THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THEREFORE MAY NOT
BE SOLD OR OTHERWISE ASSIGNED WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE
STATE LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Common Stock of
INMARK ENTERPRISES, INC.
THIS CERTIFIES THAT, for value received,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
the holder or registered assigns (the "Warrantholder") is entitled to purchase
from Inmark Enterprises, Inc., a Delaware corporation (the "Company"), at any
time during the five (5) year period commencing on May 1, 1997 (the
"Commencement Date"), Thirty Thousand (30,000) shares of the Company's Common
Stock, par value $.001 per share (the "Common Shares"), at an exercise price of
$5.00 per share, in lawful money of the United States of America. The number of
Common Shares purchasable hereunder and the exercise price therefor are subject
to adjustment from time to time as hereinafter set forth. This Warrant shall
expire on the Expiration Date.
SECTION 1
DEFINITIONS
-----------
For all purposes of this Warrant, the following terms shall
have the meanings indicated:
"▇▇▇▇▇▇▇ Warrant Shares" shall mean the Common Shares issuable
by the Company upon exercise of that certain Warrant to Purchase Common Stock of
the Company, dated as of May 1, 1997, granted by the Company to ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇ Warrant Shares").
"Commencement Date" shall be May 1, 1997.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act of
1933, as amended.
"Common Shares" shall mean shares of the Common Stock, par
value $.001 per share, of the Company.
"Company" shall mean Inmark Enterprises, Inc., a Delaware
corporation.
1
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall mean the exercise price of $5.00 per
share or such exercise price as adjusted from time to time pursuant to the
provisions hereof.
"Expiration Date" shall mean April 30, 2002.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 4 shall include any disposition
of any Warrants, or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
"Warrant Shares" shall mean the aggregate number of Common
Shares issuable by the Company upon the exercise of this Warrant.
"Warrantholder" shall mean the owners of the Warrant issued
hereby.
All terms used in this Warrant which are not defined in this
Section 1 shall have the meanings respectively set forth therefor elsewhere in
this Warrant.
SECTION 2
EXERCISE OF WARRANT
-------------------
A. Method of Exercise. To exercise this Warrant in whole or in
part, the registered holder hereof shall complete the Subscription Form attached
hereto (specifying the number of Common Shares as to which this Warrant is being
exercised) and deliver to the Company at its principal executive office, or to
the stock transfer agent of the Company at its principal executive office, the
Subscription Form, this Warrant and payment in an amount equal to the then
aggregate Exercise Price of the Common Shares being purchased. Payment of the
aggregate Exercise Price shall be made in cash (by certified check or official
bank check) payable to the order of the Company. In the alternative, the holder
may exercise its right to receive Warrant Shares on a net basis, such that
without the exchange of any funds, the holder receives that number of Common
Shares otherwise issuable upon the exercise of this Warrant less that number of
Warrant Shares having a fair market value equal to the aggregate Exercise Price
that would otherwise have been paid by the holder of the Warrant Shares. For
purposes of the preceding sentence, (i) "fair market value" of the Warrant
Shares shall be the Market Price of the Warrant Shares on the date immediately
preceding the date of payment of the Exercise Price and (ii) "Market Price" at
any date shall be deemed to be the last reported sale price of the Common Shares
(if such Market Price is being calculated for
2
the Common Shares) or if no such reported sale takes place on such day, the
average of the last reported sale prices for the last three (3) trading days, in
either case as officially reported by the principal securities exchange on which
the Common Shares are listed or admitted to trading or by NASDAQ, or if the
Common Shares are not listed or admitted to trading on any such securities
exchange or quoted by NASDAQ, the average closing bid price as furnished by the
National Quotation Bureau or a similar organization if NASDAQ is no longer
reporting such information, or if such information is no longer being provided
with respect to the Common Shares, then as determined in good faith by written
resolution of the Board of Directors of the Company, based on the best
information available to it.
