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EXHIBIT 1.2
WARRANT AGREEMENT
DATED AS OF
DECEMBER __, 1999
BETWEEN
TRUETIME, INC.
AND
▇.▇. ▇▇▇▇▇▇▇▇▇, TOWBIN
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Warrants for
Common Stock of
TrueTime, Inc.
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TABLE OF CONTENTS
ARTICLE 1
Definitions
Section 1.01 Definitions 1
Section 1.02 Other Definitions 3
Section 1.03 Rules of Construction 3
ARTICLE 2
Warrant Certificates
Section 2.01 Form and Dating 3
Section 2.02 Legend 4
Section 2.03 Execution 4
Section 2.04 Registration 4
Section 2.05 Transfer and Exchange 5
Section 2.06 Replacement Certificates 6
ARTICLE 3
Exercise Terms
Section 3.01 Exercise Price 6
Section 3.02 Exercise Periods 6
Section 3.03 Expiration 7
Section 3.04 Manner of Exercise 7
Section 3.05 Issuance of Warrant Shares 7
Section 3.06 Fractional Warrant Shares 8
Section 3.07 Reservation of Warrant Shares 8
Section 3.08 Compliance with Law 9
ARTICLE 4
Antidilution Provisions
Section 4.01 Changes in Common Stock 9
Section 4.02 Cash Dividends and Other Distributions 9
Section 4.03 Rights Issued to All Holders of Common Stock 10
Section 4.04 Other Issuances of Common Stock or Rights 11
Section 4.05 Combination; Liquidation 12
Section 4.06 Superseding Adjustment 13
Section 4.07 Minimum Adjustment 13
Section 4.08 Notice of Adjustment 13
Section 4.09 Notice of Certain Transactions 14
Section 4.10 Adjustment to Warrant Certificate 14
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ARTICLE 5
Registration Rights
Section 5.01 Effectiveness of Registration Statements 15
Section 5.02 Blue Sky 16
Section 5.03 Accuracy of Disclosure 16
Section 5.04 Indemnification 17
Section 5.05 Additional Acts 20
Section 5.06 Expenses 20
ARTICLE 6
Miscellaneous
Section 6.01 SEC Reports and Other Information 22
Section 6.02 Persons Benefitting 22
Section 6.03 Rights of Holders 22
Section 6.04 Amendment 22
Section 6.05 Notices 22
Section 6.06 Governing Law 23
Section 6.07 Successors 23
Section 6.08 Multiple Originals 23
Section 6.09 Table of Contents 23
Section 6.10 Severability 24
EXHIBITS
Exhibit A Form of Face of Warrant Certificate
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This WARRANT AGREEMENT, dated as of [December] ___, 1999 (this
"Agreement"), is between TRUETIME, INC., a Delaware corporation (the "Company"),
and ▇.▇. ▇▇▇▇▇▇▇▇▇, TOWBIN (the "Underwriter").
WHEREAS, the Company desires to issue to the Underwriter warrants (the
"Warrants") to purchase 200,000 shares of the Company's common stock, par value
$.01 per share (the "Common Stock") in connection with an initial public
offering by the Company of 3,000,000 shares of the Common Stock (including
shares offered by the selling stockholder, but excluding shares offered pursuant
to the over-allotment option (the "Shares")).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS.
"AFFILIATE" of any Person means any other Person, directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; provided, however, that
beneficial ownership of 10% or more of the voting securities of a Person shall
be decreed to be control. The terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"BOARD" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"BUSINESS DAY" means each day that is not a Saturday, a Sunday or a day
on which banking institutions are not required to be open in the State of New
York.
"CASHLESS EXERCISE RATIO" means a fraction, the numerator of which is
the excess of the Current Market Value per share of Common Stock on the Exercise
Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
"COMBINATION" means an event in which the Company consolidates with,
merges with or into, or sells all or substantially all of its assets to another
Person.
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"CURRENT MARKET VALUE" per share of Common Stock or any other security
at any date means: (i) if the security is not registered under the Exchange Act,
(a) the value of the security, determined in good faith by the Board and
certified in a Board resolution, based on the most recently completed
arm's-length transaction between the Company and a Person other than an
Affiliate of the Company, the closing of which occurred on such date or within
the six-month period preceding such date, or (b) if no such transaction shall
have occurred on such date or within such six-month period, the value of the
security as determined by an independent financial expert; or (ii) if the
security is registered under the Exchange Act, the arithmetic mean average of
the last reported sale price of the Common Stock on the Nasdaq National Market
or any other exchange or market on which the Common Stock is traded (or the
equivalent in an over-the-counter market) for each Business Day during the
period commencing 15 Business Days before such date and ending on the date one
day prior to such date, or if the security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date, the
arithmetic mean average of the last reported sale prices (or such equivalent)
for all of the Business Days before such date for which daily closing bid prices
are available (provided, however, that if the closing bid price is not
determinable for at least 10 Business Days in such period, the "Current Market
Value" of the security shall be determined as if the security were not
registered under the Exchange Act).
