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EXHIBIT 4.2
KANI, INC.
FORM OF REPRESENTATIVES' WARRANT AGREEMENT
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Kani, Inc., a California corporation (the "Company"), hereby
agrees, on the terms and subject to the conditions of this Warrant Agreement
(the "Agreement") to sell and deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc.
("Holder"), individually as the Underwriter referred to in the "Underwriting
Agreement" (as defined below), for a purchase price of $0.001 per "Warrant" (as
defined below), Warrants to purchase up to [140,000 in the aggregate] shares of
"Common Stock" (as defined below) and Holder agrees, on the terms and subject to
the conditions of this Agreement, to purchase such Warrants from the Company.
The Warrants shall be evidenced by an instrument in the form annexed hereto as
Exhibit "A" (said instrument and all instruments hereafter issued in replacement
thereof being hereinafter referred to as the "Warrants"). Each of the Warrants
will be exercisable by the "Holder" thereof (as defined below) as to all or any
lesser number of shares of the Common Stock covered thereby, at the "Purchase
Price" per share (as defined below) at any time and from time to time on and
after 9:00 a.m., Los Angeles time, on , 1997 and ending at 5:00 p.m.,
Los Angeles Time, on , 2001.
The delivery of the Warrants and payment of the purchase price
of the Warrants are to be made on the "Closing Date" (as defined in the
Underwriting Agreement defined below), at the offices of the Holder, ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or such other time and place as may
be agreed upon between Holder and the Company (the "Closing Time").
1. Definitions. As used in this Agreement, the following terms, unless the
context otherwise clearly requires, shall have for all purposes the following
respective meanings, and capitalized terms used herein without definition shall
have the meanings ascribed to them in the Underwriting Agreement:
(a) The term "Common Stock" refers to the Common Stock, no par value,
of the Company, and all other shares of any class or classes (however
designated) of the common stock of the Company, now or hereafter authorized, the
holders of which by operation of law shall have the right, without limitation as
to amount, either to all or to a part of the balance of current dividends and
liquidating dividends and distributions after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
ordinarily, in the absence of contingency, shall be entitled to vote for the
election of the directors of the Company (even though the right so to vote has
been suspended by the occurrence of such a contingency), other than those
directors of the Company (constituting a portion of the Board of Directors) who,
pursuant to the Articles of
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Incorporation or other charter documents of the Company, are to be elected by a
designated class or series of the capital stock of the Company.
(b) The term "Warrant Shares" refers to the shares of Common Stock (or
Other Securities) issuable under this Warrant Agreement pursuant to the
exercise, in whole or in part, of the Warrants.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 6 below or otherwise.
(d) The term "Prospectus" refers to the prospectus which is part of the
Company's Registration Statement on Form S-1 (No. 333- ) in the form first filed
with the Securities and Exchange Commission (the "Commission") pursuant to Rule
424(b) of the applicable rules and regulations (the "Rules and Regulations") of
the Commission under the Securities Act of 1933, as amended (the "Act").
(e) The term "Purchase Price" refers to the per share purchase price of
the Warrant Shares subject to this Warrant Agreement. The Purchase Price shall
initially be $ per share (120% of the per share price to the public), subject to
adjustment as provided in Section 6 below.
(f) The term "Registration Statement" refers to the Company's
Registration Statement on Form S-1 (No. 333- ), as amended, when it first
became effective under the Act.
(g) The term "Holder" when used with respect to the Warrants or the
Warrant Shares, shall mean the person registered on the books and records of the
Company as being the holder of record of the Warrants or the initial Holder or
Holders of the Warrant Shares, as the case may be, and, so long as Holder holds
of record any Warrants or Warrant Shares, it shall be included in the definition
of "Holder," and any action to be taken or approval to be given by the Holders,
shall, unless otherwise provided in this Agreement, require the action by, or
approval of, the Holder or Holders of at least that number of Warrants and
Warrant Shares which in the aggregate shall constitute a majority of all Warrant
Shares issued or issuable under this Agreement.
(h) "Common Stock Outstanding" shall mean the aggregate of all Common
Stock outstanding plus all Common Stock issuable upon exercise of all
outstanding Options and conversion of all outstanding Convertible Securities.
(i) "Convertible Securities" shall mean any indebtedness, shares of
stock or other rights granted by the Company (other than Options) convertible
into or exchangeable for Common Stock.
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(j) "Options" shall mean any rights, warrants or options granted by the
Company to purchase Common Stock or Convertible Securities.
2.1 Representations and Warranties. The Company represents and warrants to
Holder as follows:
(a) Corporate Action. The Company has all requisite power and
authority, and has taken all necessary action, to enter into and perform all of
its obligations under this Agreement, to issue and deliver the Warrants and to
authorize and reserve for issuance, and upon payment from time to time of the
Purchase Price in accordance with the terms of this Agreement, to issue and
deliver, the Warrant Shares; and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) Outstanding Common Stock. The outstanding shares of Common Stock
have been duly and validly authorized and issued and are fully paid and
non-assessable and free of preemptive rights. The Warrant Shares (i) are duly
authorized by the Company's charter documents, (ii) have been duly and validly
authorized to be issued and adequately reserved by the Board of Directors of the
Company, and (iii) will, when issued and delivered to the Holders in accordance
with this Agreement, be duly and validly issued, fully paid and non-assessable,
and free and clear of all liens, charges, encumbrances or rights of others
except for those which may be created by the Holder. The holders of outstanding
shares of capital stock of the Company are not entitled to any preemptive or
similar rights to subscribe for or purchase Warrant Shares or other shares of
capital stock of the Company and, except as otherwise set forth or incorporated
by reference in the Prospectus, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of, any shares
of capital stock of the Company.
