VOID AFTER 5:00 P.M., NEW YORK CITY
TIME, ON OCTOBER 21, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND
TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase [ ] Shares of Common Stock,
par value $0.001 per share
October 21, 1997
Q.E.P. CO., INC.
SERIES A
COMMON STOCK PURCHASE WARRANT
This certifies that, for value received,[NAME OF HOLDER] or its
registered assigns, is entitled to purchase from Q.E.P. CO., INC., a Delaware
corporation (the "COMPANY"), at any time or from time to time during the period
specified in Section 2 hereof, [ ] fully paid and nonassessable shares of the
Company's Common Stock, par value $0.001 per share (the "COMMON STOCK"), at an
exercise price per share (the "EXERCISE PRICE") of TEN DOLLARS ($10.00) per
share. The number of shares of Common Stock purchasable hereunder (the "WARRANT
SHARES") and the Exercise Price are subject to adjustment as provided in Section
4 hereof.
This Warrant is subject to the following terms, provisions and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and (i) payment to
the Company in cash, by certified or official bank check or by wire transfer for
the account of the Company, of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) if the resale of the Warrant Shares
by the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
delivery to the Company of a written notice of election to effect a Cashless
Exercise (as defined in Section 11(c)) for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued
to the holder hereof or such holder's designee, as the record owner of such
shares, as of the close of business on the date on which this Warrant shall have
been surrendered, the completed Exercise Agreement shall have been delivered,
and payment shall have been made for such shares as set forth above.
Certificates for the Warrant Shares so
1
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding ten business days, after this Warrant shall have been so exercised.
The certificates so delivered shall be in such denominations as may be requested
by the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and before
5:00 p.m., New York City time on the fifth anniversary of the date of issuance
(the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, 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 to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
4. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF WARRANT SHARES. During
the Exercise Period, the Exercise Price and the number of Warrant Shares shall
be subject to adjustment from time to time as provided in this Section 4.
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time during the Exercise Period subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time during the Exercise Period combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
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(b) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into, any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company at any time during the Exercise Period, then as a
condition of such consolidation, merger or sale or conveyance, adequate
provision will be made whereby the holder of this Warrant will have the right to
acquire and receive upon exercise of this Warrant in lieu of the shares of
Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 4 will thereafter be applicable as nearly as may be
possible in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Section 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(c) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION") at any time during the Exercise Period, then
the holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets (or rights) which would have been payable to
the holder had such holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution.
(d) ISSUANCE OF CERTAIN COMMON STOCK BELOW EXERCISE PRICE.
(i) In case the Company shall issue or sell to all
its then existing shareholders rights to subscribe for or purchase shares of
Common Stock ("Rights") in any transaction at a price per share of Common Stock
(determined by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Rights plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (B) the total number of shares of Common Stock covered by such
Rights) that is lower (at the date of such sale or issuance) than the Exercise
Price, or the Market Price (as defined below), or for no consideration, then in
each case the number of shares of Common Stock thereafter issuable upon the
exercise of all Warrants then outstanding shall be increased in a manner
determined by multiplying the number of shares of Common Stock theretofore
issuable upon the exercise of all Warrants then outstanding by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding
immediately prior to the sale or issuance plus the number of additional shares
of Common Stock offered for subscription and of which the denominator shall be
the number of shares of Common Stock outstanding immediately prior to the sale
or issuance plus the number of shares of Common Stock which the "aggregate
consideration to be received by the Company" (as defined in the following
paragraph) in connection with such sale or issuance would purchase at the lower
of the Market Price or Exercise Price.
(ii) For the purpose of such adjustments the
"aggregate consideration to be received by the Company" therefor shall be deemed
to be the consideration received by the Company
3
for such Rights plus any consideration or premiums stated in such Rights to be
paid for the shares of Common Stock covered thereby.