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXERCISE DATE" means the day on which the Warrants are exercised
pursuant to Section 3.04.
"ISSUE DATE" means the date on which the Warrants are initially issued.
"PERSON" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission, or any successor
agency or body performing substantially similar functions.
"SECURITIES ACT" means the Securities Act of 1933.
"WARRANT CERTIFICATES" mean the registered certificates issued by the
Company under this Agreement representing the Warrants.
"WARRANT SHARES" mean the shares of Common Stock (and any other
securities) for which the Warrants are exercisable.
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SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
---- ----------
"Agreement" Recitals
"Cashless Exercise" 3.04
"Certificate Register" 2.04
"Common Stock" Recitals
"Company" Recitals
"Exercise Price" 3.01
"Expiration Date" 3.02(b)
"Holders" 2.04
"Registrar" 3.07
"Registration Statement" 5.01
"Shares" Recitals
"Successor Company" 4.05(a)
"Transfer Agent" 3.05
"Underwriter" Recitals
"Warrants" Recitals
SECTION 1.03. RULES OF CONSTRUCTION. Unless the text otherwise
requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE 2
WARRANT CERTIFICATES
SECTION 2.01. FORM AND DATING. The Warrant Certificates shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rules,
agreements to which the Company is subject, if any, or usage and shall bear the
legends required by Section 2.02. The Warrant
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Certificates shall be dated the date of its countersignature. The terms of the
Warrant Certificates set forth in Exhibit A are part of the terms of this
Agreement.
SECTION 2.02. LEGEND. Each Warrant Certificate shall bear the following
legend:
THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF TRUETIME, INC. FOR WHICH
THESE WARRANTS ARE EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS OR IN
CONFORMITY WITH REGULATION S UNDER THE SECURITIES ACT. ACCORDINGLY, NO
HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANT AT ANY TIME
UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND DECLARED EFFECTIVE
BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP
ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS
BEEN ISSUED BY THE SEC, OR (ii) THE ISSUANCE OF SUCH SHARES IS
PERMITTED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT, OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS"
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER IS RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT.
SECTION 2.03. EXECUTION. Either the Company's President or any Vice
President, on behalf of the Company, shall execute the Warrants entitling the
Underwriter to purchase in the aggregate up to 200,000 Warrant Shares, with such
signature attested by the Company's Secretary or Assistant Secretary.
SECTION 2.04. REGISTRATION LEDGER. The Warrants shall be numbered and
shall be registered by the Company in an appropriate registration ledger as they
are issued. The
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Company shall keep an appropriate registration ledger ("Certificate Register")
of the Warrant Certificates and of their transfer and exchange. The Certificate
Register shall show the name and address of the Holder (as defined below) and
the date and number of Warrants represented on the face of each Warrant
Certificate. The Company shall be entitled to treat the registered holder(s) of
the Warrants (the "Holders") as the owner in fact thereof for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such Warrants on the part of any other Person, and shall not be liable for any
registration or transfer of any Warrant which is registered or to be registered
in the name of a fiduciary or the nominee of a fiduciary. Two hundred thousand
(200,000) Warrants shall be registered initially in the name of "▇.▇. ▇▇▇▇▇▇▇▇▇,
Towbin."
SECTION 2.05. TRANSFER AND EXCHANGE. The Warrants may not be
transferred, assigned, sold or hypothecated by the Holders except in accordance
with this Section 2.05 or in an involuntary assignment by operation of law to
the Holders' personal representative.
(a) Each Holder of the Warrants, by acceptance thereof, represents
and acknowledges that the Warrants have not been and will not be
registered under the Securities Act on the grounds that the
issuance of the Warrants is exempt from registration under
Section 4(2) of the Securities Act as not involving any public
offering. Each Holder of the Warrants represents and warrants
that the Holder (i) is acquiring such Warrants for investment for
the Holder's own account, with no intention of reselling or
otherwise distributing the same, subject, nevertheless, to any
requirement of law that the disposition of the Holder's property
shall at all times be within such Holder's control, (ii) is an
"accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act, (iii) has such knowledge and experience
in financial and business matters that it is capable of
evaluating the merits and risks of the investments made or to be
made in connection with the acquisition and exercise of the
Warrants, and (iv) has been provided all such information and
access to information concerning the Holder's investment
hereunder as the Holder has requested from the Company. The
Warrants may not be transferred except (1) to officers and
partners of the Underwriter, (2)(x) pursuant to an effective
registration statement under the Act or (y) in the case of
transfers other than those described in clause (2)(x), upon the
conditions specified in the second paragraph of the legend
contained in Section 2.02 hereof, which conditions are intended,
among other things, to ensure compliance with the provisions of
the Act in respect of the transfer of such Warrants, and (3) upon
compliance with applicable state securities laws.
