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EXHIBIT 4.9
UNDERWRITER'S WARRANT AGREEMENT dated as of July __, 1997
between Aviation Group, Inc., a Texas corporation (the "Company"), and Duke &
Co., Inc. (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Underwriter has agreed, pursuant to the
underwriting agreement (the "Underwriting Agreement") dated July __, 1997
between the Underwriter and the Company, to act as the underwriter in
connection with the Company's proposed public offering (the "Public Offering")
of 1,000,000 shares of common stock, par value $0.01 per share ("Common
Stock"), and 1,000,000 redeemable Common Stock purchase warrants ("Redeemable
Warrants"), plus up to an additional 150,000 shares of Common Stock and 150,000
Redeemable Warrants pursuant to the Underwriter's over-allotment option, which
securities are included in a registration statement on Form SB-2 (File No.
333-22727) (hereinafter, the "Public Offering Registration Statement"); and
WHEREAS, the Company proposes to issue to the Under- writer
warrants, one for the purchase of up to 100,000 shares of Common Stock and the
other for the purchase of up to 100,000 Redeemable Warrants; and
WHEREAS, the warrants issued pursuant to this Agreement are
being issued by the Company to the Underwriter or officers and partners of the
Underwriter and members of the selling group (the "Selling Group") and/or their
officers or partners, in consideration for, and as part of the Underwriter's
compensation in connection with, the Underwriter acting as the underwriter
pursuant to the Underwriting Agreement;
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NOW, THEREFORE, in consideration of the foregoing premises,
the payment by the Underwriter to the Company of an aggregate of $200.00, the
receipt of which is hereby acknowledged by the Company, the agreements herein
set forth and other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. Subject to the terms and conditions of this
Agreement, the Underwriter, and/or its designees who are officers or partners
of the Underwriter or members of the Selling Group in connection with the
Public Offering, are hereby granted the right to purchase, at any time from
July __, 1998 until 5:00 P.M., New York City time, on July __, 2002 (the
"Warrant Exercise Term"), up to (i) 100,000 shares of Common Stock (the
"Shares") at an initial exercise price (subject to adjustment as provided in
Article 8 hereof) of $9.4875 per Share and (ii) 100,000 Redeemable Warrants at
an initial exercise price of $11.38 per Redeemable Warrant. The right to
purchase Shares as described in (i) above is hereinafter referred to as
"Warrant No. 1" and the right to purchase Redeemable Warrants as described in
(ii) above is hereinafter referred to as "Warrant No. 2". Warrant No. 1 and
Warrant No. 2 are hereinafter referred to collectively as the "Warrants".
Except as specifically otherwise provided herein, the Shares and the Redeemable
Warrants issued pursuant to Warrant No. 1 and Warrant No. 2, respectively,
shall bear the same terms and conditions as described under the caption
"Description of Securities" in the Public Offering Registration Statement. In
addition, the Redeemable Warrants shall be governed by the terms of the Warrant
Agreement dated as of July __, 1997, executed in connection with the Public
Offering (the "Public Warrant Agreement"), and except that the holder shall
have registration rights under the Securities Act of 1933, as amended (the
"Act"), with
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respect to the Warrants, the Shares and the Redeemable Warrants subject thereto
and the shares of Common Stock underlying the Redeemable Warrants issuable upon
exercise of Warrant No. 2, which registration rights are more fully described
in paragraph 7 of this Warrant Agreement. In the event of any adjustments to
the exercise price of and the number of shares of Common Stock purchasable
under the Redeemable Warrants pursuant to the Public Warrant Agreement, the
same changes to the Redeemable Warrants subject to Warrant No. 2 shall be
simultaneously effected.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") for Warrant No. 1 and Warrant No. 2 to be delivered
pursuant to this Agreement shall be in the forms set forth as Exhibit A and
Exhibit B attached hereto, respectively, and made a part hereof, with such
appropriate insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
3. Exercise of Warrants.
3.1 Cash Exercise. The exercise price of the
respective Warrants shall be payable in cash or by certified or official bank
check to the order of the Company, or any combination of cash or check. Upon
surrender of the applicable Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the applicable
exercise price for the Shares and/or Redeemable Warrants purchased, at the
Company's principal offices, currently located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares and/or Redeemable Warrants so purchased. The
purchase rights represented by each Warrant Certificate are exercisable at the
option of the Holder thereof, in whole or in part (but not as to fractional
Shares or fractional Redeemable Warrants). In the
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case of the purchase of less than all the Shares or Redeemable Warrants, as the
case may be, purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall execute
and deliver a new Warrant Certificate of like tenor for the balance of the
Shares or Redeemable Warrants, as the case may be, purchasable thereunder.