B. Delivery of Certificates. Upon receipt of the items
specified in subsection A of this Section 2, the Company shall, as promptly as
practicable, and in any event, within ten (10) business days thereafter, execute
or cause to be executed and deliver to the Warrantholder, a certificate or
certificates representing the aggregate number of Common Shares specified in
said Subscription Form. Each certificate so delivered shall be in such
denomination as reasonably may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or in the name of such other
Warrantholder as shall be designated by the Warrantholder. If the Warrantholder
elects to transfer the Warrants to such other Warrantholder, the Warrantholder
will provide such evidence (including an opinion from counsel reasonably
acceptable to the Company) as is necessary to establish that the issuance of
Warrant Shares to such other Warrantholder may be made without registration
under the Securities Act (unless an appropriate registration statement covering
the Warrant Shares has been ordered effective by the Commission and remains in
effect). If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said certificate or certificates, deliver to
the Warrantholder a new Warrant evidencing the right of the Warrantholder to
purchase the remaining Common Shares covered by this Warrant. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of certificates pursuant to this Section 2,
including certificates to be issued to such Warrantholders as shall be the
initial Warrantholders. Thereafter, in the event that certificates shall be
registered in the name of a person other than the initial Warrantholder, funds
sufficient to pay all transfer taxes which shall be payable upon the execution
and delivery of such certificate or certificates shall be paid by the
Warrantholder to the Company at the time of delivering this Warrant to the
Company as mentioned above.
C. Transfer Restriction Legend. Each certificate for the
Warrant Shares (unless at the time of exercise the Warrant Shares have been sold
pursuant to a registration statement under the Securities Act) shall bear the
following legend on the face thereof:
"The transfer of the securities represented hereby is subject
to the restrictions set forth in Section 4 of Warrant No. , dated as of
, and delivered to the original holder hereof, a copy of which is
available for inspection at the office of the Company, and no transfer
of such securities shall be valid or effective unless and until the
terms and conditions of said Section 4 of said Warrant shall have
3
been complied with. The shares represented hereby have not been
registered under the Securities Act of 1933, as amended, and may be
offered or sold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available."
D. Acknowledgement of Continuing Obligation. Upon the request
of the Warrantholder at the time of the exercise of this Warrant, in whole or in
part, the Company will acknowledge in writing its continuing obligation to such
Warrantholder in respect of the rights to which such Warrantholder shall
continue to be entitled after such exercise in accordance with this Warrant,
provided, however, that the failure of such Warrantholder to make any such
request shall not affect the continuing obligation of the Company to the
Warrantholder in respect of such rights.
E. Character of Warrant Shares. All Common Shares issuable
upon the exercise of this Warrant, when paid for in accordance with this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares of the Company.
SECTION 3
OWNERSHIP OF THIS WARRANT
-------------------------
A. Persons Deemed Owners. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
B. Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the Company at
its office or to the stock transfer agent of the Company at its office, for new
Warrants of like tenor representing in the aggregate the right to purchase such
number of Common Shares as shall be equal to the number of Common Shares set
forth on the face of this Warrant. Subject to Section 4 hereof, this Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the Warrantholder in person or by duly authorized attorney, and a new
Warrant shall be made and delivered by the Company, of the same tenor as this
Warrant but registered in the name of the transferee, upon surrender of this
Warrant duly endorsed to the Company at its office or to the stock transfer
agent of the Company at its office on or after such date. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly cancelled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes) and other charges payable in
4
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 3.
SECTION 4
RESTRICTIONS ON EXERCISE AND TRANSFER
-------------------------------------
A. General. Notwithstanding any provisions contained in this
Warrant to the contrary, this Warrant shall not be exercisable or transferable
except upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of such Warrant or
transfer of such Warrant Shares. The Warrantholder agrees that it will not (i)
transfer this Warrant prior to delivery to the Company of an opinion of counsel
as described in subsection B of this Section 4, (ii) exercise this Warrant prior
to delivery to the Company of an opinion of counsel as described in subsection B
of this Section 4, or (iii) transfer Warrant Shares prior to delivery to the
Company of an opinion of counsel as described in subsection B of this Section 4,
or until registration of such Warrant Shares under the Securities Act has become
effective provided that such registration statement remains effective at the
time of such transfer.