(c) No Violation. Neither the execution or delivery of this Agreement,
the consummation of the transactions contemplated by this Agreement nor
compliance with the terms and provisions of this Agreement will conflict with or
constitute a breach of, or a default (with the passage of time or otherwise)
under, or result in the imposition of a lien on any properties of the Company,
or an acceleration of indebtedness pursuant to, the charter or bylaws, or other
equivalent instruments, of the Company or any bond, debenture, note or other
evidence of indebtedness or any indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of the property or assets of the Company is subject, or any law,
administrative regulation or order of any court or governmental agency or
authority applicable to the Company or any of its properties or assets (subject
to the accuracy of the representations and warranties of Holder set forth
herein). No consent, approval, authorization or other order of any regulatory
body, administrative agency, or other governmental body is required for the
valid issuance and sale of the Warrant Shares to Holder or the other
transactions contemplated by this Agreement except for registration under the
federal securities laws and for permits and similar authorizations required
under state Blue Sky laws or similar laws.
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(d) Underwriting Agreement. All representations and warranties made by
the Company in Section 1 of the Underwriting Agreement, dated
, 1996, by and among the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates,
Inc. and (the "Underwriting Agreement"), will be true and
correct at and as of the Closing Time and are hereby incorporated by reference
into this Agreement as if such representations and warranties were set forth
herein.
2.2 Representations and Warranties of Holder. Holder represents and warrants to
the Company that it has all requisite power and authority, and has taken all
necessary action, to enter into and perform all of its obligations under this
Agreement; and this Agreement has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding agreement, enforceable
against it in accordance with its terms, except (i) as such enforceability may
be subject to or limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws or equitable principles now or hereafter in effect
relating to or affecting creditors rights generally (collectively, the
"Equitable Defenses") and (ii) insofar as the indemnification and contribution
provisions hereof may be limited under federal and state securities laws and the
public policies underlying such laws. Holder represents and warrants to the
Company that it is acquiring the Warrants and the Warrant Shares for investment
purposes, and without a view to or for the resale thereof.
3. Compliance with the Act.
(a) Transferability of Warrants. Holder agrees that the Warrants may
not be transferred, sold, assigned or hypothecated before , 1997,
except (i) to its successors in a merger or consolidation or other business
combination; (ii) to purchasers of all or substantially all of its assets;
(iii) to any officers or partners of Holder; or (iv) by operation of law.
Holder further agrees that the Company shall have no obligation to effect
any transfer of the Warrants during the respective time periods referred to
above, except in accordance with applicable federal and state securities laws
and unless the transferee, purchaser, assignee or pledgee, as the case may be,
shall have executed an agreement obligating the transferee to comply with all
terms and conditions of this Warrant Agreement applicable to the transferor.
(b) Transferability of Warrant Shares.
(i) Except as otherwise provided in this Section 3(b), each
certificate for Warrant Shares initially issued upon the exercise of any
Warrants, shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The Shares represented by this certificate are subject to the
conditions specified in a certain Warrant Agreement dated , 1996.
No transfer, sale, pledge, hypothecation, encumbrance or other
disposition of the Shares represented by this certificate shall be
valid or effective until registered or the Company has received an
opinion of counsel, satisfactory to it, that the transaction is exempt
from registration, and until such conditions as are contained in the
Warrant Agreement have been fulfilled. A copy of the form of the
Warrant Agreement is on
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file at the offices of Kani, Inc. The holder of this certificate, by
acceptance of this certificate, agrees to be bound by the provisions of
the Warrant Agreement."
(ii) Prior to any transfer, sale, pledge, assignment,
hypothecation or other disposition (each, a "Transfer") of any Warrant Shares or
the Warrant, the Holder of such Warrant Shares or Warrant shall (a) give ten
days' prior written notice (a "Transfer Notice") to the Company of such Holder's
intention to effect such Transfer, describing the manner and circumstances of
the proposed Transfer, and (b) obtain from counsel to such Holder an opinion
reasonably satisfactory to the Company that the proposed Transfer of such
Warrant Shares or Warrant may be effected without registration under the Act,
any applicable state securities laws, and in accordance with the provisions of
this Agreement. The Company shall be deemed to have consented to such transfer
if it has not notified the Holder of such Warrant Shares or Warrant within three
business days of receipt of the Transfer Notice and opinion that it objects to
such transfer, and such Holder shall thereupon be entitled to Transfer such
Warrant Shares and Warrant in accordance with the terms of the Transfer Notice.
Each certificate evidencing such Warrant Shares issued upon such Transfer shall
bear the restrictive legend set forth in Section 3(b)(i), unless in the opinion
of counsel to such Holder, which opinion shall be reasonably satisfactory to the
Company, such legend is not required in order to ensure compliance with the Act.
(iii) Notwithstanding the foregoing provisions of this Section
3(b), the restrictions imposed by items (i) and (ii) of this Section upon the
transferability of the Warrant Shares and the legend requirements of Section
3(b)(i) shall terminate as to any particular Warrant Shares (A) when and so long
as such security shall have been effectively registered under the Act and
disposed of pursuant thereto, or (B) when the Company shall have delivered to
the Holder or Holders of any Warrants or Warrant Shares the written opinion of
counsel to the Company, which opinion of counsel shall be reasonably
satisfactory to such Holder or Holders, stating that such legend is not required
in order to ensure compliance with the Act. Whenever the restrictions imposed by
this Section shall terminate as to any Warrant Shares, as hereinabove provided,
the Holder thereof shall be entitled to receive from the Company, at the
Company's expense, a new certificate representing such Warrant Shares in the
name of the same Holder not bearing the restrictive legend set forth in Section
3(b)(i).
(c) Piggyback Registration of Warrant Shares. If, at any time during
the period commencing on the Closing Date and ending on the date which is five
years after the Closing Date, the Company shall propose to register any shares
of Common Stock or Other Securities (but excluding any registration pursuant to
Form S-8 or Form S-4 or any successor or comparable form thereto), the Company
shall (i) give each Holder written notice, or telegraphic, telecopy or
telephonic notice followed as soon as practicable by written confirmation
thereof, of such proposed registration at least 10 business days prior to the
filing of such registration statement and, (ii) upon written notice, or
telegraphic or telephonic notice followed as soon as practicable by written
confirmation thereof, given to the Company by any Holder within five business
days after the giving of such written confirmation or written notice by the
Company, the Company shall include or cause to be included in any such
registration statement all or such portion of the Warrant Shares as such Holder
may request (to the extent such Warrant Shares may be included in such
registration
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statement); provided, however, that the Company may at any time withdraw or
cease proceeding with any such registration if it shall at the same time
withdraw or cease proceeding with the registration of the Common Stock or Other
Securities originally proposed to be registered; and provided further, that in
connection with any registered public offering involving an underwriting, the
managing underwriter may (if in its opinion marketing factors so require) limit
the number of securities (including any Warrants or Warrant Shares) included in
such offering (other than securities of the Company). In the event of any such
limitation, the total number of Warrant Shares to be offered for the account of
the Holders participating in the registration shall be reduced pro rata in
proportion to the respective number of shares requested to be included therein
(other than securities being issued or sold by the Company) to the extent
necessary to reduce the total number of shares proposed to be registered to the
number of shares recommended by the managing underwriter.