3.2 Cashless Exercise for Warrant No. 1. At any
time during the Warrant Exercise Term, the Holder may, at its option, exchange
Warrant No. 1, in whole or in part (a "Warrant Exchange"), into the number of
Shares determined in accordance with this Section 3.2, by surrendering the
Warrant Certificate representing Warrant No. 1 at the principal office of the
Company, accompanied by a notice stating (i) such Holder's intent to effect
such exchange, (ii) the number of Shares subject to Warrant No. 1 as to which
the exchange is to be effected and (iii) the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange or if
the date the Notice of Exchange is received by the Company is later than the
date specified in the Notice of Exchange, such later date (the "Exchange
Date"). Certificates for the Shares issuable upon such Warrant Exchange and,
if applicable, a new warrant of like tenor evidencing the balance of the Shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within three (3) business days following the Exchange
Date. In connection with any Warrant Exchange, Warrant No. 1 shall represent
the right to subscribe for and acquire the number of Shares (rounded to the
next highest integer) equal to (i) the number of Shares specified by the Holder
in its Notice of Exchange (the "Total Number") less (ii) the number of Shares
equal to the quotient obtained by dividing (A) the
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product of the Total Number and the existing exercise price of Warrant No. 1 by
(B) the market price of a share of Common Stock on the Exchange Date; and, in
the case of any Warrant Exchange for less than all of the Shares purchasable
under Warrant No. 1, the Company shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Shares purchasable thereunder.
By way of example, if the holder of Warrant No. 1 submits a Notice of Exchange
relating to 50,000 of the 100,000 Shares subject to Warrant No. 1 and the
current market price of a share of Common Stock on the Exchange Date is $10.00,
the holder will be entitled to receive 2,550 shares of Common Stock, along with
a new Warrant Certificate entitling the holder to purchase 50,000 Shares.
4. Issuance of Certificates.
4.1. Issuance. Upon exercise of the Warrants, the
issuance of certificates for the Shares and/or Redeemable Warrants, as
applicable shall be made forthwith (and in any event within three (3) business
days thereafter) without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance thereof,
and such certificates shall (subject to the provisions of Article 5 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder,
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
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4.2. Forms of Certificates. The Warrant Certificates and
certificates representing the Shares and/or Redeemable Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman or Vice Chairman of the Board of Directors or
President or Vice President of the Company under its corporate seal reproduced
thereon, attested to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. Warrant Certificates
shall be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer. The Warrant Certificates and,
upon exercise of the Warrants, in part or in whole, certificates representing
the Shares and/or Redeemable Warrants shall bear a legend substantially similar
to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by acceptance thereof,
covenants and agrees that the Warrant is being acquired as an investment and
not with a view to the distribution thereof, and that the Warrant may not be
sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or
in part, for a period of one (1) year from the date hereof, except to officers
or partners of the Underwriter or to any member of the Selling Group
participating in the distribution to the public of the Common Stock and
Redeemable Warrants, and/or their respective officers or partners.
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6. Price.
6.1 Initial and Adjusted Exercise Prices. The
initial exercise price of Warrant No. 1 shall be $9.4875 per Share and the
initial exercise price of Warrant No. 2 shall be $11.38 per Redeemable Warrant.
The adjusted exercise price shall be the price which shall result from time to
time from any and all adjustments of the initial exercise price in accordance
with the provisions of Article 8 hereof.
6.2 Exercise Price. The term "exercise price"
herein shall mean the initial exercise price of Warrant No. 1 or Warrant No. 2,
as the case may be, or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of
1933. The Warrants, the Shares, the Redeemable Warrants and the Common Stock
issuable upon exercise of the Redeemable Warrants (the "Underlying Shares")
have been registered under the Securities Act of 1933, as amended (the "Act"),
pursuant to the Public Offering Registration Statement. In the event that, for
any reason whatsoever, the Company fails to maintain the effectiveness of the
Public Offering Registration Statement for a period of seven years following
the date of this Agreement, holders of the Registrable Securities shall have,
commencing with the date of such failure to maintain effectiveness, the
registration rights set forth in Sections 7.3 and 7.4.