(iii) In case the Company shall issue or sell Rights
for a consideration consisting, in whole or in part, of property other than cash
or its equivalent, then in determining the "price per share of Common Stock" and
the "consideration" receivable by or payable to the Company for purposes of this
Section 3(c), the Board of Directors of the Company shall determine, in good
faith, the fair value of such property. In case the Company shall issue and sell
Rights together with one or more other securities as part of a unit at a price
per unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of this
Section 3(c), the Board of Directors of the Company shall determine, in good
faith, the fair value of the Rights then being sold as part of such unit.
(iv) Any increase of the number of shares of Common
Stock issuable upon exercise of all Warrants then outstanding made pursuant to
this Section 4(d) shall be allocated among such Warrants on a pro rata basis.
(v) Upon the expiration or termination of any
unexercised Rights for which any adjustment was made pursuant to this Section
4(d), the Warrant Price shall be readjusted, and shall thereafter be such price
as would have prevailed had the Warrant Price been originally adjusted (or had
the original adjustment not been required, as the case may be) on the basis of
(a) the Common Shares, if any, actually issued or sold upon the exercise of such
Rights and (b) the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
the issuance, sale, or grant of all of such Rights, whether or not exercised;
provided, however, that no such readjustment shall have the effect of increasing
the Warrant Price by an amount in excess of the amount of the adjustment
initially made for the issuance, sale or grant of such Rights.
(e) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(f) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) FRACTIONAL EXERCISE PRICE. In the event that any
adjustment of the Exercise Price required herein results in a fraction of a
cent, then the Exercise Price shall be rounded up to the nearest cent.
(h) FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price (as defined
in Section 4(k)) of a share of Common Stock on the date of such exercise.
4
(i) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or
(ii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or distributions payable in cash out of retained
earnings consistent with the Company's past practices with respect to declaring
dividends and making distributions) to the holders of the Common Stock;
(iii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
National Market for the five (5) trading days immediately preceding such date,
or (ii) if the Nasdaq National Market is not the principal trading market for
the shares of Common Stock, the average of the last reported bid prices on the
principal trading market for the Common Stock during the same period, or, if
there is no bid price for such period, the last reported sales price for such
period, or (iii) if market value cannot be calculated as of such date on any of
the foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by the Company and
reasonably acceptable to the holder, with the costs of the appraisal to be borne
by the Company. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with
5
respect to any other security in respect of which a determination as to market
value must be made hereunder.
(l) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Shares,
par value $0.001 per share, in respect of which this Warrant is exercisable, or
shares resulting from any subdivision or combination of such Common Stock, or in
the case of any reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Section 4(j) hereof, the stock or other
securities or property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
PROVIDED that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder hereof are transferable with the prior written consent of
the Company, in whole or in part, upon surrender of this Warrant, together with
a properly executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Section 7(e) below, PROVIDED, however, that
any transfer or assignment shall be subject to the conditions set forth in
Section 7(f) hereof, and PROVIDED FURTHER, that no consent of the Company shall
be required for transfers to affiliates of the holder (it being understood that
partners of a partnership are hereby deemed to be Affiliates of the partnership)
and to clearing firms that execute trades on behalf of the holder. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder. Each of such new Warrants shall represent the right to
purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this
6
Warrant, the Company, at its expense, will execute and deliver, in lieu thereof,
a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder of this Warrant furnish to the Company a written opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such
exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (ii) that
the holder execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the Securities
Act.
(g) REDEMPTION. If, at any time after the first anniversary of
the date of issuance hereof, the average selling price for the shares of Common
Stock as reported on the Nasdaq National Market (or the then principal trading
market for the Common Stock if not the Nasdaq National Market) (the "REPORTED
PRICE"), shall, for a period of twenty (20) consecutive trading days (the
"DETERMINATION PERIOD"), be greater than or equal to $15.00 (subject to
equitable adjustments from time to time for the events described in Section
4(a)), then the Company shall have the right, exercisable on the first trading
day after the Determination Period, by written notice to the holders of this
Warrant (a "REDEMPTION NOTICE") of such exercise at least thirty (30) days prior
to the date of redemption (the "REDEMPTION DATE") to redeem this Warrant and
all, but not less than all, of the other Warrants then outstanding in full at a
redemption price per Warrant equal to the product of (i) the number of shares of
Common Stock issuable upon the exercise of such Warrant, multiplied by (ii)
$.05. Nothing herein shall prevent the exercise of, and the holder shall have
the right to exercise this Warrant at any time during the period after the
Redemption Notice and on or prior to the Redemption Date.