(b) The Warrant Certificates shall be issued in registered form only
and shall be transferable only upon the surrender of the Warrant
Certificate for registration of transfer. When any Warrant
Certificate is presented to the Company with a request to
register a transfer, the Company shall register
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the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code as in effect in the State of New
York are met. Any Warrant Certificates issued upon any
registration of transfer or exchange of any Warrant Certificate
shall be the valid obligations of the Company, entitled to the
same benefits under this Agreement as the Warrant Certificates
surrendered upon such registration of transfer or exchange. No
service charge will be made to the Holders for any registration
of transfer or exchange upon surrender of the Warrant
Certificates. However, the Company may require payment of a sum
sufficient to cover any tax, assessment or other governmental
charge that may be imposed in connection with any registration of
transfer or exchange of the Warrant Certificates but not for any
exchange or original issuance (not involving a transfer) pursuant
to Section 3.04 or 3.05.
SECTION 2.06. REPLACEMENT CERTIFICATE. If a mutilated Warrant
Certificate is surrendered to the Company or if a Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue a replacement Warrant Certificate if
the requirements of Section 8-405 of the Uniform Commercial Code as in effect in
the State of New York are met. Such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company to protect the Company from any loss
which it may suffer if a Warrant Certificate is replaced. The Company may charge
the Holder for its expenses in replacing a Warrant Certificate. Every
replacement Warrant Certificate is an additional obligation of the Company. The
Company may not issue new Warrant Certificates to replace the Warrant
Certificates to the extent it represents Warrants which have been exercised or
Warrants which the Company has purchased or otherwise acquired.
ARTICLE 3
EXERCISE TERMS
SECTION 3.01. EXERCISE PRICE. The Warrants shall initially entitle the
Holders thereof, subject to adjustment pursuant to the terms of this Agreement,
to purchase an aggregate of 200,000 shares of Common Stock for a per share
exercise price (the "Exercise Price") of $[EQUAL TO 110% OF THE INITIAL PUBLIC
OFFERING PRICE].
SECTION 3.02. EXERCISE PERIODS.
(a) Subject to the terms and conditions set forth herein, the
Warrants shall be exercisable at any time or from time to time
after [DECEMBER] _____, 2000; provided, however, that the Holders
will be able to exercise their Warrants only if (i) the
Registration Statement relating to the Warrant Shares is
effective, or (ii) the exercise of the Warrants is exempt from
the registration requirements of the Securities Act, and the
Warrant Shares are qualified for sale or exempt from
qualification under the applicable
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securities laws of the states or other jurisdictions in which
such holders reside.
(b) The Warrants shall not be exercisable after DECEMBER _____, 2004
(the "Expiration Date").
SECTION 3.03. EXPIRATION. The Warrants shall terminate and become void
as of the earlier of (i) the close of business on the Expiration Date or (ii)
the date the Warrants are exercised.
SECTION 3.04. MANNER OF EXERCISE. The Warrants may be exercised upon
(i) surrender to the Company, or its duly authorized agent, of the Warrant
Certificate, together with the form of election to purchase Common Stock on the
reverse thereof duly filled in and signed by the Holder thereof, and (ii)
payment to the Company, or its duly authorized agent, for the account of the
Company, of the Exercise Price for each Warrant Share issuable upon the exercise
of the Warrants then exercised. Such payment shall be made (i) in cash or by
certified or official bank check payable to the order of the Company or by wire
transfer of funds to an account designated by the Company for such purpose or
(ii) without the payment of cash, by reducing the number of shares of Common
Stock obtainable upon the exercise of the Warrants so as to yield a number of
shares of Common Stock upon the exercise of the Warrants equal to the product of
(a) the number of shares of Common Stock issuable as of the Exercise Date upon
the exercise of the Warrants (if payment of the Exercise Price were being made
in cash) and (b) the Cashless Exercise Ratio. An exercise of the Warrants in
accordance with the immediately preceding sentence is herein called a "Cashless
Exercise." Upon surrender of the Warrant Certificate representing more than one
Warrant in connection with the Holder's option to elect a Cashless Exercise, the
number of shares of Common Stock deliverable upon a Cashless Exercise shall be
equal to the number of shares of Common Stock issuable upon the exercise of the
Warrants that the Holder specifies are to be exercised pursuant to a Cashless
Exercise multiplied by the Cashless Exercise Ratio. All provisions of this
Agreement shall be applicable with respect to a surrender of the Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. Subject to Section 3.02, the rights represented by
the Warrants shall be exercisable at the election of the Holder thereof either
in full at any time or from time to time in part and in the event that the
Warrant Certificate is surrendered for exercise of less than all the Warrants
represented by the Warrant Certificate at any time prior to the Expiration Date,
a new Warrant Certificate representing the remaining Warrants shall be issued by
the Company.