7.2 Registrable Securities. As used herein the
term "Registrable Securities" means the Warrants, the Shares issuable upon
exercise of Warrant No. 1, the Redeemable Warrants issuable upon exercise of
Warrant No. 2, the Underlying Shares and any securities issued upon any stock
split or stock dividend in respect of any of the foregoing;
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provided, however, any of such securities shall cease to be Registrable
Securities when, as of the date of determination, (i) it has been effectively
registered under the Act and disposed of pursuant thereto, (ii) registration
under the Act is no longer required for the immediate public distribution of
such securities, (iii) it has ceased to be outstanding or (iv) such securities
have been sold pursuant to Rule 144 (or any successor rule) under the Act. In
the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of "Registrable Securities" as is appropriate
in order to prevent any dilution or enlargement of the rights granted pursuant
to this Article 7.
7.3 Piggyback Registration. If, at any time
during the seven years following the date of this Agreement, the Company
proposes to prepare and file one or more post-effective amendments to the
Public Offering Registration Statement filed in connection with the Public
Offering or any new registration statement or posteffective amendments thereto
covering equity or debt securities of the Company, or any such securities of
the Company held by its shareholders (other than pursuant to a Form S-4
relating to a merger or acquisition or pursuant to a Form S-8) (for purposes of
this Article 7, collectively, a "Registration Statement"), it will give written
notice of its intention to do so by registered mail ("Notice"), at least thirty
(30) days prior to the filing of each such Registration Statement, to all
holders of the Registrable Securities. Upon the written request of such a
holder (a "Requesting Holder"), made within twenty (20) days after receipt of
the Notice, that the Company include any of the Requesting Holder's Registrable
Securities in the proposed Registration Statement, the Company shall, as to
each such Requesting Holder, use its best efforts to effect the registration
under the Act of the Registrable Securities
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which it has been so requested to register ("Piggyback Registration"), at the
Company's sole cost and expense and at no cost or expense to the Requesting
Holders (other than underwriting discounts and commissions applicable to the
sale of such Registrable Securities and the fees and disbursements, if any, of
counsel to the Requesting Holders); provided, however, that the Company shall
in any event be entitled to withdraw such Registration Statement prior to its
effectiveness if such Registration Statement is withdrawn as to all securities
proposed to be registered thereunder.
7.4 Demand Registration.
(a) At any time during the Warrant Exercise
Term, any "Demand Holder" (as such term is defined in Section 7.4(d) below) of
the Registrable Securities shall have the right (which right is in addition to
the piggyback registration rights provided for under Section 7.3 hereof),
exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), on one occasion, at the sole expense of
the Company, a Registration Statement and such other documents, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Demand Holder), in order to comply with the provisions of
the Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof for nine (9) consecutive months. In the
event a Demand Registration Request is made pursuant to this Section 7.4(a) and
the Registration Statement relating thereto is declared effective, no further
Demand Registration Request can be made by any holder of Registrable
Securities.
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(b) The Company covenants and agrees to give
written notice of any Demand Registration Request to all holders of the
Registrable Securities within ten (10) days from the date of the Company's
receipt of any such Demand Registration Request. After receiving notice from
the Company as provided in this Section 7.4(b), holders of Registrable
Securities may request the Company to include their Registrable Securities in
the Registration Statement to be filed pursuant to Section 7.4(a) hereof by
notifying the Company of their decision to have such securities included within
ten (10) days of their receipt of the Company's notice.
(c) In addition to the registration rights
provided for under Section 7.3 hereof and subsection (a) of this Section 7.4,
at any time during the Warrant Exercise Term, any Demand Holder (as defined
below in Section 7.4(d)) of Registrable Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file with the Commission, on one occasion in respect of all holders of
Registrable Securities, a Registration Statement so as to permit a public
offering and sale of such Registrable Securities for nine (9) consecutive
months; provided, however, that all costs incident thereto shall be at the
expense of the holders of the Registrable Securities included in such
Registration Statement. If a Demand Holder shall give notice to the Company at
any time of its or their desire to exercise the registration right granted
pursuant to this Section 7.4(c), then within ten (10) days after the Company's
receipt of such notice, the Company shall give notice to the other holders of
Registrable Securities advising them that the Company is proceeding with such
registration and offering to include therein the Registrable Securities of such
holders, provided they furnish the Company with such appropriate information in
connection therewith as the Company shall reasonably request in writing.