(h) BROKER FEES. The holder of this Warrant shall indemnify
the Company and hold it harmless for the fees of any broker engaged by the
holder in connection with the transfer or exercise of this Warrant or otherwise.
The Company shall indemnify and hold the holder of this Warrant harmless for the
fees of any broker engaged by the Company in connection with the issuance or
redemption of this Warrant or otherwise.
7
8. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS.
(i) At any time after 90 days from the date hereof
until a date that is 21 months from the date hereof, upon receipt of a written
request from the holders of Warrants or Warrant Share representing a majority in
interest of all shares of Common Stock issuable (or issued) upon conversion of
Series A Warrants (the "REQUESTING WARRANTHOLDERS"), the Company promptly shall
prepare and file with the Securities and Exchange Commission ("SEC") a
registration statement under the Securities Act on an appropriate form covering
the resale through a public offering of all of the shares of Common Stock
issuable upon exercise of Series A Warrants. Upon such request, the Company
shall use all reasonable efforts to cause the registration statement to become
effective as soon as is practicable. If permitted by the Securities Act, the
Company shall use a Form S-3 registration statement (or any successor form) to
register Shares pursuant to this Section 8(a). The holders of Series A Warrants
and of shares of Common Stock issuable (or issued) upon conversion of Series A
Warrants (the "WARRANTHOLDERS"), as a group, may exercise this demand
registration only once. The Warrantholders shall state in their request for
registration whether they intend to distribute the registered Shares by means of
an underwriting. If the Warrantholders intend to distribute the registered
Shares by means of an underwriting, the Warrantholders shall sell the registered
Shares through one or more underwriters (or a syndicate managed by one or more
underwriters) that are selected by the Warrantholders with the approval of the
Company, which shall not be unreasonably withheld, and the Company shall join
the Warrantholders in entering into an underwriting agreement with the selected
underwriter or underwriters, which will provide (among other things) for the
Company, the Warrantholders, and each underwriter (and each person who controls
each underwriter within the meaning of Section 15 of the Securities Act) to
grant to each other reciprocal indemnification against liabilities under the
Securities Act (it being understood that indemnification by the Warrantholders
will be limited to those Warrantholders that include their shares in the
underwriting). The Company may not include in a registration of Shares for any
Warrantholders pursuant to the exercise of a demand registration right under
this Section 8(a) any debt or equity securities of the Company without the
advance approval of the Warrantholders, which shall not be unreasonably
withheld.
(ii) Notwithstanding anything in this Agreement to
the contrary, the Company may postpone filing with the SEC for a reasonable
period of time (not to exceed 75 days) a registration statement for a demand
registration requested by the Warrantholders, but only if: (a) the Company's
Board of Directors reasonably determines that (i) based on the written advice of
the Company's legal counsel, the postponement is necessary to avoid premature
public disclosure of a pending material event that would likely jeopardize the
outcome or success of the pending event, or (ii) based on the written advice of
the investment banking firm representing the Company, in connection with a
pending public offering of its securities, the postponement is necessary to
avoid jeopardizing the success of the pending public offering; (b) the Company
notifies the Warrantholders of the postponement and the duration of it within
five days after the determination by its Board of Directors; and (c) the Company
delivers to the Warrantholders with the notice of postponement (i) a
certificate, signed by its Chief Executive Officer and Chief Financial Officer
stating that the condition described in clause (a)(i) or (a)(ii) has occurred,
and (ii) in the case of clause (a)(ii) a copy of the written advice that the
Company's Board of Directors received from its investment banker.
