warrant Certificate for the purpose of
exercise or upon any adjustment pursuant to Article 4, or to comply with any of
the covenants of the Company contained in Article 4.
SECTION 6.03. Individual Rights of Warrant Agent. The Warrant
Agent and any stockholder, 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 its affiliates or have an interest in transactions in which the Company or
its affiliates may have an interest, or contract with or lend money to the
Company or its affiliates or otherwise act as fully and freely as though it were
not the 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.
SECTION 6.04. Warrant Agent's Disclaimer. The Warrant Agent
shall not be responsible for and makes no representation as to the validity or
adequacy of this Agreement or the Warrant Certificates and it
24
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shall not be responsible for any statement in this Agreement or the Warrant
Certificates other than its countersignature thereon.
SECTION 6.05. Compensation and Indemnity. The Company and the
Warrant Agent have entered into an agreement pursuant to which the Company
agrees to pay the Warrant Agent from time to time reasonable compensation for
its services and to reimburse the Warrant Agent upon request for all reasonable
out-of-pocket expenses incurred by it, including the reasonable compensation and
expenses of the Warrant Agent's agents and counsel. The Company shall indemnify
the Warrant Agent against any loss, liability or expense (including agents' and
attorneys' fees and expenses) incurred by it without negligence or bad faith on
its part arising out of or in connection with the acceptance or performance of
its duties under this Agreement. The Warrant Agent shall notify the Company
promptly of any claim for which it may seek indemnity. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Warrant Agent through willful misconduct, negligence or bad faith. The Company's
payment obligations pursuant to this Section 6.05 shall survive the termination
of this Agreement.
To secure the Company's payment obligations under this
Agreement, the Warrant Agent shall have a lien prior to the Holders on all money
or property held or collected by the Warrant Agent.
SECTION 6.06. Successor Warrant Agent. (a) The Company to
Provide Warrant Agent. The Company agrees for the benefit of the Holders that
there shall at all times be a Warrant Agent hereunder until all the Warrants
have been exercised or are no longer exercisable.
(b) Resignation and Removal. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 60 days after the date
on which such notice is given unless the Company otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective, which date shall not be
less than 60 days after such notice is given unless the Warrant Agent otherwise
agrees. Any removal under this Section 6.06 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Warrant Agent
(which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Warrant Agent.
(c) The Company to Appoint Successor. In the event that at any
time the Warrant Agent shall resign, or shall be removed, or shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall
commence a voluntary case under Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law, or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or State
bankruptcy, insolvency or similar law, or a decree order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing filed with the successor
25
-21-
Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be the Warrant Agent hereunder; provided, however, that in
the event of the resignation of the Warrant Agent hereunder, such resignation
shall be effective on the earlier of (i) the date specified in the Warrant
Agent's notice of resignation and (ii) the appointment and acceptance of a
successor Warrant Agent hereunder.
(d) Successor To Expressly Assume Duties. Any successor
Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder.
(e) Successor by Merger. Any corporation into which the
Warrant Agent hereunder may be merged or consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, or any corporation to which the Warrant Agent shall sell or otherwise
transfer all or substantially all the assets and business of the Warrant Agent,
provided that it shall be qualified as aforesaid, shall be the successor Warrant
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. SEC Reports and Other Information.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
with the SEC and thereupon provide the Warrant Agent and Holders with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.
SECTION 7.02. Persons Benefiting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Company,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this agreement or any part hereof.
SECTION 7.03. Rights of Holders. Holders of unexercised
Warrants are not entitled to (i) receive dividends or other distributions, (ii)
receive notice of or vote at any meeting of the stockholders, (iii) consent to
any action of the stockholders, (iv) receive notice as stockholders of any other
proceedings of the Company, (v) exercise any preemptive rights or (vi) exercise
any other rights whatsoever as stockholders of the Company.
SECTION 7.04. Amendment. This Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing
26
-22-
any defective provision contained herein or adding or changing any other
provisions with respect to matters or questions arising under this Agreement as
the Company and the Warrant Agent may deem necessary or desirable (including
without limitation any addition or modification to provide for compliance with
the transfer restrictions set forth herein); provided, however, that such action
shall not adversely affect the rights of any of the Holders. Any amendment or
supplement to this Agreement that has an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the
then outstanding Warrants.