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(d) The term "Demand Holder" as used in this
Section 7.4 shall mean any holder or any combination of holders of Registrable
Securities, if included in such holders' Registrable Securities are that
aggregate number of shares of Common Stock (including Shares already issued and
not disposed of in a public offering and/or Shares issuable pursuant to the
exercise of Warrant No. 1 and Underlying Shares already issued and not disposed
of in a public offering and/or Underlying Shares issuable pursuant to the
exercise of Redeemable Warrants issued and not disposed of in a public offering
or issuable pursuant to exercise of Warrant No. 2 (the "Total Common Shares"))
as would constitute 50% or more of the aggregate number of such Total Common
Shares.
7.5 Covenants of the Company With Respect to
Registration. The Company covenants and agrees as follows:
(a) In connection with any registration
under Section 7.4 hereof, the Company shall file the Registration Statement as
expeditiously as possible, but in no event later than thirty (30) business days
following receipt of any demand therefor (unless delayed by the failure of a
holder of Registrable Securities to promptly furnish such information necessary
to complete such registration statement), shall use its best efforts to have
any such Registration Statement declared effective at the earliest possible
time, and shall furnish each holder of Registrable Securities such number of
prospectuses as shall reasonably be requested; provided, however, if such 30th
business day falls on or after the 45th day following the last day of the
Company's most recently completed fiscal year and prior to the 90th day
following the last day of such fiscal year, unless the then applicable rules
and regulations of the Commission permit the filing of a registration statement
on a form which the Company is then eligible to use in respect of
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the Registrable Securities if the Company has not yet filed audited financial
statements for the most recently completed fiscal year, the Company shall not
be required to file such Registration Statement until the filing of the
Company's audited financial statements in respect of such fiscal year, but in
any event the filing of the Registration Statement shall be made by no later
than the 90th day following the last day of such fiscal year.
(b) The Company shall pay all costs, fees
and expenses in connection with all Registration Statements filed pursuant to
Sections 7.3 and 7.4(a) hereof (excluding any underwriting discounts and
commissions which may be incurred in connection with the sale of any
Registrable Securities and excluding any fees and expenses of counsel for any
Requesting Holder or Demand Holder), including, without limitation, the
Company's legal and accounting fees, printing expenses, and blue sky fees and
expenses. The holders of Registrable Securities included in any Registration
Statement filed pursuant to Section 7.4(c) hereof will pay all costs, fees and
expenses in connection with such Registration Statement, including their own
legal fees and expenses, if any.
(c) The Company will take all reasonably
necessary action which may be required in qualifying or registering the
Registrable Securities included in a Registration Statement for offering and
sale under the securities or blue sky laws of such states as are reasonably
requested by the holders of such securities, provided that the Company shall
not be obligated to execute or file any general consent to service of process
or to qualify as a foreign corporation to do business under the laws of any
such jurisdiction.
(d) The Company shall indemnify any holder
of the Registrable Securities to be sold pursuant to any Registration Statement
and each person, if any, who controls
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such holder within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), against all loss,
claim, damage, expense or liability (including all expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such Registration Statement to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to indemnify
the Underwriter contained in Section 6 of the Underwriting Agreement (which
indemnity will not apply to losses, claims, damages, expenses or liabilities
arising from information provided in writing by or on behalf of the holder to
the Company expressly for inclusion in the Registration Statement) and to
provide for just and equitable contribution as set forth in Section 7 of the
Underwriting Agreement.
(e) Each holder of Registrable Securities to
be sold pursuant to a Registration Statement will furnish to the Company such
information as may be reasonably be requested by the Company for inclusion in
the Registration Statement. Any holder of Registrable Securities to be sold
pursuant to a Registration Statement, and its successors and assigns, shall
severally, and not jointly, indemnify, the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage, expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished in writing by or on behalf of such holder, or its
successors or assigns, for specific inclusion in such Registration Statement to
the same extent and with the same effect as
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the provisions contained in Section 6 of the Underwriting Agreement pursuant to
which the Underwriter has agreed to indemnify the Company and to provide for
just and equitable contribution as set forth in Section 7 of the Underwriting
Agreement.
(f) Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise his Warrants prior to
the initial filing of any Registration Statement or the effectiveness thereof.