(iii) Upon receipt of a request from the
Warrantholders for a demand registration, the Company promptly shall notify the
Warrantholders of any fact, event, or circumstance that reasonably could be
expected to require or lead to a postponement of the filing of a registration
statement for the demand registration requested by the Warrantholders. If the
Company postpones the
8
filing with the SEC of a registration statement for a demand registration
requested by the Warrantholders (as permitted by this Section), (x) the
Warrantholders may elect to withdraw their request for the demand registration
at any time during the duration of the postponement specified in the Company's
notice to the Warrantholders of the postponement, and the withdrawn demand
registration will not count as an exercise of the Warrantholders' demand
registration rights, and (y) the term of this Agreement shall be extended for a
period corresponding to the duration of the postponement.
(b) PIGGY-BACK REGISTRATIONS.
(i) If at any time during the Exercise Period, the
Company shall file with the SEC a Registration Statement under the Securities
Act (a "REGISTRATION STATEMENT") relating to an underwritten offering for its
own account or the account of others of any of its equity securities, other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity of business
or equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each holder who is entitled to
registration rights under this Section 8(b) written notice of such determination
and, if within twenty (20) days after receipt of such notice, such Warrantholder
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Warrant Shares such Warrantholder requests to
be registered, except that if, in connection with any underwritten public
offering for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Warrant Shares
with respect to which such Warrantholder has requested inclusion hereunder. Any
exclusion of Warrant Shares shall be made pro rata among the holders of all
shares of Common Stock (or securities convertible into Common Stock) seeking to
include such shares in the Registration Statement in proportion to the number of
registerable Securities sought to be included by such Warrantholders. The
obligations of the Company under this Section 8(b) may be waived by
Warrantholders holding a majority in interest of the Warrant Shares and shall
expire after the Company has afforded the opportunity for the Warrantholders to
exercise registration rights under this Section 8(b) for two registrations;
PROVIDED, however, that any Warrantholder who shall have had any Warrant Shares
excluded from any Registration Statement in accordance with this Section 8(b)
shall be entitled to include in an additional Registration Statement filed by
the Company the Warrant Shares so excluded. If an offering in connection with
which an Warrantholder is entitled to registration under this Section 8(b) is an
underwritten offering, then each Warrantholder whose Warrant Shares are included
in such Registration Statement shall, unless otherwise agreed by the Company,
offer and sell such Warrant Shares in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
(c) SALES UNDER RULE 144. Notwithstanding the registration of
Warrant Shares in accordance with Section 8(a), if at any time of offer and sale
of such Warrant Shares by an Warrantholder such Warrant Shares can be sold
pursuant to Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at anytime permit the Warrantholder to
sell securities of the Company to the public without registration ("RULE 144")
in the manner, amount and on such terms as such Warrantholder wishes to offer
and sell such Warrant Shares, such Warrantholder may endeavor to offer and sell
such Warrant Shares pursuant to Rule 144; PROVIDED, however, that such
Warrantholder shall not be required to limit the amount or manner of sale or
otherwise modify such offer or sale to use Rule 144; and PROVIDED FURTHER,
however, that such Warrantholder shall have no liability to the Company under
this Section 8(c) if such Warrantholder
9
does not offer and sell such Warrant Shares pursuant to Rule 144 notwithstanding
the availability thereof.