(d) Demand Registration. In addition, at any time during the period
commencing on the Closing Date and ending on the date which is five years after
the Closing Date, upon written, telegraphic or telephonic notice followed as
soon as practicable by written confirmation thereof, from any Holder or Holders
(the "Requesting Holders") of that number of Warrants and Warrant Shares which
in the aggregate shall constitute a majority of all Warrant Shares issued or
issuable under this Agreement (excluding Warrant Shares which have been
previously sold, transferred or otherwise disposed of in a registered public
offering, pursuant to Rule 144 under the Act, as such rule may be amended from
time to time, or pursuant to Regulation S under the Act, as such Regulation may
be amended from time to time), that such Holder or Holders request the
registration under the Act of any of the Warrant Shares, the Company, as
promptly as possible after the receipt of such notice, but in any event within
45 days of the receipt of such notice shall file a registration statement with
respect to the offering and sale or other disposition of the Warrant Shares with
respect to which it shall have received such notice. Such registration may, if
the Company satisfies the applicable requirements, be made on Form S-3. If a
registration requested pursuant to this Section 3(d) is an underwritten
registration, the Company and other holders of securities of the Company may
include securities in such registration without the written consent of the
Holders of the Warrant Shares for which registration has been requested pursuant
to this Section 3(d) if, but only if, in the case of other holders of Securities
of the Company, the managing underwriters of such registration advise the
Company in writing that in their opinion such inclusion will not materially
adversely affect the successful marketing of the Warrant Shares. The Company
shall be obligated to file only one registration statement pursuant to this
Section 3(d), whether or not the registration statement at the time it becomes
effective covers all or a portion of the Warrant Shares. The Holders shall not
be deemed to have effected a demand registration pursuant to this Section 3(d)
unless and until the Registration Statement is declared effective.
Notwithstanding the foregoing, the Company shall not be required to effect a
registration under this Section 3(d) if, the Company in good faith gives written
notice to the participating Holders of Warrant Shares that it has determined to
prepare a Company-initiated registration statement in which, on the terms and
subject to the conditions set forth herein, such Holders may participate, and
the Company is actively employing in good faith reasonable efforts to cause such
registration statement to be filed and thereafter to become effective, or if the
Board of Directors of the Company determines for any reason that it would not be
in the
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best interests of the Company to file such registration statement at the time of
the receipt of the request, the Company may defer such filing for up to 120
days.
(e) Company's Obligations in Registration. If any Holder timely elects
to participate in an offering by including Warrant Shares in a registration
statement pursuant to Section 3(c) or (d) above, the Company shall use its
reasonable best efforts to effect such registration to permit the sale of
Warrant Shares in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company shall:
(i) notify the Holders as to the filing thereof and of all
amendments or supplements thereto filed prior to the effective date thereof;
(ii) use its reasonable best efforts to cause any registration
statement filed under the Act pursuant to Section 3(c) or (d) above to become
effective at the earliest possible date (subject to the Company's right to
withdraw any registration statement pursuant to Section 3(c) above) after the
filing thereof and to comply with all applicable rules and regulations of the
Commission in connection therewith; provided, that before filing a registration
statement or prospectus or any amendments or supplements thereto, including
documents which would be incorporated or deemed to be incorporated by reference
in the registration statement after the initial filing of any registration
statement, the Company will furnish to the Holders, their respective counsel and
the underwriters, if any, to be engaged in connection with the offering and sale
by the Company (for purposes of this Section 3(e), the "Underwriters"), copies
of all such documents proposed to be filed, which documents will be subject to
the review of the Holders, their respective counsel and the Underwriters, and
the Company will not file any registration statement, or amendment thereto or
any prospectus or any supplement thereto relating in whole or in part to the
Holders' Shares (including such documents incorporated or deemed to be
incorporated by reference) to which the Holders or the Underwriters, if any,
shall reasonably object; provided, however, if such Holders object to a
registration statement pursuant to Section 3(c) above, they shall withdraw from
such registration statement;
(iii) notify the Holders (1) when the registration statement
or any post-effective amendment becomes effective, (2) when a prospectus or
prospectus supplement or post-effective amendment has been filed, (3) of any
request by the Commission for amendments, supplements or additional information
related to a registration statement or prospectus or otherwise, (4) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose known to the Company, or (5) of
the receipt by the Company of any notification with respect to the suspension of
qualification of the Warrant Shares for sale in any jurisdiction in which they
were qualified or of the initiation, or the threatening, of any proceedings for
that purpose;
(iv) make reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification (or exemption from qualification) of any
of the Warrant Shares for sale in any jurisdiction in which they were qualified,
at the earliest possible moment;
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(v) if reasonably requested by the Underwriters, if any, or
the Holders, immediately incorporate in a prospectus supplement or
post-effective amendment such information as the Company and the Holders and the
Underwriters, if any, agree should be included therein relating to the sale and
distribution of the Warrant Shares, including, without limitation, information
with respect to the number of Warrant Shares being sold to such Underwriters,
the purchase price being paid therefor by such Underwriters and with respect to
any other terms of the underwritten offering of the Warrant Shares to be sold in
such offering; make all required filings of such Prospectus supplement or
post-effective amendment promptly after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
supplement or amend any registration statement if reasonably requested by the
Holders or any Underwriter of Warrant Shares covered by such Warrant Shares;
(vi) furnish to each of the Holders whose Warrant Shares have
been included therein, their respective counsel and each Underwriter, if any,
without charge, at least one signed copy of any registration statement
(including all amendments thereto) and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
(vii) during the time when a prospectus is required to be
delivered under the Act in connection with the distribution of the Warrant
Shares, comply so far as it is able with all requirements imposed upon it by the
Act, as now and hereafter amended, and by the Rules and Regulations promulgated