The consent of each Holder affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares issuable upon exercise of Warrants would be decreased (other
than pursuant to adjustments provided herein). In determining whether the
Holders of the required number of Warrants have concurred in any direction,
waiver or consent, Warrants owned by the Company or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Warrant Agent shall be
protected in relying on any such direction, waiver or consent, only Warrants
which the Warrant Agent knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Warrants outstanding at the time shall be
considered in any such determination.
SECTION 7.05. Notices. Any notice or communication shall be in
writing and delivered in Person or mailed by first-class mail addressed as
follows:
if to the Company:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
if to the Warrant Agent:
Norwest Bank Minnesota, N.A.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Company or the Warrant Agent by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the Certificate Register
and shall be sufficiently given if so mailed within the time prescribed.
27
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Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 7.06. Governing Law. The laws of the State of New York
shall govern this Agreement and the Warrant Certificates without regard to
principles of conflicts of laws.
SECTION 7.07. Successors. All agreements of the Company in
this Agreement and the Warrant Certificates shall bind its successors. All
agreements of the Warrant Agent in this Agreement shall bind its successors.
SECTION 7.08. Multiple Originals. The parties may sign any
number of copies of this Agreement. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Agreement.
SECTION 7.09. Table of Contents. The table of contents and
headings of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 7.10. Severability. The provisions of this Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
28
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
SPINCYCLE, INC.
by /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
NORWEST BANK MINNESOTA, N.A.,
as Warrant Agent,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
29
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF THE COMPANY FOR WHICH
THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY,
NO HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY
TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND
DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE
OF SUCH SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000
PRINCIPAL AMOUNT AT MATURITY OF 12 3/4% SENIOR DISCOUNT NOTES DUE MAY
1, 2005 OF SPINCYCLE, INC. (THE "NOTES") AND ONE WARRANT TO PURCHASE
.1839 SHARES OF THE COMPANY'S STOCK. PRIOR TO (i) 5:00 P.M., NEW YORK
CITY TIME, ON THE DATE OF THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE
EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT FOR THE NOTES, (ii)
JULY 29, 1998 OR (iii) SUCH EARLIER DATE AS CREDIT SUISSE FIRST BOSTON
CORPORATION MAY, IN ITS DISCRETION, DEEM APPROPRIATE, THE WARRANTS
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
WITH, THE NOTES.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS
SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I)
INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) OUTSIDE THE UNITED
30
-2-
STATES IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE)
OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
31
-3-
No. [ ] Certificate for Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
SPINCYCLE, INC.
THIS CERTIFIES THAT [ ], or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, to purchase from SpinCycle, Inc., a Delaware corporation (the
"Company"), .1839 shares of Common Stock, par value of $.01 per share, of the
Company (the "Common Stock") at the per share exercise price of $.01 (the
"Exercise Price"), or by Cashless Exercise referred to below. This Warrant
Certificate shall terminate and become void as of the earlier of (i) the close
of business on May 1, 2005 (the "Expiration Date") or (ii) upon the exercise
hereof as to all the shares of Common Stock subject hereto. The number of shares
issuable upon exercise of the Warrants and the Exercise Price per share shall be
subject to adjustment from time to time as set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of April 29, 1998 (the "Warrant Agreement"),
between the Company and Norwest Bank Minnesota, N.A. (the "Warrant Agent"),
which term includes any successor Warrant Agent under the Warrant Agreement),
and is subject to the terms and provisions contained in the Warrant Agreement,
to all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full
statement of the rights, limitations of rights, duties and obligations of the
Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, attention of: ▇▇▇▇
▇▇▇▇▇▇▇▇▇.
Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part (i) by presentation of this Warrant
Certificate with the Election to Purchase attached hereto duly executed and with
the simultaneous payment of the Exercise Price in cash (subject to adjustment)
to the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made by certified or official bank check payable to the order of the Company
or by wire transfer of funds to an account designated by the Company for such
purpose. Payment by Cashless Exercise shall be made without the payment of cash
by reducing the amount of Common Stock that would be obtainable upon the
exercise of a Warrant and payment of the Exercise Price in cash so as to yield a
number of shares of Common Stock upon the exercise of such Warrant equal to the
product of (1) the number of shares of Common Stock for which such Warrant is
exercisable as of the Exercise Date (if the Exercise Price were being paid in
cash) and (2) a fraction, the numerator of which is the excess of the Current
Market Value per share of Common Stock on the Exercise Date over the Exercise
Price per share as of the Exercise Date and the denominator of which is the
Current Market Value per share of the Common Stock on the Exercise Date.
