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EXHIBIT 4.2
THE GNI GROUP, INC.
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COMMON STOCK PURCHASE WARRANT
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Expiring December 31, 2006
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TABLE OF CONTENTS
1. Exercise of Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. When Exercise Deemed Effected . . . . . . . . . . . . . . . . . . . 2
1.3. Delivery of Stock Certificates, etc. . . . . . . . . . . . . . . . . 2
1.4. Company to Reaffirm Obligations . . . . . . . . . . . . . . . . . . 3
1.5. Payment by Application of the Notes . . . . . . . . . . . . . . . . 3
2. Adjustment of Common Stock Issuable Upon Exercise. . . . . . . . . . . . 4
2.1. Number of Shares; Warrant Price. . . . . . . . . . . . . . . . . . . 4
2.2. Adjustment of Warrant Price . . . . . . . . . . . . . . . . . . . . 4
2.2.1. Issuance of Additional Shares of Common Stock . . . . . . . . . 4
2.2.2. Extraordinary Dividends and Distributions . . . . . . . . . . . 5
2.3. Treatment of Options and Convertible Securities . . . . . . . . . . 6
2.4. Treatment of Stock Dividends, Stock Splits, etc. . . . . . . . . . . 9
2.5. Computation of Consideration . . . . . . . . . . . . . . . . . . . . 9
2.6. Adjustments for Combinations, etc. . . . . . . . . . . . . . . . . . 11
2.7. Minimum Adjustment of Warrant Price . . . . . . . . . . . . . . . . 11
3. Consolidation, Merger, Sale of Assets,
Reorganization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . 13
4. Other Dilutive Events . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Accountants' Report as to Adjustments . . . . . . . . . . . . . . . . . . 15
7. Notices of Corporate Action . . . . . . . . . . . . . . . . . . . . . . . 15
8. Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2. Notice of Proposed Transfer; Opinions of Counsel . . . . . . . . . . 17
8.3. Termination of Restrictions . . . . . . . . . . . . . . . . . . . . 18
9. Registration under Securities Act, etc. . . . . . . . . . . . . . . . . . 19
9.1. Incidental Registration . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. Underwritten Offerings . . . . . . . . . . . . . . . . . . . . . . . 25
9.4. Preparation; Reasonable Investigation . . . . . . . . . . . . . . . 26
9.5. Certain Rights of Holders . . . . . . . . . . . . . . . . . . . . . 27
9.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7. Covenants Relating to Rule 144 . . . . . . . . . . . . . . . . . . . 30
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10. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . 30
11. Reservation of Stock, etc. . . . . . . . . . . . . . . . . . . . . . . . 31
12. Listing on Securities Exchange . . . . . . . . . . . . . . . . . . . . . 31
13. Ownership, Transfer and Substitution of Warrants . . . . . . . . . . . . 31
13.1. Ownership of Warrants . . . . . . . . . . . . . . . . . . . . . . . 31
13.2. Transfer and Exchange of Warrants . . . . . . . . . . . . . . . . . 31
13.3. Replacement of Warrants . . . . . . . . . . . . . . . . . . . . . . 32
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
16. No Rights or Liabilities as Stockholder . . . . . . . . . . . . . . . . . 38
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
19. Expiration; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Form of Subscription
Form of Notice
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Form of
Common Stock Purchase Warrant
Expiring December 31, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
____________, 19__
No. W-
THE GNI GROUP, INC., a Delaware corporation (the "Company"), for
value received, hereby certifies that ________________________ or registered
assigns, is entitled to purchase from the Company ______ duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") at the purchase price per
share of $.01, at any time or from time to time on or after the Initial Date
and prior to 3 P.M., New York City time, on December 31, 2006 (or such later
date as may be determined pursuant to section 20), all subject to the terms,
conditions and adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include all Warrants issued in substitution therefor)
originally issued in connection with the issue and sale by the Company of
$20,000,000 aggregate principal amount of its 12.00% Senior Subordinated Notes
due December 31, 2003 (together with all notes issued in substitution therefor,
the "Notes"), pursuant to the Note and Warrant Purchase Agreements
(collectively, the "Purchase Agreement"), each dated as of December 31, 1996,
between the Company and the institutional investors named therein. The
Warrants originally so issued evidence rights to purchase an aggregate of
428,400 shares of Common Stock, subject to adjustment as provided herein.
Certain capitalized terms used in this Warrant are defined in section 14.
1. Exercise of Warrant. 1.1. Manner of Exercise. This
Warrant may be exercised by the holder hereof, in whole or in part, during
normal business hours on any Business Day by surrender of this Warrant, with
the form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office (or, if such exercise shall be in connection
with an underwritten Public Offering of shares of Common Stock (or Other
Securities)
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subject to this Warrant, at the location at which the Company shall have agreed
to deliver the shares of Common Stock (or Other Securities) subject to such
offering), accompanied by payment, in cash or by certified or official bank
check payable to the order of the Company or by the application of Notes in the
manner provided in section 1.5 (or by any combination of such methods), in the
amount obtained by multiplying (a) the number of shares of Common Stock
(without giving effect to any adjustment therein) designated in such form of
subscription by (b) $.01 and such holder shall thereupon be entitled to receive
the number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) determined as provided in sections
2 through 4.
1.2. When Exercise Deemed Effected. Each exercise of this
Warrant shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in section 1.1, and at such time the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in section 1.3 shall be deemed to have become the holder or holders of
record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as
practicable after the exercise of this Warrant, in whole or in part, and in any
event within ten Business Days thereafter (unless such exercise shall be in
connection with an underwritten Public Offering of shares of Common Stock (or
Other Securities) subject to this Warrant, in which event concurrently with
such exercise), the Company at its expense (including the payment by it of any
taxes applicable to the issuance of stock, other than transfer taxes) will
cause to be issued in the name of and delivered to the holder hereof or,
subject to section 8, as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market
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Price per share of such Common Stock (or Other Securities) on the
Business Day next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in section
1.1.