(d) OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Warrant Shares, the Company shall:
(i) prepare promptly and file with the SEC a
Registration Statement or Statements with respect to all Warrant Shares to be
included therein, and thereafter use its best efforts to cause the Registration
Statement to become effective as soon as possible after such filing, and, if the
Registration Statement utilizes to Rule 415 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at anytime permit
the Company to register securities to the public on a continuous or delayed
basis ("RULE 415"), to keep the Registration Statement effective at all times
until the date that is six months after the date such Registration Statement is
first ordered effective by the SEC (plus the number of days in the period of
discontinuance referred to in Section 8(e)(iii) hereof). In any case, the
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) filed by the Company shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(ii) furnish to each Warrantholder whose Warrant
Shares are included in the Registration Statement (i) promptly after the same is
filed with the SEC, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and prospectus and each amendment or
supplement thereto and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Warrantholder may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Warrantholder;
(iii) use reasonable efforts to (i) register and
qualify the Warrant Shares covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Warrantholders
who hold a majority in interest of the Warrant Shares being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements, (iii) take such other actions as may
be necessary to maintain such registrations and qualifications in effect at all
times, if the Registration Statement utilizes to Rule 415, effective at all
times until the date that is six months after the date such Registration
Statement is first ordered effective by the SEC; and (iv) take all other actions
reasonably necessary or advisable to qualify the Warrant Shares for sale in such
jurisdictions; PROVIDED, however, that the Company shall not be required in
connection therewith or as a condition thereto to (a) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 8(d)(iii), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company or (e) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders;
(iv) as promptly as practicable after becoming aware
of such event, notify each Warrantholder who holds Warrant Shares being sold
pursuant to such registration of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such
10
untrue statement or omission, and deliver a number of copies of such supplement
or amendment to each Warrantholder as such Warrantholder may reasonably request;
(v) as promptly as practicable after becoming aware
of such event, notify each Warrantholder who holds Warrant Shares being sold
pursuant to such registration of the issuance by the SEC of any stop order or
other suspension of effectiveness of the Registration Statement at the earliest
possible time;
(vi) permit a single firm of counsel designated as
selling stockholders' counsel by the Warrantholders who hold a majority in
interest of the Warrant Shares being sold pursuant to such registration to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time prior to their filing with the SEC, and shall not file
any document in a form to which such counsel reasonably objects;
(vii) make available for inspection by any
Warrantholder whose Warrant Shares are being sold pursuant to such registration,
any underwriter participating in any disposition pursuant to the Registration
Statement and any attorney, accountant or other agent retained by any such
Warrantholder or underwriter (collectively, the "INSPECTORS"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "RECORDS"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
PROVIDED, however, that each Inspector shall hold in confidence (making such
confidential information known only to officers, agents or employees thereof who
have a need to know), shall not use any information so obtained for any purpose
other than preparation or review of the registration statement, and shall not
make any disclosure (except to an Warrantholder or underwriter) of any Record or
other information which the Company determines in good faith to be confidential,
and of which determination the Inspectors are so notified, unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (ii) the release of such Records is
requested pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or (iii) the information in such Records has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector or Warrantholder until
and unless such Warrantholder or Inspector shall have entered into
confidentiality agreements (in a form as is customary in similar circumstances)
with the Company with respect thereto, substantially in the form of this Section
8(d)(vii). Each Warrantholder agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at the Company's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Warrantholder provided to the Company
pursuant to Section 8(e)(v) hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Warrantholder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Warrantholder, to undertake, at Warrantholder's expense,
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
11
(viii) use its best efforts either to (i) cause all
the Warrant Shares covered by the Registration Statement to be listed on a
national securities exchange and on each additional national securities exchange
on which similar securities issued by the Company are then listed, if any, if
the listing of such Warrant Shares is then permitted under the rules of such
exchange or (ii) secure designation of all the Warrant Shares covered by the
Registration Statement as a National Association of Securities Dealers Automated
Quotations System ("NASDAQ") "national market system security" within the
meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and the quotation of the Warrant Shares on the
Nasdaq National Market System; or, if, despite the Company's best efforts to
satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
satisfying the preceding clause (i) or (ii), to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Warrant Shares;
(ix) provide a transfer agent and registrar, which
may be a single entity, for the Warrant Shares not later than the effective date
of the Registration Statement;
(x) cooperate with the Warrantholders who hold
Warrant Shares being sold and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Warrant Shares to be sold pursuant to the
denominations or amounts as the case may be, and registered in such names as the
Warrantholders may reasonably request; and, within three business days after a
Registration Statement which includes Warrant Shares is ordered effective by the
SEC the Company shall deliver, and shall cause legal counsel selected by the
Company to deliver, to the transfer agent for the Warrant Shares (with copies to
the Warrantholder whose Warrant Shares are included in such Registration
Statement) instructions to the transfer agent to issue new stock certificates
without a legend and an opinion of such counsel that the shares have been
registered; and
(xi) take all other reasonable actions necessary to
expedite and facilitate disposition by the Warrantholder of the Warrant Shares
pursuant to the Registration Statement.