B. Notice of Intention to Exercise or Transfer: Opinion of
Counsel. The Warrantholder agrees that prior to any exercise or transfer of this
Warrant, the Warrantholder will give written notice to the Company of its
intention to effect such exercise or such transfer. The following provisions
shall then apply:
1. If there shall have been delivered to the Company
an opinion of counsel selected by the Warrantholder as shall be approved by the
Company (which approval shall not be unreasonably withheld), to the effect (and
in form and substance acceptable to the Company) that the proposed exercise or
transfer of this Warrant or the proposed transfer of the Warrant Shares in
accordance with the intended method of disposition specified in the notice to
the Company may be effected without registration under the Securities Act and
applicable state securities laws, then the Warrantholder of this Warrant shall
be entitled to exercise or transfer this Warrant or transfer such Warrant
Shares, as the case may be, in accordance with the intended method of
disposition specified in the notice delivered by such holder to the Company
without registration in reliance on an exemption from the registration
provisions of federal and state securities laws.
2. If an opinion of such Warrantholder's counsel to
the effect described in Clause (1) of this subsection B shall not have been
delivered to the Company, the Warrantholder shall not be entitled to transfer
this Warrant, and shall not be entitled to exercise this Warrant or to transfer
such Warrant Shares, as the case may be, until registration under the Securities
Act of such Warrant Shares, as the case may be, is effective.
5
C. Registration Rights. The Warrantholder shall have the
following piggyback registration rights, excluding registration statements filed
under Commission Forms S-4 and S-8 and any successor forms thereto:
1. If the Company shall intend to file a registration
statement, then the Warrantholder and any successor Warrantholders and the
initial Holder and the first and second transferee of the Warrant Shares (it
being acknowledged that no transferee of the Warrant Shares following the second
transfer shall be entitled to the rights provided under this Section 4C(1), and
that an affiliate of the initial Holder shall not be deemed a transferee for
this purpose) shall have the right to piggyback the Warrant Shares in the
registration statement, provided that after the Company delivers written notice
by registered mail of its intention to file a registration statement under the
Securities Act, the holders must respond affirmatively within thirty (30)
business days after delivery of such notice. In connection with this piggyback
registration right, the Company shall bear all expenses attendant to registering
such securities (other than the cost of counsel to selling stockholders and
underwriting discounts and commissions, except as prohibited by Blue Sky laws).
2. If, in the sole judgment of the managing
underwriter of any public offering by the Company, the amount of securities to
be registered pursuant to the aforementioned piggyback rights of Section 4C(1)
hereof shall be determined to be, in the aggregate, an amount which would
adversely affect the success of the Company's registration of its securities for
its own account, then, as to the amount of Common Shares to be registered on
behalf of persons other than the Company and the Warrant Shares to be included
in the registration statement, such persons shall agree to delay the offer and
sale of such Warrant Shares for a period of forty-five (45) days from the date
of completion of the underwritten distribution of the securities being
registered for the account of the Company; provided, that no other security
holder may sell securities owned by it in such underwritten offering. 3. If
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), as the Warrantholder, has not previously had the
opportunity to exercise piggyback registration rights with respect to the
Warrant Shares, then ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), jointly but not
individually, shall have the right, exercisable by written notice to the Company
executed by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, to have the Company prepare and file with the
Commission, on one occasion, a registration statement and such other documents,
including a prospectus, covering all, but not less than all, of the Warrant
Shares and the ▇▇▇▇▇▇▇ Warrant Shares, as may be necessary in the opinion of
counsel for the Company, in order to comply with the provisions of the
Securities Act, so as to permit a public offering and sale of the Warrant Shares
and the ▇▇▇▇▇▇▇ Warrant Shares by ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ for the period set forth
in Section 4D(1) hereof. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, on the one hand, and the Company,
on the other hand, shall each bear fifty percent (50%) of the expenses attendant
to registering such securities (provided, however, that each party shall bear
the cost of its own counsel and that ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall jointly and
severally bear the cost of any underwriting discounts and commissions).