SECTION 3.05. ISSUANCE OF WARRANT SHARES. Subject to Section 2.06, upon
the surrender of the Warrant Certificate and payment of the per share Exercise
Price, as set forth in Section 3.04, the Company shall issue and cause a
transfer agent and registrar for the Common Stock ("Transfer Agent") to
countersign and deliver to or upon the written order of the Holders and in such
name or names as the Holders may designate a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
other securities or property to which it is entitled, registered
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or otherwise, to the Person or Persons entitled to receive the same, together
with cash as provided in Section 3.06 in respect of any fractional Warrant
Shares otherwise issuable upon such exercise. Such certificate or certificates
shall be deemed to have been issued and any Person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of the Warrant Certificate and payment of the
per share Exercise Price, as aforesaid; provided, however, that if, at such
date, the transfer books for the Warrant Shares shall be closed, the
certificates for the Warrant Shares in respect of which the Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened and until such date the Company shall be under no duty to deliver any
certificates for such Warrant Shares; provided further, however, that such
transfer books, unless otherwise required by law, shall not be closed at any one
time for a period longer than 20 calendar days.
SECTION 3.06. FRACTIONAL WARRANT SHARES. The Company shall not be
required to issue fractional Warrant Shares on the exercise of the Warrants. If
any fraction of a Warrant Share would, except for the provisions of this Section
3.06, be issuable on the exercise of the Warrants (or specified portion
thereof), the Company shall pay at the time of exercise an amount in cash equal
to the Current Market Value per Warrant Share, as determined on the day
immediately preceding the date the Warrants are exercised, multiplied by such
fraction, computed to the nearest whole cent.
SECTION 3.07. RESERVATION OF WARRANT SHARES. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The Transfer Agent shall at all times until the Expiration Date
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent.
All Warrant Shares which may be issued upon exercise of the Warrants shall, upon
issue, be fully paid, nonassessable, free of preemptive rights and free from all
taxes, liens, charges and security interests with respect to the issue thereof.
The Company will supply the Transfer Agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be payable as provided in Section 3.06. The Company will furnish to
the Transfer Agent a copy of all notices of adjustments (and certificates
related thereto) transmitted to the Holders.
Before taking any action which would cause an adjustment pursuant to
Article 4 to reduce the Exercise Price below the then par value (if any) of the
Common Stock, the Company shall take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock at the
Exercise Price as so adjusted.
The Company covenants that all shares of Common Stock which may be
issued upon exercise of the Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
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SECTION 3.08. COMPLIANCE WITH LAW. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Holders be entitled to exercise
the Warrants unless (i) a registration statement filed under the Securities Act
in respect of the issuance of the Warrant Shares is then effective or (ii) in
the opinion of counsel to the Company the exercise of such Warrants is exempt
from the registration requirements of the Securities Act and such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the States or other jurisdictions in which such holders reside.
ARTICLE 4
ANTIDILUTION PROVISIONS
SECTION 4.01. CHANGES IN COMMON STOCK. In the event that at any time or
from time to time the Company shall (i) pay a dividend or make a distribution on
its Common Stock in shares of its Common Stock or other shares of its capital
stock, (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock issuable upon
exercise of the Warrants immediately after the happening of such event shall be
adjusted to a number determined by multiplying the number of shares of Common
Stock that the Holders would have owned or have been entitled to receive upon
exercise had the Warrants been exercised immediately prior to the happening of
the events described above (or, in the case of a dividend or distribution of
Common Stock or other shares of capital stock, immediately prior to the record
date therefor) by a fraction, the numerator of which shall be the total number
of shares of Common Stock outstanding immediately after the happening of the
events described above and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately prior to the happening of the
events described above; and subject to Section 4.08, the Exercise Price for each
Warrant shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such event by such fraction. An adjustment made pursuant to
this Section 4.01 shall become effective immediately after the effective date of
such event, retroactive to the record date therefor in the case of a dividend or
distribution in shares of Common Stock or other shares of the Company's capital
stock.