(e) OBLIGATIONS OF THE WARRANTHOLDERS. In connection with the
registration of the Warrant Shares, the Warrantholders shall have the following
obligations:
(i) It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to each Warrantholder that such Warrantholder shall
furnish to the Company such information regarding itself, the Warrant Shares
held by it and the intended method of disposition of the Warrant Shares held by
it as shall be reasonably required to effect the registration of the Warrant
Shares and shall execute such documents in connection with such registration as
the Company may reasonably request. At least fifteen (15) days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify each Warrantholder of the information the Company requires from each such
Warrantholder (the "REQUESTED INFORMATION") if such Warrantholder elects to have
any of such Warrantholder's Warrant Shares included in the Registration
Statement. If within five (5) business days prior to the filing date the Company
has not received the Requested Information from an Warrantholder (a
"NON-RESPONSIVE WARRANTHOLDER"), then the Company may file the Registration
Statement without including Warrant Shares of such Non-Responsive Warrantholder;
(ii) Each Warrantholder by such Warrantholder's
acceptance of the Warrant ▇▇▇▇▇▇ agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Warrantholder has
12
notified the Company in writing of such ▇▇▇▇▇▇▇▇▇▇▇▇▇'s election to exclude all
of such Warrantholder's Warrant Shares from the Registration Statement;
(iii) Each Warrantholder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 8(d)(iv) or 8(d)(v), such Warrantholder will immediately discontinue
disposition of Warrant Shares pursuant to the Registration Statement covering
such Warrant Shares until such Warrantholder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 8(d)(iv) or 8(d)(v)
and, if so directed by the Company, such Warrantholder shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Warrantholder's possession, of
the prospectus covering such Warrant Shares current at the time of receipt of
such notice;
(iv) In the event Warrantholders holding a majority
in interest of Warrant Shares being registered determined to engage the services
of an underwriter, each Warrantholder agrees to enter into and perform such
Warrantholder's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Warrant Shares, unless such Warrantholder has
notified the Company in writing of such Warrantholder's election to exclude all
of such Warrantholder's Warrant Shares from the Registration Statement; and
(v) No Warrantholder may participate in any
underwritten registration hereunder unless such Warrantholder (i) agrees to sell
such Warrantholder's Warrant Shares on the basis provided in any underwriting
arrangements approved by the Warrantholders entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
requested under the terms of such underwriting arrangements and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and other
fees and expenses of investment bankers and any manager or managers of such
underwriting and legal expenses of the underwriters applicable with respect to
its Warrant Shares, in each case to the extent not payable by the Company
pursuant to the terms of this Agreement.
(f) EXPENSES OF REGISTRATION. All expenses (other than
brokerage commissions or discounts) incurred in connection with registrations,
filings or qualifications pursuant to Section 8(d)(iii), including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees and the fees and disbursements of counsel for the Company, shall
be borne by the Company; PROVIDED, HOWEVER, that the Warrantholders shall bear
the fees and out-of-pocket expenses of the one legal counsel selected by the
Warrantholders pursuant to Section 8(d)(vi) hereof.
(g) INDEMNIFICATION. In the event any Warrant Shares are
included in a Registration Statement under this Agreement:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Warrantholder who holds such Warrant Shares,
the directors, if any, of such Warrantholder, the officers, if any, of such
Warrantholder, each person, if any, who controls any Warrantholder within the
meaning of the Securities Act or the Exchange Act, any underwriter (as defined
in the Securities Act) for the Warrantholders, the directors, if any, of such
underwriter and the officers, if any, of such underwriter, and each person, if
any, who controls any such underwriter within the meaning of the Securities Act
or the Exchange Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively "CLAIMS") to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims
13
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement, or contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state securities law or
any rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
8(g)(iv) with respect to the number of legal counsel, the Company shall
reimburse the Warrantholders and each such underwriters or controlling person,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 8(g)(i) (a) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
8(d)(ii) hereof; (b) with respect to any preliminary prospectus shall not inure
to the benefit of any such person from whom the person asserting any such Claim
purchased the Warrant Shares that are the subject thereof (or to the benefit of
any person controlling such person) if the untrue statement or omission of
material fact contained in the preliminary prospectus was corrected in the
prospectus, as then amended or supplemented, if such prospectus was timely made
available by the Company pursuant to Section 8(d)(ii) hereof; (c) shall not be
available to the extent such Claim is based on a failure of the Warrantholder to
deliver or cause to be delivered the prospectus made available by the Company;
and (d) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld.