1.4. Company to Reaffirm Obligations. The Company will, at
the time of any exercise of this Warrant, upon the written request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued
upon such exercise, acknowledge in writing its continuing obligation to afford
to such holder all rights (including, without limitation, any right of
registration of any shares of Common Stock (or Other Securities) issuable upon
exercise of this Warrant pursuant to section 9) to which such holder shall
continue to be entitled after such exercise in accordance with the terms of
this Warrant, provided that if any such holder shall fail to make any such
request, the failure shall not affect the continuing obligation of the Company
to afford such rights to such holder.
1.5. Payment by Application of the Notes. Upon any exercise
of this Warrant, the holder hereof may, at its option, instruct the Company, by
so specifying in the form of subscription submitted therewith as provided in
section 1.1, to apply to the payment required by section 1.1 all or any part of
the principal amount then unpaid and of the interest on such principal amount
then accrued on any one or more Notes at the time held by such holder, in which
case the Company will accept the aggregate amount of principal and accrued
interest on such principal specified in such form of subscription in
satisfaction of a like amount of such payment. Within five days after receipt
of any such notice, the Company will pay to the holder of the Notes submitting
such form of subscription, in the manner provided in such Notes and the
Purchase Agreement, all unpaid interest accrued to the date of exercise of such
Warrant on any amount of principal so specified in such form of subscription
that is not applied to the payment required by section 1.1 under this section
1.5. In the event that the
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entire unpaid principal amount of any Note is applied to the payment required
by section 1.1 under this section 1.5, such Note shall be promptly surrendered
and canceled in accordance with the provisions of section 15 of the Purchase
Agreement.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1.
Number of Shares; Warrant Price. The number of shares of Common Stock which
the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this section 2) be issuable
upon such exercise, as designated by the holder hereof pursuant to section 1.1,
by a fraction of which (i) the numerator is $.01 and (ii) the denominator is
the Warrant Price in effect on the date of such exercise. The "Warrant Price"
shall initially be $.01 per share, shall be adjusted and readjusted from time
to time as provided in this section 2 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this section 2. This section will not be construed to reduce the purchase
price for the shares of Common Stock upon exercise hereof to an amount less
than $.01.
2.2. Adjustment of Warrant Price. 2.2.1. Issuance of
Additional Shares of Common Stock. In case the Company, at any time or from
time to time after December 31, 1996 (the "Initial Date"), shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to section 2.3 or 2.4) without consideration or
for a consideration per share less than the Base Price in effect, in each case,
on the date of and immediately prior to such issue or sale, then, and in each
such case, subject to section 2.8, such Warrant Price shall be reduced,
concurrently with such issue or sale, to a price (calculated to the nearest
.001 of a cent) determined by multiplying such Warrant Price by a fraction,
(a) the numerator of which shall be (i) the number of shares
of Common Stock outstanding immediately prior to such issue or sale
plus (ii) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
the Base Price, and
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(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1, (x) immediately after
any Additional Shares of Common Stock are deemed to have been issued pursuant
to section 2.3 or 2.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed to be outstanding.
2.2.2. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the Initial Date shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities
or property or Options by way of dividend or spin-off, reclassification or
recapitalization) on any Common Stock, other than (a) a dividend payable in
Additional Shares of Common Stock (which are covered in section 2.2.1) or in
Options for Common Stock (which are covered in section 2.3) or (b) a regular,
periodic dividend payable in cash and declared out of the earned surplus of the
Company as at the date hereof as increased by any credits (other than credits
resulting from a revaluation of property) and decreased by any debits made
thereto after such date, then, and in each such case, subject to section 2.8,
the Warrant Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of any class of securities
entitled to receive such dividend or distribution shall be reduced, effective
as of the close of business on such record date, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction,
(i) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of ex-dividend
trading, less the value of such dividend or distribution (as
determined in good faith by the Board of Directors of the Company)
applicable to one share of Common Stock, and
(ii) the denominator of which shall be such Current Market
Price.
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2.3. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the Initial Date shall
issue, sell, grant or assume, or shall fix a record date for the determination
of holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be issued for
purposes of section 2.2.1 as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the
close of business on such record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of ex-dividend trading),
provided that such Additional Shares of Common Stock shall not be deemed to
have been issued for purposes of determining whether an adjustment is to be
made pursuant to section 2.2.1 unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the Base Price in
effect, in each case, on the date of and immediately prior to such issue, sale,
grant or assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which Additional Shares of Common
Stock are deemed to be issued,
(a) no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Additional Shares of Common Stock
or Convertible Securities upon the exercise of such Options or the
conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior
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to the commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed
to reflect such increase or decrease insofar as it affects such
Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration of any such Options or of the rights
of conversion or exchange under any such Convertible Securities which
shall not have been exercised (or upon purchase by the Company and
cancellation or retirement of any such Options which shall not have
been exercised or of any such Convertible Securities the rights of
conversion or exchange under which shall not have been exercised), the
Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation or retirement, as
the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or of
Convertible Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was (x) an
amount equal to (A) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus (B) the consideration
actually received by the Company upon such exercise, minus (C)
the consideration paid by the Company for any purchase of such
Options which were not exercised, or (y) an amount equal to
(A) the consideration actually received by the Company for the
issue, sale, grant or assumption of all such Convertible
Securities, whether or not converted or exchanged, plus (B)
the additional consideration, if any, actually received by the
Company upon such conversion or exchange, minus (C) the
consideration paid by the
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Company for any purchase of such Convertible Securities the
rights of conversion or exchange under which were not
exercised, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
(y) the consideration deemed to have been received by the
Company (pursuant to section 2.5) upon the issue or sale of
the Convertible Securities with respect to which such Options
were actually exercised, minus (z) the consideration paid by
the Company for any purchase of such Options which were not
exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Warrant Price by an amount in
excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
(e) in the case of any such Options which expire by their
terms not more than 90 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Warrant Price shall be made
until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the manner provided in subdivision (c)
above.