SECTION 4.02. CASH DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that
at any time or from time to time the Company shall distribute to all holders of
Common Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other assets, properties or
securities or (ii) any options, warrants or other rights to subscribe for or
purchase any of the foregoing (other than, in each case, (w) the issuance of any
rights under a shareholder rights plan, (x) any dividend or distribution
described in Section 4.01, (y) any rights, options, warrants or securities
described in Section 4.03 and (z) any cash dividends or other cash distributions
from current or retained earnings), then the number of shares of Common Stock
issuable upon
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the exercise of the Warrants shall be increased to a number determined by
multiplying the number of shares of Common Stock issuable upon the exercise of
the Warrants immediately prior to the record date for any such dividend or
distribution by a fraction, the numerator of which shall be the Current Market
Value per share of Common Stock on the record date for such dividend or
distribution and the denominator of which shall be such Current Market Value per
share of Common Stock on the record date for such dividend or distribution less
the sum of (x) the amount of cash, if any, distributed per share of Common Stock
and (y) the fair value (as determined in good faith by the Board, whose
determination shall be evidenced by a board resolution, a copy of which will be
sent to Holders upon request) of the portion, if any, of the distribution
applicable to one share of Common Stock consisting of evidences of indebtedness,
shares of stock, securities, other assets or property, warrants, options or
subscription or purchase rights; and, subject to Section 4.08, the Exercise
Price shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such record date by the above fraction. Such adjustments
shall be made whenever any distribution is made and shall become effective as of
the date of distribution, retroactive to the record date for any such
distribution; provided, however, that the Company is not required to make an
adjustment pursuant to this Section 4.02 if at the time of such distribution the
Company makes the same distribution to the Holders of the Warrants as it makes
to holders of Common Stock pro rata based on the number of shares of Common
Stock for which the Warrants are exercisable (whether or not currently
exercisable). No adjustment shall be made pursuant to this Section 4.02 which
shall have the effect of decreasing the number of shares of Common Stock
issuable upon exercise of the Warrants or increasing the Exercise Price.
SECTION 4.03. RIGHTS ISSUED TO ALL HOLDERS OF COMMON STOCK. In the
event that at any time or from time to time the Company shall issue to all
holders of Common Stock without any charge, rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock, or
securities convertible into or exchangeable or exercisable for Common Stock,
entitling such holders to subscribe for or purchase shares of Common Stock at a
price per share that is lower at the record date for such issuance than the then
Current Market Value per share of Common Stock other than in connection with the
adoption of a shareholder rights plan by the Company, then the number of shares
of Common Stock issuable upon the exercise of the Warrants shall be increased to
a number determined by multiplying the number of shares of Common Stock
theretofore issuable upon exercise of the Warrants by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding on the date
of issuance of such rights, options, warrants or securities plus the number of
additional shares of Common Stock offered for subscription or purchase or into
or for which such securities that are issued are convertible, exchangeable or
exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options,
warrants or securities plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities)
would purchase at the then Current Market Value per share of Common Stock.
Subject to Section 4.08, in the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such date of issuance by
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the aforementioned fraction. Such adjustment shall be made immediately after
such rights, options or warrants are issued and shall become effective,
retroactive to the record date for the determination of stockholders entitled to
receive such rights, options, warrants or securities. No adjustment shall be
made pursuant to this Section 4.03 which shall have the effect of decreasing the
number of shares of Common Stock purchasable upon exercise of the Warrants or of
increasing the Exercise Price.