(g) If the Company shall fail to materially
comply with the provisions of this Article 7, the Company shall, in addition to
any other equitable or other relief available to the holders of Registrable
Securities, be liable for any or all actual damages (but not punitive or
consequential damages) sustained by the holders of Registrable Securities,
requesting registration of their Registrable Securities.
(h) The Company shall not permit the
inclusion of any securities other than the Registrable Securities to be
included in any Registration Statement filed pursuant to Section 7.4 hereof,
or, unless otherwise required by the terms of a contract existing on the date
of this Agreement, permit any other registration statement to be or remain
effective during the ninety (90) day period commencing on the effectiveness of
a Registration Statement filed pursuant to Section 7.4 hereof (except for a
Form S-4 relating to a merger or acquisition or a Form S-8 or successor form),
without the prior written consent of the Demand Holders, which consent shall
not be unreasonably withheld.
(i) The Company shall deliver promptly to
each holder of Registrable Securities whose securities are included in a
Registration Statement copies of all correspondence between the Commission and
the Company, its counsel or auditors and all
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memoranda relating to discussions with the Commission or its staff with respect
to the Registration Statement and permit each holder of Registrable Securities
and underwriters to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the Registration Statement
as it deems reasonably necessary to comply with applicable securities laws or
rules of the National Association of Securities Dealers, Inc. ("NASD");
provided that each such holder of Registrable Securities agrees not to disclose
such information without the prior consent of the Company. Such investigation
shall include access to books, records and properties and opportunities to
discuss the business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times and as often as any
such holder of Registrable Securities or underwriter shall reasonably request.
(j) If, in connection with a registration
which includes Registrable Securities pursuant to this Article 7, the Company
shall enter into an underwriting agreement with one or more underwriters
selected for such underwriting, such agreement shall contain such
representations, warranties and covenants by the Company and such other terms
as are customarily contained in agreements of that type used by the
underwriters. The holders of Registrable Securities shall be parties to any
underwriting agreement relating to an underwritten sale of their Registrable
Securities and may, at their option, require that any or all the
representations and warranties of the Company to or for the benefit of such
underwriters shall, to the extent that they may be applicable, also be made to
and for the benefit of such holders of Registrable Securities. Such holders of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters except as
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they may relate to such holders of Registrable Securities and their intended
methods of distribution.
8. Adjustments of Exercise Price and Number of Shares.
8.1 Stock Dividend, Split, etc.. In case the
Company shall (i) declare a dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify
its outstanding shares of Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of Common Stock into a
smaller number of shares, the exercise price under Warrant No. 1 in effect at
the time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the
exercise price by a fraction, the denominator of which shall be the number of
shares or Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action.
8.2 Rights or Warrants. In the case the Company
shall fix a record date for the issuance of rights or warrants to all holders
of its Common Stock entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less than the
current market price of the Common Stock (as defined in Section 8.5 below) on
such record date, the exercise price of Warrant No. 1 shall be adjusted so that
it shall thereafter equal the price determined by multiplying (i) the exercise
price in effect immediately prior to the date of such issuance and (ii) a
fraction, the numerator of which shall be the sum of the number of shares of
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Common Stock outstanding on such record date and the number of additional
shares of Common Stock which the aggregate offering price of the total number
of shares of Common Stock so offered for subscription or purchase (or the
aggregate conversion price of the convertible securities so offered) would
purchase at such current market price per share of the Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent
that shares of Common Stock are not delivered (or securities convertible into
Common Stock are not delivered) after the expiration of such rights or warrants
the exercise price shall be readjusted to the exercise price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or securities convertible into Common Stock) actually delivered.
8.3 Evidences of Indebtedness or Assets. In case
the Company shall hereafter distribute to the holders of its Common Stock
evidences of its indebtedness or assets (excluding cash dividends or
distributions of securities of the type referred to in Section 8.1 above) or
subscription rights or warrants (excluding those referred to in Section 8.2
above), then in each such case the exercise price of Warrant No. 1 in effect
thereafter shall be determined by multiplying (i) the exercise price in effect
immediately prior thereto and (ii) a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding multiplied
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by the current market price per share of Common Stock (as defined in Section
8.5 below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the total number
of shares of Common Stock outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effectively immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
8.4 Adjustment of Number of Shares. Whenever the
Exercise Price payable upon exercise of Warrant No. 1 is adjusted pursuant to
Sections 8.1, 8.2 or 8.3 above, the number of Shares purchasable upon exercise
of Warrant No. 1 shall simultaneously be adjusted by multiplying the number of
Shares initially issuable upon exercise of Warrant No. 1 by the exercise price
in effect on the date hereof and dividing the product so obtained by the
exercise price, as adjusted.