In case at any time after the Initial Date the Company shall
be required to increase the number of Additional Shares of Common Stock subject
to any Option or into which any Convertible Securities (other than the
Warrants) are convertible or exchangeable pursuant to the operation of anti-
dilution provisions applicable thereto, such Additional Shares shall be deemed
to be issued for purposes of section 2.1 as of the time of such increase.
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2.4. Treatment of Stock Dividends, Stock Splits, etc. In case
the Company at any time or from time to time after the Initial Date shall
declare or pay any dividend or other distribution on any class of stock of the
Company payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock) , then, and in each such case, Additional Shares of Common Stock shall
be deemed to have been issued (a) in the case of any such dividend, immediately
after the close of business on the record date for the determination of holders
of any class of securities entitled to receive such dividend, or (b) in the
case of any such subdivision, at the close of business on the day immediately
prior to the day upon which such corporate action becomes effective.
2.5. Computation of Consideration. For the purposes of this
section 2:
(a) The consideration for the issue or sale of any Additional
Shares of Common Stock or for the issue, sale, grant or assumption of
any Options or Convertible Securities, irrespective of the accounting
treatment of such consideration, shall
(i) insofar as it consists of cash, be computed at
the amount of cash received by the company, without deducting
any expenses paid or incurred by the Company or any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services and any accrued interest or dividends in connection
with such issue or sale,
(ii) insofar as it consists of consideration
(including securities) other than cash, be computed at the
fair market value thereof at the time of such issue or sale,
as determined in good faith by the Board of Directors of the
Company, without deducting any expenses paid or incurred by
the Company for any commissions or compensation paid or
concessions or discounts allowed to underwriters, dealers or
others performing similar services and any accrued interest or
dividends in connection with such issue or sale, and
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(iii) in case Additional Shares of Common Stock are
issued or sold or Convertible Securities are issued, sold,
granted or assumed together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the proportion of such consideration so received,
computed as provided in subdivisions (i) and (ii) above,
allocable to such Additional Shares of Common Stock or
Convertible Securities, as the case may be, all as determined
in good faith by the Board of Directors of the Company.
(b) All Options issued, sold, granted or assumed together
with other stock or securities or other assets of the Company for a
consideration which covers both, all Additional Shares of Common
Stock, Options or Convertible Securities issued in payment of any
dividend or other distribution on any class of stock of the Company
and all Additional Shares of Common Stock issued to effect a
subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in Common Stock) shall be deemed to have
been issued without consideration.
(c) Additional Shares of Common Stock deemed to have been
issued for consideration pursuant to section 2.3, relating to Options
and Convertible Securities, shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the issue,
sale, grant or assumption of the Options or Convertible
Securities in question, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise in full of such
Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
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Securities, in each case computing such consideration as
provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
(d) Additional Shares of Common Stock issued or deemed to
have been issued pursuant to the operation of anti-dilution provisions
applicable to Convertible Securities (other than the Warrants),
Options or other securities of the Company (either as a result of the
adjustments provided for by the Warrants or otherwise) shall be deemed
to have been issued without consideration.
2.6. Adjustments for Combinations, etc. In case the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Warrant Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Minimum Adjustment of Warrant Price. If the amount of
any adjustment of the Warrant Price required pursuant to this section 2 would
be less than one one-hundredth (.01) of a cent, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one one-
hundredth (.01) of a cent.
3. Consolidation, Merger, Sale of Assets, Reorganization,
etc. 3.1. General Provisions. Notwithstanding any limitation contained in
section 2.1, in case the Company, after the Initial Date, (a) shall consolidate
with or merge into any other Person and shall
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not be the continuing or surviving corporation of such consolidation or merger,
or (b) shall permit any other Person to consolidate with or merge into the
Company and the Company shall be the continuing or surviving Person but, in
connection with such consolidation or merger, Common Stock or Other Securities
shall be changed into or exchanged for cash, stock or other securities of any
other Person or any other property, or (c) shall transfer all or substantially
all of its properties and assets to any other Person, or (d) shall effect a
capital reorganization or reclassification of Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, the Company shall give written notice thereof to each holder of
any Warrant not less than 30 days prior to the consummation thereof (or, if it
shall be impracticable to provide 30 days notice, such lesser number of days as
may be practicable but in no event less than five) and proper provision shall
be made so that, upon the basis and the terms and in the manner provided in
this section 3, the holder of this Warrant, upon the consummation of such
transaction, shall be entitled to receive, at the aggregate Warrant Price in
effect at the time of such consummation for all Common Stock (or Other
Securities) issuable upon such exercise immediately prior to such consummation,
in lieu of the Common Stock (or Other Securities) issuable upon such exercise
prior to such consummation, the highest amount of cash, securities or other
property to which such holder would actually have been entitled as a
shareholder upon such consummation if such holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in section 2 and this section 3, provided that if a purchase, tender or
exchange offer shall have been made to and accepted by the holders of Common
Stock under circumstances in which, upon completion of such purchase, tender or
exchange offer, the maker thereof, together with members of any group (within
the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is
a part, and together with any affiliate or associate of such maker (within the
meaning of Rule 12b-2 under the Exchange Act) and any members of any such group
of which any such affiliate or associate is a part, own beneficially (within
the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the
outstanding shares of Common Stock, and if the
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holder of this Warrant so designates in a notice given to the Company, the
holder of this Warrant shall be entitled to receive the highest amount of cash,
securities or other property to which such holder would actually have been
entitled as a shareholder if the holder of this Warrant had exercised this
Warrant prior to the expiration of such purchase, tender or exchange offer,
accepted such offer and all of the Common Stock held by such holder had been
purchased pursuant to such purchase, tender or exchange offer, subject to
adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments provided
for in section 2 and this section 3.