by the Commission thereunder, as from time to time in force, so far as necessary
to permit the continuance of sales of or dealings in the Warrant Shares (which
period shall be limited to the period the Company otherwise maintains the
registration statement in effect in the case of a registration statement
pursuant to Section 3(c), above, and 120 days in the case of a registration
statement pursuant to Section 3(d), above). If at any time when a prospectus
relating to the Warrant Shares is required to be delivered under the Act any
event shall have occurred as a result of which, in the opinion of counsel for
the Company or counsel for the Holders, the prospectus relating to the Warrant
Shares as then amended or supplemented includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend such prospectus to comply with the Act, the Company will use its best
efforts promptly to prepare and file with the Commission an appropriate
amendment or supplement (in form reasonably satisfactory to the Holders);
(viii) make generally available to its security holders as
soon as practicable but not later than 15 months following the effective date of
such Registration Statement, an earnings statement or statements of the Company
and its subsidiaries covering a period of at least twelve months beginning after
the effective date of the registration statement (but in no event commencing
later than 90 days after such date), which shall satisfy the provisions of
Section 11(a) of the Act and Rule 158 promulgated thereunder;
(ix) prepare and promptly file with the Commission such
amendments and post-effective amendments to such registration statement as may
be necessary to keep such
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registration statement continuously effective for a period of 120 days; cause
the related prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act; and
comply with the provisions of the Act with respect to the disposition of all
Warrant Shares covered by such registration statement during the applicable
period in accordance with the intended methods of disposition as set forth in
such registration statement or supplement to such prospectus;
(x) deliver to each of the Holders, their respective counsel
and the Underwriters, if any, without charge, as many copies of the prospectus
or prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request; the Company consents
to the use of any such prospectus or any amendment or supplement thereto by the
Holders and each of the Underwriters, if any, in connection with the offering
and sale of the Warrant Shares covered by such prospectus or any amendment or
supplement thereto;
(xi) prior to any public offering of Warrant Shares, register
or qualify or cooperate with the Holders, the Underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Warrant Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
the Holders or any Underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period the applicable registration statement is required to be kept effective
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Warrants and the Warrant Shares covered
by the applicable registration statement; provided, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(xii) cooperate with the Holders and the Underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
Warrant Shares to be sold which certificates shall not bear any restrictive
legends; and enable such Warrant Shares to be in such denominations and
registered in such names as the Underwriters may request at least two business
days prior to any sale of Warrant Shares to the Underwriters;
(xiii) enter into such agreements in form and substance
reasonably acceptable to the Company and its counsel (including an underwriting
agreement) and take all such other actions in connection therewith as may be
necessary to expedite or facilitate the disposition of such Warrant Shares and,
in such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (1) in the case
of an underwritten offering, enter into an underwriting agreement in form, scope
and substance as is customary in underwritten offerings and obtain (a) opinions
of counsel to the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the Underwriters)
addressed to the Underwriters covering the matters customarily covered in
opinions requested by underwriters in underwritten offerings and such other
matters as may be reasonably requested by the Underwriters and (b) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory
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to the Holders) addressed to the Holders covering matters reasonably requested
by the Holders; (2) obtain "comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is or is required to be included in the registration statement)
addressed to the Holders and each of the Underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"comfort" letters to underwriters in connection with underwritten offerings; (3)
if an underwriting agreement is entered into, the same shall set forth in full
the indemnification and contribution provisions and procedures of Section 3(f)
hereof (or such other indemnification and contribution provisions as shall be
acceptable to the Holders and the Underwriters of such underwritten offering)
with respect to all parties to be indemnified pursuant to said section (and each
participating Holder shall agree to enter into such agreement and provide the
indemnification to the Company contained in Section 3(f) hereof); and (4) the
Company shall deliver such documents and certificates as may be requested by the
Holders and the Underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (1) above and to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company. The above shall be done at each
closing under such underwriting or similar agreement or as and to the extent
required thereunder;
(xiv) pay all costs and expenses incident to the performance
of the Company's obligations under Sections 3(c) and (d) above and under this
Section 3(e) (collectively "Registration Expenses"), including without
limitation the fees and disbursements of the Company's auditors, legal counsel,
and of legal counsel responsible for qualifying the Warrant Shares under Blue
Sky laws, all filing fees and printing expenses, all expenses in connection with
the transfer and delivery of the Warrant Shares, and all expenses in connection
with the qualification of the Warrant Shares under applicable Blue Sky laws
reasonably designated by the Holders; provided, that in no event shall
Registration Expenses include any underwriting discounts, commissions or fees or
the fees of counsel retained by the Holders or Underwriters in either case in
connection with the sale of Warrant Shares pursuant to Section 3(c) or 3(d)
above; and
(xv) in connection with the filing of a registration statement
pursuant to Section 3(c) or (d) above, use its reasonable best efforts to obtain
indemnification of the Holders by the Underwriter to the same extent said
Underwriter provides indemnification to the Company (but only if such Holders
provide a reciprocal indemnification).
As used in this Section 3(e), the term "Holders" refers only to those
Holders who have timely elected to participate in an offering. In addition to
the rights granted to the participating Holders as a group, all notifications,
approvals and other rights granted to the Holders in this Section 3(e) may be
separately exercised by Holder (other than the right to demand registration
pursuant to Section 3(d) above), but only if they are participating Holders in
the offering.
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(f) Indemnification.