6
D. Company's Obligations in Registration. If and whenever the
Company is required by the provisions of this Section 4 to effect the
registration of the Warrant Shares under the Securities Act, the Company will:
1. Prepare and file with the Commission a
registration statement with respect to all outstanding Warrant Shares and cause
such registration statement to become effective and file such amendments
necessary to maintain the effectiveness of the registration statement for a
period of not less than one (1) year, except that the Company shall not be
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto after the period of distribution of the
registered securities has been completed;
2. Furnish to the holders for whom such Warrant
Shares are registered or are to be registered such numbers of copies of the
preliminary prospectus included in such registration statement and the
prospectus included in such registration statement at the time it is ordered
effective by the Commission as such holders may reasonably request in order to
facilitate the disposition of the registered securities;
3. Use reasonable efforts to register or qualify the
Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Warrantholders for whom
the Warrant Shares are registered or are to be registered shall reasonably
request, provided, however, that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not be
required to do so but for this Clause 3; (ii) subject itself to taxation in such
jurisdiction; (iii) consent to general service of process; (iv) register in any
state requiring, as a condition to registration, the escrow or surrender of any
Company securities held by any security holder; and (v) incur expenses exceeding
$10,000 in the aggregate, in connection with such registration or qualification;
and
4. Notify each holder for whom such Warrant Shares
are registered or are to be registered covered by such registration statements,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, 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 not
misleading in the light of the circumstances then existing, and at the request
of any such holder, prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in the light of the circumstances then
existing, provided that no such supplement or amendment need be filed after
distribution of the registered securities has been completed.
7
E. Information From Warrantholders. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section 4 shall
contain such information regarding the Warrant and the Warrant Shares and the
intended method of disposition of the Warrant Shares and such other information
regarding the Warrantholders as shall reasonably be required by counsel to the
Company in order to appropriately disclose matters pertaining to the
Warrantholders in the registration statement.
F. Company's Indemnification. In the event of any registration
under the Securities Act of any Warrant Shares pursuant to this Section 4, the
Company hereby agrees to indemnify and hold harmless each Warrantholder
disposing of such Warrant Shares and each other person, if any, who controls
such Warrantholder within the meaning of the Securities Act and each other
person (including underwriters) who participates in the offering of such
underlying securities, against any losses, claims, damages or liabilities, joint
or several, to which such Warrantholder or controlling person or participating
person may become subject under the Securities Act or otherwise, in so far as
such losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which such Warrant Shares were registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Warrantholder and each such controlling person or
participating person for any legal or any other expenses reasonably incurred by
such Warrantholder or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Warrantholder or such
controlling or participating person, as the case may be, specifically for use in
the preparation thereof.
G. Warrantholder's Indemnification. It shall be a condition of
the Company's obligation under this Section 4 to effect any registration under
the Securities Act that there shall have been delivered to the Company an
agreement or agreements duly executed by each Warrantholder for whom Warrant
Shares are to be registered, whereby such Warrantholder agrees to indemnify and
hold harmless the Company, each other person referred to in subparts (1), (2),
(3) and (5) of Section 11(a) of the Securities Act in respect of such
registration statement and each other person, if any, which controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Securities Act or otherwise, but only to the extent that such losses, claims,
damages or liabilities (or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
8
any material fact contained, on the effective date thereof, in any registration
statement under which such Warrant Shares were registered under the Securities
Act, in any preliminary prospectus or final prospectus contained therein or in
any amendment or supplement thereto or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
which, in each such statement, said preliminary or final prospectus or said
amendment or supplement in reliance upon, and in conformity with, written
information furnished to the Company by such Warrantholder specifically for use
in the preparation thereof.
H. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Warrant Shares to the public without registration, the Company
agrees to:
(1) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ten (10) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the public;
(2) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
reasonably necessary to enable the Warrantholders to utilize Form S-2, if
available, or Form S-3 for the sale of the Warrant Shares, such action to be
taken immediately after the first registration statement filed by the Company
for the offering of its securities to the general public is declared effective;
(3) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(4) Furnish to the Warrantholders forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Warrantholder shall be required
to have to avail itself of any rule or regulation of the Commission allowing,
the Warrantholder to sell any such securities without registration.
SECTION 5
ANTI-DILUTION PROVISIONS
------------------------
A. Adjustment of Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares
9
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment.
B. Exercisable Price Adjustment Formulas. If and whenever
after the date of this Warrant, the Company shall issue or sell any Common
Shares (except as provided in Subsection H of this Section 5) for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of issue or sale, then forthwith the Exercise Price shall be reduced
to the prices (calculated to the nearest tenth of a cent) determined by dividing
(1) an amount equal to the sum of (aa) the number of Common Shares outstanding
immediately prior to such issue or sale (assuming the conversion of all
securities convertible into Common Shares) multiplied by the Exercise Price in
effect immediately prior to such issue or sale, and (bb) the consideration, if
any, received and deemed received by the Company upon such issue or sale, by (2)
the total number of Common Shares outstanding and deemed outstanding immediately
after such issue or sale. No adjustment of the Exercise Price, however, shall be
made in an amount less that $.01 per share, but any such lesser adjustment shall
be carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $.01 per share or more.
C. Constructive Issuances of Stock, Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of subsection B of this
Section 5, the following provisions (1) to (8), inclusive, shall also be
applicable:
(1) In case at any time subsequent to the date
hereof, the Company shall in any manner grant any rights to
subscribe for or to purchase, or any options for the purchase
of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such convertible or
exchangeable stock or securities being hereinafter called
"Convertible Securities") whether or not such rights or
options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
consideration per share for which Common Shares are issued or
sold upon the exercise of such Convertible Securities
(determined by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case
of any such rights or option, which relate to such Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities (and, if such convertible securities
constitute obligations of the Company, the principal amount of
such obligations so converted) and upon the conversion or
exchange thereof, by (b) the total maximum number of Common
Shares issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect
10
immediately prior to the time of the granting of such rights
or options, then the total maximum number of Common Shares
issuable upon the exercise of such rights or options (or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such
rights or options) shall be deemed to be outstanding and to
have been issued for such price per share. Except as provided
in Clause (3) below, no further adjustments of the Exercise
Price shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon exercise of such
rights or options or upon the actual issue of such Common
Shares upon conversion or exchange of such Convertible
Securities.
(2) In case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which
Common Shares are issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (b)
the total maximum number of shares which would be issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of Common Shares issuable upon conversion
or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been issued for such
price per share; except as otherwise specified in Clause (3)
below, no further adjustments of the Exercise Price shall be
made upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities.