3.2. Assumption of Obligations. Notwithstanding anything
contained in this Warrant or the Purchase Agreement to the contrary, the
Company will not effect any of the transactions described in subdivisions (a)
through (d) of section 3.1 unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any cash,
stock or other securities or other property upon the exercise of this Warrant
as provided herein shall have delivered to the holder of this Warrant an
opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that such Person shall have assumed,
either by an instrument in writing delivered to, and reasonably satisfactory
to, the holder of this Warrant, or by operation of law, the obligations of the
Company under this Warrant (and if the Company shall survive the consummation
of such transaction, such assumption shall be in addition to, and shall not
release the Company from, any continuing obligations of the Company under this
Warrant) and (ii) the obligation to deliver to such holder such cash, stock or
other securities or other property as, in accordance with the foregoing
provisions of this section 3, such holder may be entitled to receive. Nothing
in this section 3 or in section 7 shall be deemed to authorize the Company to
enter into any transaction not otherwise permitted by the Purchase Agreement.
4. Other Dilutive Events. In case any event shall occur as
to which the provisions of section 2 or section 3 are not strictly applicable
but the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in
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each such case, upon the written request of the holder of this Warrant, the
Company shall appoint a firm of independent public accountants of recognized
national standing (which may be the regular auditors of the Company), which
shall give their opinion upon the adjustment, if any, on a basis consistent
with the essential intent and principles established in sections 2 and 3,
necessary to preserve, without dilution, the purchase rights represented by
this Warrant. Upon receipt of such opinion the Company will promptly mail a
copy thereof to the holder of this Warrant and shall make the adjustments
described therein.
5. No Dilution or Impairment. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as the Company in good faith shall determined may be necessary
in order to protect the rights of the holder of this Warrant against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares of stock receivable
upon the exercise of this Warrant to exceed the amount payable therefor upon
such exercise, and, if the Warrant Price in effect at any time shall be reduced
to such par value, the Company will promptly cause the par value of such shares
to be reduced to $0.01, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock upon the exercise of all of the Warrants from
time to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock (or other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise and, (d) will not issue
any capital stock of any class which has the right to more than one vote per
share or which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless
such stock is sold for a cash consideration at least equal to the amount of its
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preference upon voluntary or involuntary dissolution, liquidation or winding-up
and the rights of the holders thereof shall be limited to a fixed percentage
(not exceeding 15%) of such cash consideration in respect of participation in
dividends (or, if such dividend shall become taxable to the recipient thereof
by reason of a change of law subsequent to the Initial Date, such greater
percentage as shall be equivalent to 15% on an after-tax basis).
6. Accountants' Report as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable upon the exercise of the Warrants, the Company at its
expense will promptly compute such adjustment or readjustment in accordance
with the terms of the Warrants and cause to be delivered a certificate of the
chief financial officer of the Company setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including
without limitation (a) the consideration received or to be received by the
Company for any Additional Shares of Common Stock issued or sold or deemed to
have been issued, (b) the number of shares of Common Stock outstanding or
deemed to be outstanding, and (c) the Warrant Price in effect immediately prior
to such issue or sale and as adjusted and readjusted (if required by section 2)
on account thereof. In addition, at least annually in connection with the
audit of the Company's financial statements, if there shall have been any
adjustment or readjustment during the previous fiscal year, the Company will
cause independent public accountants of recognized national standing selected
by the Company (which may be the regular auditors of the Company) to verify all
computations made by the Company and prepare a report setting forth such
adjustments or readjustments and showing in reasonable detail the method of
calculation thereof. The Company will forthwith mail a copy of each such
certificate and each such report to each holder of a Warrant. The Company will
also keep copies of all such certificates and reports at its principal office
and will cause the same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any prospective purchaser
of a Warrant designated by the holder thereof.
7. Notices of Corporate Action. In the event of
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(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a regular
periodic dividend payable in cash out of earned surplus) or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or substantially all the assets of
the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which
any such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up is to take place and
the time, if any such time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to exchange their shares
of Common Stock (or Other Securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 20 days prior to the date therein specified, in
the case of any date referred to in the foregoing subdivision (i), and at least
90 days prior to the date therein specified, in the case of the date referred
to in the foregoing subdivision (ii) (or, in each case, if it shall be
impracticable to provide such notice, such lesser number of days as may be
practicable but in no event less than five).
8. Restrictions on Transfer. 8.1. Restrictive Legends.
Except as otherwise permitted by this section 8, each Warrant originally issued
pursuant to the Purchase
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Agreement and each Warrant issued upon direct or indirect transfer or in
substitution for any Warrant pursuant to section 13 shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of 1933
and may not be transferred in the absence of such registration or an
exemption therefrom under such Act."
Except as otherwise permitted by this section 8, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant and each
certificate issued upon the direct or indirect transfer of any such Common
Stock (or Other Securities) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred
in the absence of such registration or an exemption therefrom under
such Act. Such shares are also subject to certain restrictions on
transferability imposed by Common Stock Purchase Warrants expiring
December 31, 2006, a copy of which is on file at the offices of the
Company."
8.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act (other than a
transfer pursuant to Rule 144 or any comparable rule under such Act), the
holder thereof will give written notice to the Company of such holder's
intention to effect such transfer and to comply in all other respects with this
section 8.2. Each such notice (a) shall describe the manner and circumstances
of the proposed transfer in sufficient detail to enable counsel to render the
opinions referred to below, and (b) shall designate counsel for the holder
giving such notice (who may be in-house counsel for such holder). The holder
giving such notice will submit a copy thereof to the counsel designated in such
notice. The following provisions shall then apply:
(i) If in the opinion of counsel for the holder the proposed
transfer may be effected without registration, such holder shall
thereupon be entitled to
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transfer such Restricted Securities in accordance with the terms of
the notice delivered by such holder to the Company. Each Warrant or
certificate, if any, issued upon or in connection with such transfer
shall bear the appropriate restrictive legend set forth in section 8.1
unless, in the opinion of such counsel, such legend is no longer
required to insure compliance with the Securities Act.