SECTION 4.04 OTHER ISSUANCES OF COMMON STOCK OR RIGHTS. In the event
that at any time or from time to time the Company shall issue (i) shares of
Common Stock (subject to the provisions below), (ii) rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock (provided,
however, that no adjustment shall be made upon the exercise of such rights,
options or warrants), or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (provided, however, that no adjustment shall be
made upon the conversion, exchange or exercise of such securities (other than
issuances specified in (i), (ii) or (iii) which are made as the result of
anti-dilution adjustments in such securities)), at a price per share at the
record date of such issuance that is less than the then Current Market Value per
share of Common Stock, then the number of shares of Common Stock issuable upon
the exercise of the Warrants shall be increased to a number determined by
multiplying the number of shares of Common Stock theretofore issuable upon
exercise of the Warrants by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such sale or
issuance plus the number of additional shares of Common Stock offered for
subscription or purchase or into or for which such securities that are issued
are convertible, exchangeable or exercisable, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
sale or issuance plus the total number of shares of Common Stock which the
aggregate consideration expected to be received by the Company (assuming the
exercise or conversion of all such rights, options, warrants or securities, if
any) would purchase at the then Current Market Value per share of Common Stock;
and subject to Section 4.08 the Exercise Price shall be adjusted to a number
determined by dividing the Exercise Price immediately prior to such date of
issuance by the aforementioned fraction; provided, however, that no adjustment
to the number of Warrant Shares issuable upon the exercise of the Warrants or to
the Exercise Price shall be made as a result of (i) the issuance of shares of
Common Stock under any warrants, options or other rights existing on the date
hereof, (ii) the issuance of shares of Common Stock in bona fide public
offerings that are underwritten or in which a placement agent is retained by the
Company, (iii) the issuance of options, or shares of Common Stock pursuant to
any option, under any employee benefit plans approved by the Board of Directors,
or (iv) the issuance of shares of Common Stock in connection with an acquisition
or merger; provided, however, that the Board of Directors has determined that
the consideration to be received for such shares in connection with (iv) above
is equal to or greater than the Current Market Value per share of the Common
Stock. Such adjustments shall be made whenever such rights, options or warrants
or convertible securities are issued. No adjustment shall be made pursuant to
this Section 4.04 which shall have the effect of decreasing the number of shares
of Common Stock issuable upon exercise of each warrant or of increasing the
Exercise Price. For purposes of Section 4.04 only, any issuance of
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Common Stock, or rights, options or warrants to subscribe for, or other
securities convertible into or exercisable or exchangeable for, Common Stock,
which issuance (or agreement to issue) (A) is in exchange for or otherwise in
connection with the acquisition of the property (excluding any such exchange
exclusively for cash) of any Person and (B) is at a price per share equal to the
lower of the Current Market Value at the time an agreement in principle is
reached or at the time a definitive agreement is entered into, shall be deemed
to have been made at a price per share equal to the Current Market Value per
share at the record date with respect to such issuance (the time of closing or
consummation of such exchange or acquisition) if such definitive agreement is
entered into within 90 days of the date of such agreement in principle.
SECTION 4.05. COMBINATION; LIQUIDATION.
(a) Except as provided in Section 4.05(b), in the event of a
Combination, the Holders shall have the right to receive upon
exercise of the Warrants the kind and amount of shares of capital
stock or other securities or property which the Holders would
have been entitled to receive upon or as a result of such
Combination had the Warrants been exercised immediately prior to
such event. Unless Section 4.05(b) is applicable to a
Combination, the Company shall provide that the surviving or
acquiring Person (the "Successor Company") in such Combination
will enter into an agreement confirming the Holders' rights
pursuant to this Section 4.05(a) and providing for adjustments,
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 4. The provisions of
this Section 4.05(a) shall similarly apply to successive
Combinations involving any Successor Company.
(b) In the event of (i) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable
solely in cash or (ii) the dissolution, liquidation or winding-up
of the Company, the Holders of the Warrants shall be entitled to
receive, upon surrender of their Warrant Certificates,
distributions on an equal basis with the holders of Common Stock
or other securities issuable upon exercise of the Warrants, as if
the Warrants had been exercised immediately prior to such event,
less the Exercise Price.
In case of any Combination described in this Section 4.05(b), the
surviving or acquiring Person and, in the event of any
dissolution, liquidation or winding-up of the Company, the
Company, shall deposit promptly with an independent agent
appointed for such purpose the funds, if any, necessary to pay to
the Holders of the Warrants the amounts to which they are
entitled as described above. After such funds and the surrendered
Warrant Certificate is received, such agent is required to
deliver a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is
appropriate)
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to such Person or Persons as it may be directed in writing by the
Holder surrendering the Warrants.
SECTION 4.06. SUPERSEDING ADJUSTMENT. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
adjustments pursuant to this Article 4, if any thereof shall not have been
exercised, the number of Warrant Shares issuable upon the exercise of the
Warrants shall be readjusted pursuant to the applicable section of Article 4 as
if (A) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) shares of Common Stock
actually issued, if any, were issuable for the consideration actually received
by the Company upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange privileges whether or not
exercised and the Exercise Price shall be readjusted inversely; provided,
however, that no such readjustment shall (except by reason of an intervening
adjustment under Section 4.01) have the effect of decreasing the number of
Warrant Shares purchasable upon the exercise of the Warrants or increase the
Exercise Price by an amount in excess of the amount of the adjustment initially
made in respect of the issuance, sale or grant of such rights, options, warrants
or conversion or exchange privileges.