8.5 Determination of Current Market Price. For
the purpose of any computation under Sections 8.2 and 8.3 above, the current
market price per share of Common Stock at any date shall be deemed to be the
average of the daily closing prices for twenty (20) consecutive business days
before such date. The closing price for each day shall be the last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in either case
on the principal national securities exchange on which the Common Stock is
admitted to trading or listed, or as reported by National Association of
Securities Dealers, Inc. Automatic Quotation System ("NASDAQ") or other
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19
similar organization if NASDAQ is no longer reporting such information, or if
not so available, the fair market price as determined by the Board of
Directors.
8.6 No Adjustment for De Minimus Adjustment. No
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least ten cents ($0.10) in such price;
provided, however, that any adjustments which by reason of this Section 8.6 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All calculations under
this Article 8 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Article 8 to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the exercise price, in addition to those
required by this Article 8, as it shall determine, in its sole discretion, to
be advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Redeemable Warrants issuable upon exercise of Warrant No. 2).
8.7 Notice. Whenever an exercise price is
adjusted, as herein provided, the Company shall promptly, but no later than 10
days after any request for such an adjustment by the Holder, cause a notice
setting forth the adjusted exercise price and adjusted number of Shares and/or
Warrants issuable upon exercise of the Warrants and, if requested, information
describing the transactions giving rise to such adjustments, to be mailed to
the Holder, at the address set forth herein, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. The Company may retain a
firm of independent certified public accountants selected by the Board of
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20
Directors (who may be the regular accountants employed by the Company) to make
any computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
8.8 Other Securities. In the event that at any
time, as a result of any adjustment made pursuant to this Article 8, the Holder
thereafter shall become entitled to receive any securities of the Company other
than Common Stock and Redeemable Warrants, thereafter the number of such other
securities receivable upon exercise of the Warrants shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock and Redeemable
Warrants contained in Sections 8.1 to 8.6, inclusive above.
9. Exchange and Replacement of Warrant Certificates.
9.1 Exchange. Each Warrant Certificate is
exchangeable without expense, upon the surrender hereof by the registered
Holder at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Shares or Redeemable Warrants, as the case may be,
in such denominations as shall be designated by the Holder thereof at the time
of such surrender.
9.2 Replacement. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of any Warrants, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
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21
10. Elimination of Fractional Interests. The Company
shall not be required to issue certificates representing fractions of shares of
Common Stock or Redeemable Warrants and shall not be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up
to the nearest whole number of shares of Common Stock or Redeemable Warrants,
as the case may be.
11. Reservation and Listing of Securities. The Company
shall at all times reserve and keep available out of its authorized shares of
Common Stock, solely for the purpose of issuance upon the exercise of Warrant
No. 1 and the exercise of the Redeemable Warrants subject to Warrant No. 2,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of Warrant No. 1
and payment of the exercise price therefor, all shares of Common Stock issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any shareholder, and that, upon
exercise of Warrant No. 2 and payment of the exercise price therefor, the
Redeemable Warrants will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms. As long as the
Warrants shall be outstanding, the Company shall use its best efforts to cause
all shares of Common Stock and all Redeemable Warrants issuable upon the
exercise of the Warrants, as well as the Underlying Shares, to be listed on or
quoted by NASDAQ or listed on such national securities exchanges as the
Company's Common Stock is then listed.
12. Notices to Warrant Holders. Nothing contained in
this Agreement shall be construed as conferring upon the Holder or Holders the
right to vote or to consent or to receive notice as a shareholder in respect of
any meetings of shareholders for the election of directors or
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22
any other matter, or as having any rights whatsoever as a shareholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders
of its shares of Common Stock and/or Redeemable Warrants for
the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current
or retained earnings, as indicated by the accounting treatment
of such dividend or distribution on the books of the Company;
or
(b) the Company shall offer to all the holders of
its Common Stock and/or Redeemable Warrants any additional
shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its property,
assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or
entitled to vote on such proposed dissolution, liquidation, winding up or sale.
Such notice shall specify such record date or the date of closing of the
transfer books, as the case may be. Failure to give such notice or any
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23
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to a registered Holder of the
Warrants, to the address of such Holder as shown on the books of the Company;
or
(b) If to the Company, to ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn: President, or to such other
address as the Company may designate by notice to the Holders.