(ii) If the opinion of such counsel for the holder is not to
the effect that the proposed transfer may legally be effected without
registration of such Restricted Securities under the Securities Act,
such holder shall not be entitled to transfer such Restricted
Securities (other than in a transfer pursuant to Rule 144 or any
comparable rule under the Securities Act) until the conditions
specified in subdivision (i) above shall be satisfied or until
registration of such Restricted Securities under the Securities Act
has become effective.
Notwithstanding the foregoing provisions of this section 8.2, the
holder of any Restricted Securities shall be permitted to transfer any such
Restricted Securities pursuant to Rule 144A under the Securities Act, provided
that each transferee agrees in writing to be bound by all the restrictions on
transfer of such Restricted Securities contained in this section 8.2. The
Company will pay the reasonable fees and disbursements of counsel (other than
in-house counsel) for any holder of Restricted Securities and of counsel for
the Company in connection with all opinions rendered by them pursuant to this
section 8.2 and pursuant to section 8.3.
8.3. Termination of Restrictions. The restrictions imposed
by this section 8 upon the transferability of Restricted Securities shall cease
and terminate as to any particular Restricted Securities (a) when such
securities shall have been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering such
Restricted Securities, (b) when, in the opinions of both counsel for the holder
thereof and counsel for the Company, such restrictions are no longer required
in order to insure compliance with the Securities Act, or (c) when such
securities have been beneficially owned, by a person who has not been an
affiliate of the Company for at least three months, for a period of at least
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three years, all as determined under Rule 144 under the Securities Act.
Whenever such restrictions shall terminate as to any Restricted Securities, as
soon as practicable thereafter and in any event within ten days, the holder
thereof shall be entitled upon request to receive from the Company, without
expense (other than transfer taxes, if any), new securities of like tenor not
bearing the applicable legend set forth in section 8.1 hereof.
9. Registration under Securities Act, etc. 9.1. Incidental
Registration. (a) Right to Include Registrable Securities. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any reoffer prospectus
associated therewith, or any successor or similar forms), whether or not for
sale for its own account, in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such holders' rights under this
section 9.1. Upon the written request of any such holder made within 20 days
after receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement which
covers the securities which the Company proposes to register, provided that if,
at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each holder
of Registrable Securities and, thereupon, (a) in the case of a determination
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith) and (b) in
the case of a determination to delay
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registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this section 9.1.
(b) Priority in Incidental Registrations. If a registration
pursuant to this section 9.1 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration to the extent of the number which the Company is so advised can be
sold in such offering securities determined as follows:
(i) if such registration as initially proposed by the Company
was solely a primary registration of its securities, (x) first, the
securities proposed by the Company to be sold for its own account, and
(y) second, any Registrable Securities requested to be included in
such registration and any other securities of the Company requested to
be included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
such securities requested to be included by such holders, and
(ii) if such registration as initially proposed by the
Company was in whole or in part requested by holders of securities of
the Company, other than holders of Registrable Securities, pursuant to
demand registration rights, (x) first, such securities held by the
holders initiating such registration, pro rata among the holders
thereof, on the basis of the number of shares of such securities
requested to be included by such holders, (y) second, any securities
proposed by the Company to be sold for its own account, and (z) third,
any Registrable Securities requested to be included in such
registration and any other securities of the Company proposed to be
included in such registration, pro rata among the holders thereof
requesting such registration on the basis of the number of shares of
such securities requested to be included by such holders.
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9.2. Registration Procedures. If and whenever the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in section 9.1, the Company will as expeditiously as
possible:
(a) prepare and file with the Commission the requisite
registration statement (including such audited financial statements as
may be required by the Securities Act or the rules and regulations
promulgated thereunder) to effect such registration and use its best
efforts to cause such registration statement to become effective,
provided that before filing such registration statement or any
amendments thereto, the Company will furnish to the counsel selected
by the holders of Registrable Securities whose Registrable Securities
are to be included in such registration copies of all such documents
proposed to be filed, which documents will be subject to the review of
such counsel, and provided, further, that the Company may discontinue
any registration of its securities which are not Registrable
Securities at any time prior to the effective date of the registration
statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness
of such registration statement and to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or 90 days after such
registration statement becomes effective, provided that if less than
all the Registrable Securities are withdrawn from registration after
the relevant period, the shares to be so withdrawn shall be allocated
pro rata among the holders thereof on the basis of the respective
numbers of Registrable Securities held by them included in such
registration;
(c) furnish to each seller of Registrable Securities covered
by such registration statement (and
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each Requesting Holder) such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request;
(d) use its reasonable best efforts to register or qualify
all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (d) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction;
(e) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(f) use its reasonable best efforts to furnish to each seller
of Registrable Securities a signed counterpart, addressed to such
seller (and the underwriters, if any), of
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of any closing under the underwriting agreement),
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reasonably satisfactory in form and substance to such seller,
and
(ii) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten Public Offering, dated the date of
any closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten Public Offerings of securities
and, in the case of the accountants' letter, such other financial
matters, as such seller (or the underwriters, if any) may reasonably
request;
(g) notify each holder of Registrable Securities covered by
such registration statement, 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 under which
they were made, and at the request of any such holder promptly 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 statements therein not misleading in the light
of the circumstances under which they were made;
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(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first full calendar
month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act, and not file any amendment or supplement to such
registration statement or prospectus to which any such seller shall
have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder, having been furnished with a copy thereof at least five
business days prior to the filing thereof;
(i) provide a transfer agent and registrar for all
Registrable Securities covered by such registration statement not
later than the effective date of such registration statement; and
(j) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the securities of the same class as the Registrable
Securities are then listed.