(i) The Company shall indemnify and hold harmless Holder, the
Holders and any underwriter (as defined in the Act) for Holder, and the Holders,
and each person, if any, who respectively controls (within the meaning of
Section 15 of the Act) Holder or any of the Holders or such underwriter against
any losses, claims, damages or liabilities (or actions in respect thereof) and
expense whatsoever (including, but not limited to, any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which Holder, the Holders or such underwriter or such controlling
person becomes subject, under the Act, the Exchange Act, or other federal or
state statute, law or regulation, at common law or otherwise, insofar as any
such loss, liability, claim, damage or expense (or actions in respect thereof)
(1) arises out of or is based upon any breach of any representation, warranty,
or covenant of the Company in this Agreement or upon any untrue statement or
alleged untrue statement of any material fact contained in (A) Section 2 of this
Agreement, (B) any registration statement (including the Registration Statement)
covering the Warrant Shares as originally filed or in any amendment thereof, in
the prospectus contained therein or in an amendment or supplement thereto, or
(C) in any application or other document, or any amendment or supplement thereto
(in this Section collectively called "application") executed by or on behalf of
the Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Warrant Shares under
the securities laws thereof or filed with the Commission or any securities
association or securities exchange, or (2) arises out of or is based upon the
omission or alleged omission to state in any of the documents described in
subclauses (A), (B) or (C) above, a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified person, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigation or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be obligated to indemnify in any such case to the
extent that any such loss, claim, damage, expense or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon, and in conformity with, written
information furnished to the Company by the indemnified person specifically for
use therein. The Company will not, without the prior written consent of Holder
(not to be unreasonably withheld), settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or not
Holder is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of all
indemnified parties from all liability arising out of such claim, action, suit
or proceeding, satisfactory in form and substance to Holder.
(ii) Holder (whether or not it is a party), and each Holder
that sells all or a part of the Warrant Shares pursuant to the Registration
Statement, agrees to indemnify and hold harmless the Company and each of its
directors and officers who have signed the Registration Statement, any other
Holder of Warrant Shares included in such registration statement, and any
underwriter (as defined in the Act) for the Company or the Holders of Warrant
Shares, and each person, if any, who controls (within the meaning of Section 15
of the Act) the Company or such underwriter to the same
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extent as the indemnity by the Company in Section 3(f)(i) but only with respect
to any untrue statement or alleged untrue statement or omissions or alleged
omissions, if any, made in the Registration Statement, or any amendment thereto,
or in any application in reliance upon, and in conformity with, written
information furnished by it or Holder to the Company or such controlling person
expressly for use in the Registration Statement, or any amendment or supplement
thereto, or any application, as the case may be. Neither Holder nor any such
Holder shall, without the prior written consent of the Company (not to be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not the
Company is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of all
indemnified parties from all liability arising out of such claim, action, suit
or proceeding, satisfactory in form and substance to the Company. If any action
shall be brought in respect of which indemnity may be sought against any of the
Holders, such person shall have the rights and duties given to the indemnifying
party, and the persons so indemnified shall have the rights and duties given to
the indemnified party, by the provisions of Section 3(f)(iii) below;
(iii) If any action is brought against a person in respect of
which indemnity may be sought hereunder against an indemnifying party, such
person shall promptly notify the indemnifying party in writing of the
institution of such action and the indemnifying party shall assume the defense
of the action, including the employment of counsel satisfactory to the
indemnified person and payment as incurred of all fees and expenses related
thereto. The indemnified person shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified person unless (1) the employment of such counsel
and the payment of fees and expenses thereof shall have been authorized in
writing by the indemnifying party in connection with the defense of the action
or (2) the indemnifying party shall have failed promptly after notice by such
indemnified person to assume the defense of such action or proceeding and to
employ counsel satisfactory to the indemnified person in any such action or
proceeding or (3) the named parties to any such action or proceeding (including
any impleaded parties) include both such indemnified person and the
indemnifying party, and such indemnified person shall have been advised by
counsel that there is an actual conflict in such representation (in
which case, if such indemnified person notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified
person. Anything in this paragraph to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent. The indemnity agreements contained in this
Section shall remain in full force and effect regardless of any investigation
made by or on behalf of any indemnified person, and shall survive any
termination of this Agreement. The indemnifying party agrees promptly to notify
the indemnified party of the commencement of any litigation or proceedings
against the indemnifying
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party or any of its officers or directors in connection with the registration
statement pursuant to Section 3(c) or (d) above.
(iv) If the indemnification provided for in items (i), (ii)
and (iii) of this Section 3(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, the indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in item (iii) of this Section 3(f), any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this item (iv) of this Section 3(f) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. If the full amount of the contribution
specified in this item (iv) of this Section 3(f) is not permitted by law, then
such indemnified person shall be entitled to contribution from the indemnifying
party to the full extent permitted by law. Notwithstanding the provisions of
this Section 3(f)(iv), no Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Warrant Shares of
such Holder were offered to the public exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue
statement or omission. No party found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any party who was not found guilty of such fraudulent
misrepresentation.
4. Exercise of Warrants.
(a) Exercise of Warrants. The Warrants may be exercised in full or in
part by the Holder thereof by surrender of (i) the Warrants, with the Election
to Purchase attached thereto duly executed by such Holder, to the Company at its
offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or
at such other office or agency as the Company may from time to time designate in
writing, accompanied by payment, in cash or by certified or bank cashier's check
payable to the order of the Company, in the amount obtained by multiplying the
number of Warrant Shares designated by the Holder in the Election to Purchase
by the Purchase Price per share and (ii) an
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acknowledgment by the purchasing Holder that it will not dispose of the Warrant
Shares except in compliance with Section 3(b) hereof, the Act and any applicable
state securities laws. Upon any partial exercise of the Warrants, the Company at
its expense will forthwith issue and deliver to the purchasing Holder a new
Warrant, in the name of such Holder on the face or faces of the Warrants for the
number of Warrant Shares equal to the number of shares called for on the face of
the surrendered Warrant (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such Warrant Shares (after
giving effect to such adjustment) purchased by the Holder pursuant to such
exercise.
(b) Company to Reaffirm Obligations. On the date of any exercise of any
Warrants (except that if, upon such date, the stock transfer books of the
Company shall be closed, in which case on the next succeeding date on which the
transfer books are open) the Holder exercising the same shall be deemed to have
become, and therefor shall be considered, a holder of record of the shares of
Common Stock purchased upon such exercise for all purposes. Holders of Warrants
shall have no rights of share ownership until they exercise their Warrants. The
Company will, at the time of any exercise of any Warrant, upon the request of
the Holder thereof, acknowledge in writing its continuing obligation to afford
to that Holder any rights (including without limitation any right to
registration of the Warrant Shares issued upon such exercise) to which the
Holder shall continue to be entitled after such exercise in accordance with the
provisions of this Agreement; provided, however, that if the Holder of a Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any of such
rights.