Subject to the terms and conditions set forth herein, the
Warrants shall be exercisable at any time or on or after the earlier of (x)
April 29, 1999 and (y) 60 days after the consummation of an initial public
offering of the Company's Common Stock. Unless earlier exercised the Warrants
will expire on after May 1, 2005.
32
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In the event the Company enters into a Combination, the Holder
hereof will be entitled to receive upon exercise of the Warrants the kind and
amount of shares of capital stock or other securities or other property of such
surviving entity as the Holder would have been entitled to receive upon or as a
result of the combination had the Holder exercised its Warrants immediately
prior to such Combination; provided, however, that in the event that, in
connection with such Combination, consideration to holders of Common Stock in
exchange for their shares is payable solely in cash or in the event of the
dissolution, liquidation or winding-up of the Company, the Holder hereof will be
entitled to receive such cash distributions as the Holder would have received
had the Holder exercised its Warrants immediately prior to such Combination,
less the Exercise Price.
As provided in the Warrant Agreement, the number of shares of
Common Stock issuable upon the exercise of the Warrants and the Exercise Price
are subject to adjustment upon the happening of certain events.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 2.06 of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate
representing those Warrants which were not exercised. This Warrant Certificate
may be exchanged at the office of the Warrant Agent by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant
Certificate for other Warrant Certificates evidencing an equal number of
Warrants. No fractional Warrant Shares will be issued upon the exercise of the
Warrants, but the Company shall pay an amount in cash equal to the Current
Market Value per Warrant Share on the day immediately preceding the date the
Warrant is exercised, multiplied by the fraction of a Warrant Share that would
be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued and
fully paid and non-assessable.
The holder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company and the Warrant Agent as the absolute
owner of the Warrant Certificate for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any holder hereof to any of the
rights of a shareholder of the Company.
33
-5-
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
SPINCYCLE, INC.
By:
-------------------------------------
By:
-------------------------------------
DATED:
Countersigned:
NORWEST BANK MINNESOTA, N.A.,
as Warrant Agent,
By:
------------------------------
Authorized Signatory
34
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FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
SPINCYCLE, INC.
The undersigned hereby irrevocably elects to exercise [ ]
Warrants (i) at an exercise price per Warrant (subject to adjustment) of $.01 to
acquire shares of Common Stock, par value $.01 per share, of SpinCycle, Inc.
on the terms and conditions specified within the Warrant Certificate and the
Warrant Agreement therein referred to or (ii) pursuant to the Cashless Exercise
provisions of Section 3.04 of the Warrant Agreement and surrenders this Warrant
Certificate and all right, title and interest therein to SpinCycle, Inc. and
directs that the shares of Common Stock deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
Date: __________
(1)
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
---------------------------------------
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
--------
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration
or enlargement or any change whatsoever, and must be guaranteed by a
national bank or trust company or by a member firm of any national
securities exchange.
35
-7-
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
36
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock
(the "Warrants") of SpinCycle, Inc.
(the "Company")
This Certificate relates to Warrants held in definitive form
by _______________ (the "Transferor").
The Transferor has requested the Warrant Agent by written
order to exchange or register the transfer of a Warrant or Warrants. In
connection with such request and in respect of each such Warrant, the Transferor
does hereby certify that the Transferor is familiar with the Warrant Agreement
relating to the above captioned Warrants and that the transfer of this Warrant
does not require registration under the Securities Act of 1933, (the "Securities
Act") because*:
[ ] Such Warrant is being transferred pursuant to an effective
Registration Statement under the Securities Act.
[ ] Such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in
reliance on Rule 144A under the Securities Act.
[ ] Such Warrant is being transferred in a transaction meeting
the requirements of Regulation S under the Securities Act.
[ ] Such Warrant is being transferred in a transaction meeting
the requirements of Rule 144 under the Securities Act other than Rule 144A or
Regulation S.
The Warrant Agent and the Company are entitled to rely upon
this Certificate and are irrevocably authorized to produce this Certificate or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby.
________________________________________
[INSERT NAME OF TRANSFEROR]
by
Date:______________________
_________________________________
*Please check applicable box.