The Company may require each holder of Registrable Securities
as to which any registration is being effected to furnish the Company such
information regarding such holder and the distribution of such securities as
the Company may from time to time reasonably request in writing, and each
holder will comply with such request.
Each holder of Registrable Securities agrees by the
acquisition of such Registrable Securities that upon receipt of any notice from
the Company of the happening of any event of the kind described in subdivision
(g) of this section 9.2, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(g) of this section 9.2 and, if so directed by
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the Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the periods referred to in subdivision (b) of this section 9.2 shall be
extended by a number of days equal to the number of days during the period from
and including the giving of notice pursuant to subdivision (g) of this section
9.2 and including the date when each seller of any Registrable Securities
covered by such registration statement shall receive the copies of the
supplemented or amended prospectus contemplated by subdivision (g) of this
section 9.2.
9.3. Underwritten Offerings. (a) Incidental Underwritten
offerings. If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by section 9.1 and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of section 9.1(b), use its reasonable
best efforts, if requested by any holder of Registrable Securities, to arrange
for such underwriters to include the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. No holder of Registrable Securities shall
be required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or
agreements regarding such holder and such holder's intended method of
distribution and any other representation required by law.
(b) Holdback Agreements. (i) Each holder of Registrable
Securities agrees by acquisition of such Registrable Securities, if so required
by the managing
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underwriter, not to effect any public sale or distribution of such securities
during the seven days prior to and the 120 days after the closing of any
underwritten registration pursuant to section 9.1 has become effective, or, if
the managing underwriter advises the Company in writing that, in its opinion,
no such public sale or distribution should be effected for a specified period
longer than 90 days after such underwritten registration in order to complete
the sale and distribution of securities included in such registration and the
Company gives notice to such holder of Registrable Securities of such advice,
during a reasonable longer period after such underwritten registration, except
as part of such underwritten registration, whether or not such holder
participates in such registration.
(ii) The Company agrees, if so requested by the managing
underwriter, (x) not to effect any public sale or distribution of its equity
securities or securities convertible into or exchangeable or exercisable for
any of such securities during the seven days prior to and the 120 days after
the closing of any underwritten registration pursuant to section 9.1 has become
effective, except as part of such underwritten registration and except pursuant
to registrations on Form S-4 or S-8, or any reoffer prospectus associated
therewith, or any successor or similar forms thereto, and (y) to cause each
holder of its equity securities or of any securities convertible into or
exchangeable or exercisable for any of such securities, in each case purchased
from the Company at any time after the date of this Agreement (other than in a
Public Offering), to agree not to effect any such public sale or distribution
of such securities, during such period, or, in either case, if the managing
underwriter advises the Company in writing that, in its opinion, no such public
sale or distribution should be effected for a specified period longer than 120
days after such underwritten registration in order to complete the sale and
distribution of securities included in such registration, during a reasonable
longer period after such underwritten registration, except as part of such
underwritten registration.
9.4. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act, the Company will give the holders of Registrable Securities
registered under such registration statement, their underwriters, if any, and
their respective counsel and accountants, the opportunity to
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participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
9.5. Certain Rights of Holders. The Company will not file
any registration statement under the Securities Act which refers to any holder
of any Notes or Registrable Securities by name or otherwise as the holder of
any securities of the Company, unless it shall first have given to such holder
the right to require (a) the insertion therein of language, in form and
substance satisfactory to such holder, to the effect that the holding by such
holder of such securities does not make such holder a "controlling person" of
the Company within the meaning of the Securities Act and is not to be construed
as a recommendation by such holder of the investment quality of the Company's
debt or equity securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of
the Company, or (b) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such holder.
9.6. Indemnification. (a) Indemnification by the Company. In
the event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless
the seller of Registrable Securities covered by any registration statement
filed pursuant to section 9.1, its directors and officers and each other
Person, if any, who controls any such seller within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or controlling
Person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under
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which such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any 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 the Company will reimburse such seller
and each such director, officer and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
with respect to any seller the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation thereof. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such seller or
any such director, officer or controlling person and shall survive the transfer
of such securities by such seller.
(b) Indemnification by the Sellers. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to section 9.1, that the Company shall have received
an undertaking satisfactory to it from the prospective seller of such
securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this section 9.6) the Company, each
director of the Company, each officer of the Company and each other person, if
any, who controls the company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation of such
registration
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statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement, provided that such seller's obligations hereunder
shall be limited to an amount equal to the proceeds to such holder of the
Registrable Securities sold pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section
9.6, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this section 9.6, except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall consent to entry of any judgment or
enter into any settlement without the consent of the indemnified party which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this section 9.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
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(e) Indemnification Payments. The indemnification required
by this section 9.6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
9.7. Covenants Relating to Rule 144. The Company will file
reports in compliance with the Exchange Act and will, at its expense, forthwith
upon the request of any holder of Restricted Securities, deliver to such holder
a certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number, (b) the Company's Internal
Revenue Service identification number, (c) the Company's Commission file
number, (d) the number of shares of Common Stock of the Company outstanding as
shown by the most recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed under the
Exchange Act for a period of at least 90 days prior to the date of such
certificate and in addition has filed the most recent annual report required to
be filed thereunder. If at any time the Company is not required to file
reports in compliance with either section 13 or section 15(d) of the Exchange
Act, the Company at its expense will, forthwith upon the written request of the
holder of any Restricted securities, make available adequate current public
information with respect to the Company within the meaning of paragraph (c)(2)
of Rule 144 of the General Rules and Regulations promulgated under the
Securities Act.