(3) If the purchase price provided for in any right
or option referred to in Clause (1) of this subsection 5, or
the additional consideration, if any, payable upon the
conversion or exchange of any convertible securities referred
to in Clause (i) or (ii) of this Section 5, or the rate at
which any Convertible Securities referred to in Clauses (1)
and (2) of this subsection C of this Section 5 are convertible
into or exchangeable for Common Shares, shall change or a
different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in
effect at the time of such event shall forthwith be increased
or decreased to such Exercise Price as would have obtained had
the rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional compensation or rate of commission or exchange, as
the case may be, at the time initially granted, issued or
sold. On the expiration of any
11
such option or right or the termination of any such right to
convert or exchange such Convertible Securities, the Exercise
Price then in effect hereunder shall forthwith be increased to
such Exercise Price as would have obtained at the time of such
expiration or termination had such option, right or
convertible securities never been issued. If the purchase
price provided for in any right or option referred to in
Clause (1) of subsection C of this Section 5, or the
additional consideration payable upon the exchange or
conversion of any Convertible Securities referred to in Clause
(1) and (2) of this Section 5, or the rate at which any
Convertible Securities referred to in Clauses (1) and (2) of
subsection C of this Section 5 are convertible into or
exchangeable for Common Shares, shall decrease at any time
under or by reason of provisions with respect thereto designed
to protect against dilution, then in the case of the delivery
of Common Shares upon the exercise of any such right or option
or upon conversion or exchange of any such right or option or
upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall
forthwith be decreased to such Exercise Price as would have
obtained had the adjustments made upon issuance of such right
or option or Convertible Securities been made upon the basis
of the issuance of (and the total consideration computed in
accordance with Clause (1) or (2) of this subsection C of
Section 5, as the case may be, received for) the Common Shares
delivered as aforesaid.
(4) In case of the issuance of Common Shares or
Convertible Securities of the Company as a dividend or
distribution upon any Common Shares of the Company, such
Common Shares or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) In case at any time any Common Shares or
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company
therefor, without deduction therefrom of any expenses incurred
or any underwriting or selling commissions or concessions paid
by the Company in connection therewith and plus any
underwriting or selling discounts allowed by the Company in
connection therewith. In case any Common Shares or Convertible
Securities or any rights or options to purchase any such
Common Shares or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any
underwriting or selling commissions or concessions paid by the
Company in connection therewith and plus any underwriting or
selling discounts allowed by the Company in connection
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therewith. In case any Common Shares or Convertible Securities
shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value, as determined
by the Board of Directors of the Company, of such portion of
the assets of such merged corporation as such Board shall
determine to be attributable to such Common Shares,
Convertible Securities, rights or options, as the case may be.
(6) In case at any time the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (b)
to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(7) The number of Common Shares outstanding at any
given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares
shall not be considered an issue or sale of Common Shares for
the purposes of subsection B of this Section 5.
D. Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the Common Shares payable otherwise than
out of earnings or earned surplus (other than in a partial or total liquidation
or dissolution of the Company) and otherwise than in Common Shares or
Convertible Securities, the per share Exercise Price in effect immediately prior
to the declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per Common Share or,
in the case of any other dividend, to the fair value thereof per Common Share as
determined by the Board of Directors of the Company. For the purposes of the
foregoing a dividend other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or if a record is not taken, the date as of which the holders of
record of Common Shares entitled to such dividends are to be determined. As used
in this subsection D, the term "dividend" shall mean any distribution to the
holders of Common Shares. Except as provided in this subsection D, no adjustment
in the Exercise Price and no change in the number of Warrant Shares so
purchasable shall be made pursuant to this Section 5 as a result of or by reason
of any such dividend.
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E. Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding Common Shares into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Common Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced. Except
as provided in this subsection E, no adjustment in the Exercise Price and no
exchange in the number of Warrant Shares so purchasable shall be made pursuant
to this Section 5 as a result of or by reason of any such subdivision or
combination.
F. Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Shares shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby each holder of Warrants shall thereafter have the right to
receive upon the basis and upon their terms and conditions specified herein and
in lieu of the shares of the Common Shares of the Company immediately
theretofore receivable upon the exercise of such Warrants, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Common Shares equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares issuable upon exercise and for the registration of
the Warrants and the underlying Common Shares as provided in Section 4) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
Warrants. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each Warrantholder, the
obligation to deliver to such Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions such Warrantholder may be
entitled to receive, and containing the express assumption of such successor
corporation of the performance and observance of the provisions of this Warrant
to be performed and observed by the Company and of all liabilities and
obligation of the Company hereunder.
G. Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and in
each such case, the
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Company will promptly obtain a certificate of a firm of independent certified
public accountants of recognized standing selected by the Company's Board of
Directors, who may be the regular auditors of the Company, stating, the adjusted
Exercise Price and the new number of Warrant Shares so issuable, or specifying
the other shares of stock, securities or assets and the amount thereof
receivable as a result of such change in rights, and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based. The Company will promptly mail a copy of such accountant's certificate to
the Warrantholders, which certificate shall be conclusive evidence of the
correctness of the computation with respect to any such adjustment of the
Exercise Price and any such change in the number of such Warrant Shares so
issuable.
H. No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under an
employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant.
SECTION 6
SPECIAL AGREEMENT OF THE COMPANY
--------------------------------
A. Reservation of Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, a number of authorized
but unissued Common Shares deliverable upon the exercise of the Warrants
sufficient to enable it any time to fulfill all its obligation hereunder.
B. Avoidance of Certain Actions. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all of the provisions of this Warrant and in taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
this Warrant against dilution or other impairment.
C. Restriction on Issuance of Stock. With the exception of a
corporate merger or acquisition which has been approved by the Company's
shareholders in accordance with the law of the State of Delaware, the Company
will not issue any capital stock of any class which has rights to be preferred
as to dividends or as to the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding-up unless such rights shall be
limited to a fixed sum or percentage or par value in respect of participation in
dividends and in the distribution of such assets.
D. Listing on Securities Exchanges; Registration. If, and so
long as the Company's Common Shares are listed on any national securities
exchange, as defined in the
15
Exchange Act, it will, at its expense, obtain and maintain the approval for
listing upon official notice of issuance of all Warrant Shares at the time
outstanding and maintain the listing of such shares after their issuance so long
as listing for such Common Shares is otherwise maintained; and the Company will
so list on such national securities exchange, will register under the Exchange
Act (or any similar statute then in effect) and will maintain such listing of,
any other securities that at any time are issuable upon exercise of the Warrants
if and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company for so long as such securities shall
be listed on such national securities exchange by the Company.
E. Notices of Certain Events. The Company agrees to give
notice to the Warrantholders within ten (10) days after the Company shall have
filed with the Commission or with any national securities exchange, as defined
in the Exchange Act, an application to register any securities of the Company
pursuant to Section 12 of the Exchange Act, or any comparable federal statute.
SECTION 7
NOTIFICATIONS BY THE COMPANY
----------------------------
In case at any time:
(1) the Company shall declare any dividend payable in Common
Shares or any distribution (other than cash dividends which are not in a greater
amount per share than most recent cash dividend) to the holders of the Common
Shares;
(2) the Company shall make an offer for subscription pro rata
to the holders of its Common Shares of any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give notice to the
Warrantholder of this Warrant of the date on which (a) the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Shares of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up as the case may be. Such written notice shall be
given not less
16
than 10 days and not more than 90 days prior to the record date or the date on
which the Company's transfer books are closed in respect thereto and such notice
may state that the record date is subject to the effectiveness of a registration
statement under the Securities Act, or to a favorable vote of stockholders, if
either is required.
SECTION 8
NOTICES
-------
Any notice or other document required or permitted to be given
or delivered to Warrantholders shall be delivered at, or sent by certified or
registered mail to each Warrantholder at such address as shall have been
furnished to the Company in writing by such Warrantholder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the principal office
of the Company at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such
other address as shall have been furnished to the Warrantholders by the Company.
SECTION 9
NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY
-------------------------------------------------
This Warrant shall not entitle any holder hereof to any of the
rights of a stockholder of the Company including without limitation, the right
to vote and receive dividends or other distributions. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase Common
Shares, and no mere enumeration herein of the rights of privileges of the holder
hereof, shall give rise to any liability of such for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 10
LAW GOVERNING
-------------
This Warrant shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
SECTION 11
MISCELLANEOUS
-------------
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal and to be dated
as of May 1, 1997.
INMARK ENTERPRISES, INC.
By:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
(Corporate Seal)
WARRANTHOLDER:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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