5. Delivery of Stock Certificates, etc., on Exercise. As soon as practicable
after the exercise of any Warrants and in any event within five business days
thereafter, the Company, at its expense (including the payment by it of any
applicable issue taxes), will cause to be issued in the name of and delivered to
the purchasing Holder a certificate or certificates for the number of fully paid
and nonassessable Warrant Shares to which such Holder shall be entitled upon
such exercise, plus cash, in lieu of any fractional share to which such Holder
would otherwise be entitled, as provided in Section 6(a) of this Agreement,
together with any Other Securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 6 of this Agreement or otherwise.
6. Anti-dilution Provisions. The Warrants are subject to the following
additional terms and conditions:
(a) Fractional Shares. The Company will not issue a fractional share of
Common Stock upon exercise of a Warrant. Instead, the Company will deliver an
amount, in cash, and rounded to the nearest whole cent equal to the product of
(x) the Current Market Price (as defined below) of a full share of the Common
Stock as of the last trading day prior to the exercise date multiplied by (y)
the fractional amount.
(b) Adjustment for Change in Capital Stock. If, after the date of this
Agreement, the Company:
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(1) pays a dividend or makes a distribution on its Common
Stock in shares of its capital stock (including Common Stock);
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(4) issues by reclassification of its Common Stock any shares
of its capital stock or other securities (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation);
then the Purchase Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination, reclassification or
recapitalization shall be adjusted so that the Purchase Price shall be equal to
the price determined by multiplying the Purchase Price in effect immediately
prior to such event by a fraction, the numerator of which shall be (x) the total
number of outstanding shares of Common Stock of the Company immediately prior to
such event; and the denominator of which shall be (y) the total number of
outstanding shares of Common Stock of the Company, or such shares of its capital
stock or other securities issued in connection with any such reclassification,
immediately after such event, as appropriate, and, as so adjusted or readjusted,
the Purchase Price shall remain in effect until a further adjustment or
readjustment is required by this Section 6(b).
The adjustment shall become effective on (x) in the case of a
dividend or distribution, the earlier of the record date or the distribution
date and (y) in the case of a subdivision, combination or reclassification, the
earlier of the record date or the effective date; provided, that such adjustment
shall be reversed and shall be of no effect if such dividend or distribution, or
such subdivision, combination or reclassification is not in fact effected.
Whenever the Purchase Price payable upon exercise of each
Warrant is adjusted pursuant to this Section 6(b), the Warrant Shares shall
simultaneously be adjusted by multiplying the number of Warrant Shares issuable
upon exercise of each Warrant immediately prior to such event by the Purchase
Price in effect on the date thereof and dividing the product so obtained by the
Purchase Price, as adjusted.
(c) Adjustments For Other Distributions. If, after the date of this
Agreement the holders of Common Stock shall generally have received, or (on or
after the record date fixed for the determination of eligible stockholders)
shall generally have become entitled to receive in respect of the Common Stock
(i) securities other than capital stock, (ii) evidences of its indebtedness,
(iii) assets (excluding cash dividends made in the ordinary course of business),
or (iv) rights, options or warrants or convertible or exchangeable securities
(other than Convertible Securities or Options) containing the right to subscribe
for or purchase securities of the Company, then, and in each such case the
holder of each Warrant, upon the exercise thereof as provided in Section 4
above, shall be entitled to receive the amount of securities, indebtedness,
assets (including cash in the case referred
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to in subdivision (iii) of this Section 6(c)) and rights which such Holder would
hold on the date of such exercise if on the date of this Agreement such Holder
had been the holder of record of the number of shares of Common Stock called for
on the face of the Warrant held by such Holder and had thereafter, during the
period from the date of this Agreement to and including the date of such
exercise, retained such shares receivable by such Holder as aforesaid during
such period, giving effect to all adjustments called for during such period by
this Section 6.
(d) Excluded Events. Notwithstanding anything in this Section 6 to the
contrary, the Purchase Price shall not be adjusted by virtue of (i) the
conversion of the Warrants or any other convertible securities of the Company
outstanding on the date hereof or the existence or exercise of any other
warrants or options of the Company outstanding on the date hereof, or (ii) the
repurchase of shares from the Company's employees, consultants, officers, or
directors at such person's cost (or at such other price as may be agreed to by
the Company's Board of Directors), or (iii) the issuance or sale of, or the
grant of options to purchase, Common Stock to employees, directors, or officers
of, or consultants to, the Company or its subsidiaries, if any, pursuant to
stock option plans currently existing, or hereafter approved by the shareholders
of the Company.
(e) Current Market Price. For the purpose of any computation under this
Section 6, the "Current Market Price" per share of Common Stock at any date
shall be the average of the daily closing prices for 15 consecutive trading days
commencing 20 trading days before such date. The closing price for each day
shall be the last reported sale price, regular way, or, in case no such reported
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such day, in either case on the principal national securities
exchange on which the shares are listed or admitted to trading, or if they are
not listed or admitted to trading on any national securities exchange, but are
traded in the NASDAQ National Market System, or if the Shares are otherwise
securities for which transaction reports are required to be made on a real-time
basis pursuant to an effective transaction reporting plan under rule 11a3-1 of
the Rules of the Commission under the Exchange Act, the last reported sales
price, or if they are not listed or admitted to trade, and if last sale data is
not then available from NASDAQ, but are traded in the over-the-counter market,
the average of the representative closing bid and asked quotations for the
Common Stock on NASDAQ or any comparable system, or if the Common Stock is not
listed on NASDAQ or a comparable system, the average of the closing bid and
asked prices as furnished by two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose.
(f) Minimum Adjustment. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Warrant Shares
purchasable upon the exercise of each Warrant. Any adjustments that by reason of
this Section 6(f) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment, and, notwithstanding the foregoing,
all adjustments so carried forward shall be made at the time of, and in
connection with, each exercise of any of the Warrants. All calculations shall be
made to the nearest one-thousandth of a share, or cent, as the case may be.