10. Availability of Information. Upon the written request of
any registered holder of any Restricted Securities, the Company will cooperate
with such holder of any Restricted Securities in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each registered holder of
any Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the commission.
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11. Reservation of Stock, etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding.
All shares of Common Stock (or Other Securities) shall be duly authorized and,
when issued upon such exercise, shall be validly issued and, in the case of
shares, upon payment of the consideration therefor, fully paid and
nonassessable with no liability on the part of the holders thereof.
12. Listing on Securities Exchange. The Company will list on
each national securities exchange on which any Common Stock may at any time be
listed, subject to official notice of issuance upon exercise of the Warrants,
and will maintain such listing of, all shares of Common Stock from time to time
issuable upon exercise of the Warrants. The Company will also so list on each
national securities exchange, and will maintain such listing of, any other
securities if at the time any securities of the same class shall be listed on
such national securities exchange by the Company.
13. Ownership, Transfer and Substitution of Warrants. 13.1.
Ownership of Warrants. The Company may treat the person in whose name any
Warrant is registered on the register kept at the principal office of the
Company as the owner and holder thereof for all purposes, notwithstanding any
notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to section 8, a Warrant, if properly
assigned, may be exercised by a new holder without first having a new Warrant
issued.
13.2. Transfer and Exchange of Warrants. Upon the surrender
of any Warrant, properly endorsed, for registration of transfer or for exchange
at the principal office of the Company, the Company at its expense will
(subject to compliance with section 8, if applicable) execute and deliver to or
upon the order of the holder thereof a new Warrant or Warrants of like tenor,
in the name of such holder or as such holder (upon payment by such holder of
any applicable transfer taxes) may direct, calling
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in the aggregate on the face or faces thereof for the number of shares of
Common Stock called for on the face or faces of the Warrant or Warrants so
surrendered.
13.3. Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than any institutional
investor, upon delivery of indemnity reasonably satisfactory to the Company in
form and amount (it being understood that, in the case of the original holder
hereof and any subsequent holder that is an institutional investor, an
unsecured indemnity agreement will be deemed satisfactory to the Company) or,
in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the principal office of the Company, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
14. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: for the purposes of this
Agreement, all shares (including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be issued) by the Company
after the Initial Date hereof, whether or not subsequently reacquired or
retired by the Company, other than (a) shares of Common Stock issued upon the
exercise of Warrants and (b) shares of Common Stock issued upon the exercise of
Stock Options.
Base Price: on any date specified herein, the greater of (i)
the Current Market Price and (ii) the Warrant Price.
Business Day: any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of New York are
authorized by law to be closed, provided that, in determining the period within
which certificates or Warrants are to be issued and delivered pursuant to
section 1.3 at a time when shares of Common Stock (or Other Securities) are
listed or admitted to trading on any national
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securities exchange or in the over-the-counter market and in determining the
Market Price of any securities listed or admitted to trading on any national
securities exchange or in the over-the-counter market, "Business Day" shall
mean any day when the principal exchange in which securities are then listed or
admitted to trading is open for trading or, if such securities are traded in
the over-the-counter market in the United States, such market is open for
trading, and provided, further, that any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Commission: the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act or the
Exchange Act, whichever is the relevant statute for the particular purpose.
Common Stock: the Company's Common Stock, par value $.01 per
share, as constituted on the date hereof, any stock into which such Common
Stock shall have been changed or any stock resulting from any reclassification
of such Common Stock, and all other stock of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
Company: The GNI Group, Inc., a Delaware corporation.
Convertible Securities: any evidences of indebtedness, shares
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
Current Market Price: on any date specified herein, (a) with
respect to Common Stock, (i) if at the relevant time of determination the
Company shall be effecting a Public Offering, the price to the public in such
Public Offering and, in all other cases, the average daily Market Price during
the period of the most recent 10 consecutive Business Days ending on such date,
or (ii) if shares of Common Stock are not then listed or admitted to trading on
any national securities exchange and if the closing bid and asked prices
thereof are not then quoted or published in the over-the-counter market, the
Market Price on such date; and (b) with respect to any other securities, the
Market Price on such date.
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Exchange Act: the Securities Exchange Act of 1934, or any
similar Federal statute, and the rules and regulations of the commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
Initial Date: the meaning specified in section 2.2.
Market Price: on any date specified herein, (a) with respect
to Common Stock, the amount per share equal to (i) the last sale price of
shares of such security, regular way, on such date or, if no such sale takes
place on such date, the average of the closing bid and asked prices thereof on
such date, in each case as officially reported on the principal national
securities exchange on which the same are then listed or admitted to trading,
or (ii) if no shares of such security are then listed or admitted to trading on
any national securities exchange but such security is designated as a national
market system security by the NASD, the last trading price of such security on
such date, or if such security is not so designated, the average of the
reported closing bid and asked prices thereof on such date as shown by the NASD
automated quotation system or, if no shares thereof are then quoted in such
system, as published by the National Quotation Bureau, Incorporated or any
successor organization, and in either case as reported by any member firm of
the New York Stock Exchange selected by the Company, or (iii) if no shares of
such security are then listed or admitted to trading on any national exchange
or designated as a national market system security and if no closing bid and
asked prices thereof are then so quoted or published in the over-the-counter
market, the higher of (x) the book value thereof as determined by agreement
between the Company and the Requisite Holders of Warrants, or if the Company
and the Requisite Holders of Warrants fail to agree, by any firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company, as of the last day of any month ending within 60 days preceding
the date as of which the determination is to be made or (y) the fair value
thereof determined in good faith by the Board of Directors of the issuer
thereof as of a date which is within 15 days of the date as of which the
determination is to be made; and (b) with respect to any
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other securities, the fair value thereof determined in good faith by the Board
of Directors of the Company as of a date which is within 15 days of the date as
of which the determination is to be made.