SECTION 4.07. MINIMUM ADJUSTMENT. The adjustments required by the
preceding Sections of this Article 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Exercise Price or the number of shares of Common Stock issuable upon
exercise of the Warrants that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made increases or decreases by at least 1% the Exercise Price or the
number of shares of Common Stock issuable upon exercise of the Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Article 4 and not previously made, would result in a minimum adjustment. For the
purpose of any adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence. In computing adjustments
under this Article 4, fractional interests in Common Stock shall be taken into
account to the nearest one-hundredth of a share.
SECTION 4.08. NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrants are adjusted, as herein provided, the Company shall
promptly deliver to the Holders in accordance with Section 6.05 a certificate of
the Company's chief financial officer setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which (i) the Board
determined the fair value of any evidences of indebtedness, other securities or
property or warrants, options or other subscription or purchase rights and (ii)
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the Current Market Value of the Common Stock was determined, if either of such
determinations were required), and specifying the Exercise Price and the number
of shares of Common Stock issuable upon exercise of the Warrants after giving
effect to such adjustment.
SECTION 4.09. NOTICE OF CERTAIN TRANSACTIONS. In the event that the
Company shall publicly propose to (a) pay any dividend payable in securities of
any class to the holders of its Common Stock or to make any other non-cash
dividend or distribution to the holders of its Common Stock, (b) offer the
holders of its Common Stock rights to subscribe for or to purchase any
securities convertible into shares of Common Stock or shares of stock of any
class or any other securities, rights or options, (c) issue any (i) shares of
Common Stock, (ii) rights, options or warrants entitling the holders thereof to
subscribe for shares of Common Stock, or (iii) securities convertible into or
exchangeable or exercisable for Common Stock (in the case of (i), (ii) and
(iii), if such issuance or adjustment would result in an adjustment hereunder),
(d) effect any capital reorganization, reclassification, or combination, (e)
effect the voluntary or involuntary dissolution, liquidation or winding-up of
the Company or (f) make a tender offer or exchange offer with respect to the
Common Stock, the Company shall within 5 days after any public proposal send to
the Holders a notice of such proposed action or offer. Such notice shall be
mailed to each Holder at its address as it appears in the Certificate Register,
which shall specify the record date for the purposes of such dividend,
distribution or rights, or the date such issuance or event is to take place and
the date of participation therein by the holders of Common Stock, if any such
date is to be fixed, and shall briefly indicate the effect of such action on the
Common Stock and on the number and kind of any other shares of stock and on
other property, if any, and the number of shares of Common Stock and other
property, if any, issuable upon exercise of the Warrants and the Exercise Price
after giving effect to any adjustment pursuant to Article 4 which will be
required as a result of such action. Such notice shall be given as promptly as
possible and (x) in the case of any action covered by clause (a) or (b) above,
at least 10 days prior to the record date for determining holders of the Common
Stock for purposes of such action or (y) in the case of any other such action,
at least 20 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Common Stock, whichever shall be
the earlier.
SECTION 4.10. ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and the Warrant Certificate issued after such adjustment may state
the same Exercise Price and the same number of shares of Common Stock issuable
upon exercise of the Warrants as is stated in the Warrant Certificate initially
issued pursuant to this Agreement. The Company, however, may at any time in its
sole discretion make any change in the form of Warrant Certificate that it may
deem appropriate to give effect to such adjustments and that does not affect the
substance of the Warrant Certificate, and the Warrant Certificate thereafter
issued or countersigned, whether in exchange or substitution for an outstanding
Warrant Certificate or otherwise, may be in the form as so changed.
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ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. EFFECTIVENESS OF REGISTRATION STATEMENT.
(a) The Company shall cause to be filed pursuant to Rule 415 (or any
successor provision) of the Securities Act a registration
statement covering the resale of the Warrant Shares by the
Holders (the "Registration Statement") and shall use all
commercially reasonable efforts to cause the Registration
Statement to be declared effective on or before the tenth day
following the first anniversary of the effective date of the
Company's registration statement on Form S-1 (file No.
333-90269). The Company shall cause the Registration Statement to
remain effective until the earlier of (i) such time as all
Warrants have been exercised and (ii) two years after the
Registration Statement is declared effective by the Commission,
unless extended pursuant to Section 5.01(c). The Company shall
(i)furnish to the Holders, without charge, at least one copy of
the Registration Statement and any amendments thereto, (ii) for
so long as any Registration Statement is effective, deliver to
the Holders, without charge, as many copies of the final
prospectus included in such Registration Statement and any
amendment or supplement thereto as the Holders may reasonably
request and (iii) if in the opinion of counsel for the Holders
any amendment or supplement to the Registration Statement is
legally required to enable the Holders to resell Warrant Shares,
effect such amendments or supplements (during which time after
notice of such undertaking to make such amendment or supplement,
sales of Warrant Shares will be deferred until such amendment or
supplement is effected) and cooperate in any arrangement with
respect to such resale.