14. Supplements and Amendments. The Company and the
Underwriter may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the
Company and the Underwriter may deem necessary or desirable and which the
Company and the Underwriter deem not to adversely affect the interests of the
Holders of Warrant Certificates.
15. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Holders inure to the
benefit of their respective successors and assigns hereunder.
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24
16. Termination. This Agreement shall terminate at the
close of business on July __, 2005. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date when all Warrants have been
exercised and all the Shares issuable upon exercise of Warrant No. 1 and all
the Redeemable Warrants issuable upon exercise of Warrant No. 2 (or the
Underlying Shares) have been resold to the public; provided, however, that the
provisions of Section 7.5 shall survive such termination until the close of
business on July __, 2008.
17. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State.
18. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company and the Underwriter and any other registered holder or holders of
the Warrant Certificates, Warrants or the underlying securities any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and
any other holder or holders of the Warrant Certificates, Warrants or the
underlying securities.
19. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
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25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
AVIATION GROUP, INC.
By:_____________________________________
Name:
Title:
Attest:
_______________________________
Name:
Title
DUKE & CO., INC.
By:_____________________________________
Name:
Title:
Attest:
_______________________________
Name:
Title
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26
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, JULY __, 2002
No. WW-1 100,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________ or
registered assigns is the registered holder of 100,000 Warrants to purchase, at
any time from July __, 1998 until 5:00 P.M. New York City time on July __, 2002
("Expiration Date"), up to 100,000 shares ("Shares") of fully-paid and
nonassessable preferred stock, par value $.001 per share ("Common Stock"), of
Aviation Group, Inc., a Texas corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $9.4875 per Share upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Warrant Agreement dated as of July __,
1997 between the Company and Duke & Co., Inc. (the "Warrant Agreement").
Payment of the Exercise Price may be made in cash, or by certified or official
bank check in New York Clearing House funds payable to the order of the
Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby
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27
incorporated by reference in and made a part of this instrument and is hereby
referred to in a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the
Warrant Agreement.
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28
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of the date below.
Dated: July __, 1997 AVIATION GROUP, INC.
By:_____________________________________
Name:
Title:
Attest:
___________________________________
Name:
Title
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29
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ Shares and
herewith tenders in payment for such Shares cash or a certified or official
bank check payable in New York Clearing House Funds to the order of
__________________ in the amount of $ _________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such Shares be
registered in the name of ____________________, whose address is
____________________ and that such Certificate be delivered to whose address
is___________________.
Dated: Signature:______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
__________________________________________________________
__________________________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
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30
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________, Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
_______________________________________
(Signature must conform in all respects
to name of holder as specified on
the face of the Warrant Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
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31
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, JULY __, 2002
No. WW-2 100,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________ or registered
assigns is the registered holder of 100,000 Warrants to purchase, at any time
from July __, 1998 until 5:00 P.M. New York City time on _____________, 2002
("Expiration Date"), up to 100,000 Redeemable Common Stock Purchase Warrants
("Redeemable Warrants"), of Aviation Group, Inc., a Texas corporation (the
"Company"), at the exercise price (the "Exercise Price"), of $11.38 per
Redeemable Warrant upon surrender of this Warrant Certificate and payment of
the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Warrant Agreement dated as of July __,
1997 between the Company and Duke & Co., Inc. (the "Warrant Agreement").
Payment of the Exercise Price may be made in cash, or by certified or official
bank check in New York Clearing House funds payable to the order of the
Company, or any combination of cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby
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32
incorporated by reference in and made a part of this instrument and is hereby
referred to in a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax, or other governmental
charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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33
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: July __, 1997 AVIATION GROUP, INC.
By:_____________________________________
Name:
Title:
Attest:
____________________________________
Name:
Title
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34
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _________ Redeemable
Warrants and herewith tenders in payment for such Redeemable Warrants cash or a
certified or official bank check payable in New York Clearing House Funds to
the order of __________________ in the amount of $ __ ______, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such Redeemable Warrants be registered in the name of ____________________,
whose address is ____________________ and that such Certificate be delivered
to whose address is___________________.
Dated: Signature:______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
_______________________________________________________________
______________________________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
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35
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED_____________________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________, Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:_______________________________________
(Signature must conform in all respects
to name of holder as specified on
the face of the Warrant Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
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