NASD: the National Association of Securities Dealers.
Notes: the meaning specified in the opening paragraphs of
this Warrant.
Option Plans: The GNI Group, Inc. 1995 Management Equity
Incentive/Stock Option Plan and The GNI Group, Inc. 1991 Stock Option Plan.
Options: rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible securities.
Other Securities: any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Parent: as to any Acquiring Person, any corporation which (a)
controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to include the Acquiring Person in its
consolidated financial statements under generally accepted accounting
principles and (c) is not itself included in the consolidated financial
statements of any other Person (other than its consolidated subsidiaries).
Person: an individual, a partnership, an association, a joint
venture, a corporation, a limited liability company, a business, a trust, an
unincorporated organization or a government or any department, agency or
subdivision thereof.
Public Offering: any offering of Common Stock to the public
pursuant to an effective registration statement under the Securities Act.
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Purchase Agreement: the meaning specified in the opening
paragraphs of this Warrant.
Registrable Securities: (a) the Warrants, (b) any shares of
Common Stock or other Securities issued or issuable upon exercise of the
Warrants and (c) any securities issued or issuable with respect to any Common
Stock or Other Securities referred to in subdivision (b) by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
As to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (x) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (y) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, or (z) they shall have ceased to be outstanding.
Registration Expenses: all expenses incident to the Company's
performance of or compliance with section 9, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, the reasonable fees and
disbursements of a single counsel and single firm of accountants retained by
the holders of the Registrable Securities being registered, premiums and other
costs of policies of insurance against liabilities arising out of the public
offering of the Registrable Securities being registered and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and commissions and transfer
taxes, if any.
Requisite Holders of Warrants: the holders of more than 50%
of all the Warrants at the time outstanding determined on the basis of the
number of shares of Common Stock or Other Securities deliverable upon exercise
thereof.
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Restricted Securities: (a) any Warrants bearing the
applicable legend set forth in section 8.1, (b) any shares of Common Stock (or
Other Securities) which have been issued upon the exercise of Warrants and
which are evidenced by a certificate or certificates bearing the applicable
legend set forth in such section, and (c) unless the context otherwise
requires, any shares of Common Stock (or Other Securities) which are at the
time issuable upon the exercise of Warrants and which, when so issued, will be
evidenced by a certificate or certificates bearing the applicable legend set
forth in such section.
Securities Act: the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal statute.
Stock Options: stock options granted by the Company and its
Subsidiaries pursuant to the Option Plans.
Subsidiary: any corporation, association or other business
entity at least 50% (by number of votes) of the Voting Common Stock of which is
at the time owned by the Company or by one or more Subsidiaries or by the
Company and one or more Subsidiaries.
Transfer: unless the context otherwise requires, any sale,
assignment, pledge or other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is defined in section
2(3) of the Securities Act.
Voting Common Stock: with respect to any corporation,
association or other business entity, stock of any class or classes (or
equivalent interest) , if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies, entitled
to vote for the election of a majority of the directors (or persons performing
similar functions) of such corporation, association or business entity, even if
the right so to vote has been suspended by the happening of such a contingency.
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Warrant Price: the meaning specified in section 2.1.
Warrants: the meaning specified in the opening paragraphs of
this Warrant.
15. Remedies. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of
this Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof any rights as a stockholder of the Company or as imposing any
liabilities on such holder to purchase any securities or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors or stockholders of the Company or otherwise.
17. Notices. All notices and other communications under this
Agreement shall be in writing and shall be delivered by hand or courier
service, or mailed by registered or certified mail, return receipt requested,
addressed (a) if to any holder of any Warrant or any holder of any Common Stock
(or Other Securities), at the registered address of such holder as set forth in
the register kept at the principal office of the Company, or (b) if to the
Company, to the attention of its Chief Financial Officer, at its principal
office, provided that the exercise of any Warrant shall be effected in the
manner provided in section 1.
18. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. The agreements of the Company contained in this
Warrant, other than those applicable solely to the Warrants and the holders
thereof, shall inure to the benefit of and be enforceable by any registered
holder or holders at the time of any Common Stock (or Other Securities) issued
upon the exercise of Warrants, whether so expressed or not. This Warrant shall
be construed and enforced in accordance with and governed by the laws of the
State of New York. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
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19. Expiration; Notice. The right to exercise this Warrant
shall expire at 3 P.M., New York City time, on December 31, 2006.
THE GNI GROUP, INC.
By:
-------------------------------
Name:
Title:
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FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To _________________
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder,
_____________(1) shares of Common Stock of THE GNI GROUP, INC., a Delaware
corporation, and herewith makes payment of $_______ therefor [by application
pursuant to section 1.5 of such Warrant of $________ aggregate principal amount
of Notes (as defined in such Warrant) plus $________ accrued interest
thereon],(2) and requests that the certificates for such shares be issued in
the name of, and delivered to __________________ whose address is
__________________.
[The undersigned hereby instructs you to credit the principal
amount of each Note so applied against the installments of principal remaining
unpaid on such Note in the ______________ order of their maturity dates.]
Dated: ______________
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant)
[insert address]
----------------------------------
(1) Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property or
cash which, pursuant to the adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of a partial exercise, a new warrant or
Warrants will be issued and delivered, representing the unexercised portion of
this Warrant, to the holder surrendering the same.
(2) Delete inapplicable language in brackets.
44
FORM OF ASSIGNMENT
(To be executed only upon transfer of Warrant)
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto ____________________
the right represented by such Warrant to purchase shares ____________ of Common
Stock of THE GNI GROUP, INC., a Delaware corporation, to which such Warrant
relates, and appoints ____________________ Attorney to make such transfer on
the books of ___________________ maintained for such purpose, with full power
of substitution in the premises.
Dated:
---------------
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
[insert address]
Signed in the presence of:
--------------------------