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(g) Other Securities. If at any time, as a result of an adjustment made
pursuant to this Section 6, the Holders shall become entitled to purchase any
shares of capital stock or other securities of the Company other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of each Warrant and the Purchase Price of such securities shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Section 6; and the provisions of Sections 3, 4 and 7,
inclusive, with respect to the Warrant Shares, shall apply on like terms to any
such Other Securities.
(h) Consolidations, Mergers and Other Transactions. In case of any
consolidation of the Company with or merger of the Company into another
corporation or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Company or such successor or purchasing corporation, as the case may be, shall
execute an agreement whereby each Holder shall have the right thereafter upon
payment of the Purchase Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities and property, if any, which the Holder would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale or
conveyance had such Warrant been exercised immediately prior to such action. The
Company shall mail by first class mail, postage prepaid, to each Holder, notice
of the execution of any such agreement. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The provisions of this Section 6
shall similarly apply to successive consolidations, mergers, sales or
conveyances. Each Holder of Warrants shall be under no duty or responsibility to
determine the correctness of any provisions contained in any such agreement
relating either to the kind or amount of shares of stock or other securities or
property receivable upon exercise of warrants or with respect to the method
employed and provided therein for any adjustments.
(i) Notice of Adjustments. Whenever the Purchase Price or the kind or
amount of securities purchasable under the Warrants shall be adjusted pursuant
to any of the provisions of this Warrant Agreement, the Company shall forthwith
thereafter cause to be sent to Holder and all other Holders a certificate
setting forth the adjustments in the Purchase Price and in said number of
shares, and also setting forth in detail the facts requiring such adjustments.
(j) Notice of Certain Events. In the event of (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or (ii) any capital reorganization of the Company, or
any reclassification or recapitalization of the capital stock of the Company,
or any transfer of all or substantially all of the assets of the Company to, or
consolidation or merger of the Company with or into, any other person, or (iii)
any voluntary or involuntary dissolution or liquidation of the Company, then and
in each such event the Company will mail or cause to be mailed to each Holder a
notice specifying the date upon which any such record is to be taken for the
purpose of such dividend, distribution or right, stating the amount and
character of such dividend, distribution or right, and the date on which any
such
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reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any, as of which the holders of record of Common Stock (or Other Securities)
shall be entitled to exchange their shares of Common Stock (or Other Securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
five days prior to the proposed record date therein specified.
(k) Other Events Altering Purchase Price. Upon the occurrence of any
event not specifically denominated in this Section 6 as altering the Purchase
Price and the amount of Common Stock purchasable upon the exercise of the
Warrants, if the reasonable exercise of the business judgment of the Board of
Directors of the Company requires, on equitable principles, the alteration of
the Purchase Price and corresponding adjustment to the number of shares into
which the Warrants are exercisable, the Purchase Price and such number of shares
shall be equitably altered.
7. Further Covenants of the Company. The Company hereby agrees as follows:
(a) Reservation of Stock. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon the exercise of the
Warrants, all Warrant Shares from time to time issuable upon the exercise of the
Warrants.
(b) Title to Stock. All of the Warrant Shares delivered upon the
exercise of the Warrants shall be validly issued, fully paid and nonassessable;
each Holder of a Warrant shall receive good and marketable title to the Warrant
Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities, and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(c) Exchange of Warrants. Subject to Section 3(a) hereof, upon
surrender for exchange of any Warrant to the Company, the Company at its expense
will promptly issue and deliver to the Holder thereof a new Warrant or Warrants
of like tenor, in the name of such Holder, calling in the aggregate on the face
or faces thereof for the number of Warrant Shares called for on the face or
faces of the Warrants so surrendered.
(d) Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
Warrants and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement by the Warrant Holder reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, upon surrender
by the Holder and cancellation of such Warrants, the Company at its expense will
execute and deliver, in lieu thereof, new Warrants of like tenor.
(e) Reporting by the Company. The Company agrees that during the term
of the Warrants, it will use its best efforts to keep current in the filing of
all forms and other materials which it may be required to file with the
appropriate regulatory authority pursuant to the Exchange Act. The Company will
take such further action as any Holder may reasonably request, all to the
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extent required from time to time to enable such Holder to sell Warrant Shares
without registration under the Act within the limitation of the exemptions
provided by (a) Rule 144 under the Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the Commission.
8. Other Holders. The Warrants are issued upon the following terms, to all of
which each Holder or owner thereof by the taking thereof consents and agrees as
follows: (a) any person who shall become a transferee, within the limitations on
transfer imposed by Section 3(a) hereof, of a Warrant properly endorsed, shall
take such Warrant subject to the provisions of Sections 3(a) and 3(b) hereof and
thereupon shall be authorized to represent that such transferee is the absolute
owner thereof and, subject to the restrictions contained in this Warrant
Agreement, shall be empowered to transfer absolute title by endorsement and
delivery thereof to a permitted bona fide purchaser for value; and (b) each
prior taker or owner waives and renounces all equities or rights in such Warrant
in favor of each such permitted bona fide purchaser, and each such permitted
bona fide purchaser shall acquire absolute title thereto and to all rights
presented thereby; and (c) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
Holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary.
9. Miscellaneous. All notices, certificates and other communications from or at
the request of the Company to the Holder of any Warrant shall be mailed by first
class, registered or certified mail, postage prepaid, to the Holder at the
address specified above, or such other address as the Holder may have furnished
to the Company in writing. This Warrant Agreement and any of the terms hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. Notwithstanding the foregoing, the
provisions of Section 6 hereof cannot be changed, waived, discharged or
terminated in a manner adverse to the Holders without the written consent of
either Holder or one or more Holder or Holders who collectively own, of record,
that number of Warrants and/or Warrant Shares which in the aggregate shall
constitute a majority of all Warrant Shares issued or issuable under this
Agreement (excluding Warrant Shares which have been previously sold, transferred
or otherwise disposed of in a registered public offering, pursuant to Rule 144
under the Act, as such Rule may be amended from time to time, or pursuant to
Regulation S, as such regulation may be amended from time to time). The headings
in this Warrant Agreement are for purposes of reference only and shall not limit
or otherwise affect any of the terms hereof. This Warrant Agreement, together
with the forms of instruments annexed hereto, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
10. GOVERNING LAW. THIS WARRANT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS
BETWEEN CALIFORNIA RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN
CALIFORNIA.