(ii) In connection with any Registration Statement in
which an Warrantholder is participating, each such Warrantholder agrees to
indemnify and hold harmless, to the same extent and in the same manner set forth
in Section 8(g)(i), the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim
to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs (a) in reliance upon and in conformity with written information
furnished to the Company by such Warrantholder expressly for use in connection
with such Registration Statement or (b) the Warrantholder's violation of
Regulation M; and such Warrantholder will promptly reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; PROVIDED, however, that the indemnity agreement
contained in this Section 8(g)(ii) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent of
such Warrantholder, which consent shall not be unreasonably withheld; and
PROVIDED FURTHER, that the Warrantholder shall be liable under this Section
8(g)(ii) for only that amount of a Claim
14
as does not exceed the net proceeds to such Warrantholder as a result of the
sale of Warrant Shares pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
8(g)(ii) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(iii) The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so furnished
in writing by such persons expressly for inclusion in the Registration
Statement.
(iv) Promptly after receipt by an Indemnified Party
of notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 8(g), deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying parties and the Indemnified Party;
PROVIDED, however, that an Indemnified Party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable written opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential differing
interests between such Indemnified Party or other party represented by such
counsel in such proceeding. The Company shall pay for only one separate legal
counsel for the Warrantholders; such legal counsel shall be selected by the
Warrantholders holding a majority in interest of the shares of Common Stock
issuable (or issued) upon exercise of Series A Warrants that are included in the
Registration Statement to which the claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party under this Section 8(g), except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Section 8(g) shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(h) CONTRIBUTION. To the extent any indemnification provided
for herein is prohibited or limited by law, the indemnifying party agrees to
make the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 8(g) to the fullest extent permitted by law;
PROVIDED, however, that (a) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 8(g)(ii); (b) no seller of Warrant Shares guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Warrant
Shares who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of Warrant Shares shall be limited in amount to the
net amount of proceeds received by such seller from the sale of such Warrant
Shares.
(i) REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Warrantholders the benefits of Rule 144 or any other similar
rule or regulation of the SEC that may at any time permit the Warrantholders to
sell securities of the Company to the public without Registration,
15
until such time as the Warrantholders have sold all the Warrant Shares pursuant
to a Registration Statement or Rule 144, the Company agrees to:
(i) make and keep public information available, as
those terms are understood and defined in Rule 144;
(ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to each Warrantholder so long as such
Warrantholder owns Warrants or Warrant Shares, promptly upon request, (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other information
as may be reasonably requested to permit the Warrantholder to sell such
securities pursuant to Rule 144 without Registration.
9. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Q.E.P. Co., Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
with copy to:
Holland & Knight
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 9.
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed in the State of Florida. The Company
irrevocably consents to the jurisdiction of the United States federal courts
located in Florida in any suit or proceeding based on or arising under this
Warrant and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law.
16
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several Sections of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised at any time or from time
to time in whole or in part during the Exercise Period, by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "CASHLESS EXERCISE").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Q.E.P. CO., INC.
By:____________________
▇▇▇▇▇ ▇▇▇▇▇
Its: President
17
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase
_______ of the shares of Common Stock of Q.E.P. CO., INC., a Delaware
corporation (the "COMPANY"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR
AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY
FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD
PURSUANT TO RULE 144(K) UNDER SAID ACT.
The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_____________________ ___________________________
Signature of Holder
___________________________
Name of Holder (Print)
Address:
___________________________
___________________________
___________________________
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No. of Shares
and hereby irrevocably constitutes and appoints ________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:_______________, ___
In the presence of
______________________________ Name:_____________________________________
Signature:________________________________
Title of Signing Officer or Agent (if any):
__________________________________________
Address:__________________________________
__________________________________
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.