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IN WITNESS WHEREOF, the Company has caused this Warrant
Agreement to be executed on this day of
, 1996 by its proper corporate officers thereunto duly authorized.
KANI, INC.
By:_______________________________
Its:______________________________
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ASSOCIATES, INC.
By:______________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
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Exhibit A
FORM OF WARRANT
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS
SPECIFIED IN A WARRANT AGREEMENT, DATED , 1996
BY AND BETWEEN KANI, INC. AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ASSOCIATES, INC. AND
. NO TRANSFER, SALE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR
OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID
OR EFFECTIVE UNTIL REGISTERED OR THE COMPANY HAS BEEN ADVISED BY AN OPINION OF
COUNSEL SATISFACTORY TO IT THAT THE SHARES WILL BE TRANSFERRED IN A TRANSACTION
EXEMPT FROM REGISTRATION AND UNTIL SUCH CONDITIONS IN THE WARRANT AGREEMENT HAVE
BEEN FULFILLED. A COPY OF THE FORM OF SAID WARRANT AGREEMENT IS ON FILE AT THE
OFFICES OF KANI, INC. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT AGREEMENT.
THIS WARRANT IS NON-TRANSFERRABLE EXCEPT AS PROVIDED IN THE WARRANT AGREEMENT.
No. __________________________
Warrant to Purchase up to ____________ Shares of
Common Stock EXERCISABLE COMMENCING 9:00 A.M.,
LOS ANGELES TIME, ON
________________, 1997 AND ENDING
5:00 P.M., LOS ANGELES TIME, ON
_____________, 2001
KANI, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc., or
registered assigns, is the holder (the "Holder") of this Warrant to purchase,
subject to adjustment, the number of fully paid and nonassessable shares set
forth above (the "Warrant Shares") of Common Stock, no par value (the "Common
Stock"), of Kani, Inc., a California corporation (the "Company"), at the per
share exercise price, subject to adjustment (the "Purchase Price"), set forth in
the Warrant Agreement, dated , 1996 (the "Warrant Agreement"), between the
Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc. and at any time prior to the
Expiration Date (defined below), by surrendering this Warrant, with the form of
subscription set forth hereon duly executed, to the Company at the Company's
offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or
at such other office or agency as the Company may designate and by paying in
full in the manner provided in Section 4 of the Warrant Agreement, the Purchase
Price for the Warrant Shares then purchased. Payment of the Purchase Price may
be made in cash or by certified or bank
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cashier's check payable to the order of the Company, or by surrender of a
portion of this Warrant, as provided in Section 4(c) of the Warrant Agreement.
This Warrant may be exercised at any time and from time to
time, in whole or in part, at the option of the Holder, commencing 9:00 a.m.,
Los Angeles time, on , 1997 until 5:00 p.m., Los Angeles time, on
, 2001 (the "Expiration Date"). Upon the purchase of fewer
than all of the Warrant Shares, there shall be issued to the Holder a new
Warrant exercisable for the number of Warrant Shares for which this Warrant has
not been exercised or surrendered as payment. Prior to the Expiration Date, the
Holder shall be entitled to exchange this Warrant, without charge, for another
Warrant or Warrants exercisable for the same aggregate number of Warrant Shares.
This Warrant is issued under and in accordance with the
Warrant Agreement and, except as otherwise provided in this Warrant, is subject
to the terms and provisions contained therein. Upon certain events provided for
in the Warrant Agreement, the Purchase Price and the number of shares of Common
Stock issuable upon the exercise of the Warrant are subject to adjustment. No
fractional shares will be issued upon the exercise of a Warrant. Instead, the
Company shall pay the cash value thereof, determined as provided in the Warrant
Agreement.
THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS BETWEEN
CALIFORNIA RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN
CALIFORNIA.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed.
KANI, INC.
By: ________________________________________
Its: ________________________________________
Attest:
________________________________________
________________________________________
Secretary
A-2
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ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise this
Warrant to purchase _________ shares of Common Stock, acknowledges that it will
not dispose of such shares except in compliance with Section 3(b) of the Warrant
Agreement and the Securities Act of 1933, and requests that Certificates for
such shares be issued and delivered as follows:
ISSUE TO: __________________________________________________
(Name)
__________________________________________________
(Address, Including Zip Code)
__________________________________________________
(Social Security or Tax Identification Number)
DELIVER TO: __________________________________________________
(Name)
__________________________________________________
(Address, Including Zip Code)
In full payment of the aggregate purchase price with respect
to the number of shares being purchased upon exercise of this Warrant, the
undersigned hereby (check applicable payment method): (i)/ / tenders payment of
$_________ by certified or bank cashier's check payable to the order of Kani,
Inc. or (ii) / / hereby surrenders to the Company, Warrants to purchase ______
shares of Common Stock. If the Warrant is exercised hereby (and surrendered, as
the case may be) so as to purchase fewer than all the shares of Common Stock
that may be purchased pursuant to this Warrant, the undersigned requests that a
new Warrant representing the number of full shares for which the Warrant has not
been exercised or surrendered be issued and delivered as set forth below.
Name of Warrant holder or Assignee:_____________________________________________
(Please Print)
Address:________________________________________________________________________
________________________________________________________________________________
Signature DATED: , 199_
(Signature must conform in all respects to name of holder as specified
on the face of the Warrant)
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned represented by the
within Warrant, with respect to the number of shares of Common Stock set forth
below:
Number of Taxpayer
Shares of Identification
Name of Assignee Address Common Stock Number
---------------- ------- ------------ --------------
and does hereby irrevocably authorize the Company to make such transfer on the
Warrant Register maintained at the principal office of the Company.
Dated:_____________, 199__
___________________________
Signature
(Signature must conform in all respects to name of holder as
specified on the face of the Warrant).