(b) If the Company receives notice of a proposed sale under the
Registration Statement, the Company may give notice to the Holder
requesting such sale that such sale under the Registration
Statement must be deferred and not made for up to 60 days (less
the number of days that the use of a prospectus was already
suspended pursuant to Sections 5.01(b) and (c)) after the date of
receipt by the Company of such notice of proposed sale if at the
time the Company receives such notice, the Company is engaged in
confidential negotiations or other confidential business
activities, disclosure of which would be required to be made in
the prospectus included in the Registration Statement (but would
not be required if such sale were not made) in order to prevent
such prospectus from containing any untrue statement of a
material fact or omitting to state any material fact necessary to
make the statements therein not misleading and the Board of
Directors of the Company, based on the advice of counsel,
reasonably determines in good faith that such disclosure would be
materially detrimental to the Company. A deferral of such
proposed sale
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pursuant to this Section 5.01(b) shall be lifted, and the sale
may be forthwith made if the negotiations or other activities are
disclosed or terminated.
(c) If in the reasonable opinion of counsel for the Company any
amendment or supplement to the Registration Statement is legally
required to enable the Holders to resell Warrant Shares, the
Company shall use all commercially reasonable efforts to effect
such amendments or supplements as soon as possible during which
time, after notice of such undertaking to make such amendment or
supplement, sales of Warrant Shares will be deferred until such
amendment or supplement is effected. If the Company defers sales
pursuant to this Section 5.01(c), the Company will extend the
period of effectiveness of the Registration Statement required in
Section 5.01(a) by either (i) one additional day for each day
over 60 days that sales were suspended or (ii) three additional
days for each day over 60 days that sales were suspended, if it
is determined that such suspension was not legally required.
In order to defer sales under the Registration Statement pursuant
to (b) or (c) of this Section 5.01, the Company shall promptly,
upon determining to seek such deferral, deliver to the Holders, a
certificate signed by the President or Chief Financial Officer of
the Company stating that the Company is deferring sales under the
Registration Statement and indicating whether such deferral is
pursuant to Section 5.01(b) or (c).
SECTION 5.02. BLUE SKY. The Company shall use its reasonable efforts to
register or qualify the Warrant Shares under all applicable securities laws,
blue sky laws or similar laws of all jurisdictions in the United States and
Canada in which the Holders of the Warrants may or may be deemed to purchase
Warrant Shares upon the exercise of the Warrants and shall use its reasonable
efforts to maintain such registration or qualification through the earlier of
(i) such time as the Warrants have been exercised in full or (ii) the Expiration
Date; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 5.02 or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
SECTION 5.03. ACCURACY OF DISCLOSURE. To the extent the Holders use the
Registration Statement for any resale of Warrant Shares as provided in clause
(iii) of Section 5.01, the Company represents and warrants to the Holders and
agrees for the benefit of the Holders that (i) the Registration Statement and
any amendment thereto will 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 contained therein not misleading; and (ii) the prospectus
delivered to the Holders upon the exercise of the Warrants and the documents
incorporated by reference therein will 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 contained therein, in light of the
circumstances under which they
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were made, not misleading; provided, however, that the Company shall have no
liability under clauses (i) or (ii) of this Section 5.03 with respect to any
such untrue statement or omission made in any Registration Statement in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Holders specifically for inclusion therein.
SECTION 5.04. INDEMNIFICATION. To the extent the Holders use the
Registration Statement for any resale of Warrant Shares as provided in clause
(iii) of Section 5.01:
(a) In connection with any Registration Statement, the Company agrees
to indemnify and hold harmless the Holders of the Warrants and/or
Warrant Shares and each person, if any, who controls the Holders
within the meaning of the Securities Act or the Exchange Act (the
Holders and such controlling persons being referred to
collectively as the "Indemnified Parties") from and against any
losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof (including but not limited to any
losses, claims, damages, liabilities or actions relating to
purchases and sales of the Warrant Shares) to which each
Indemnified Party may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement or prospectus or in
any amendment or supplement thereto, or arise out of, or are
based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, and shall reimburse, as incurred,
the Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in
respect thereof; provided, however, that (i) the Company shall
not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or any
preliminary or final prospectus or in any amendment or supplement
thereto in reliance upon and in conformity with written
information pertaining to the Holders and furnished to the
Company by or on behalf of the Holders specifically for inclusion
therein, (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any prospectus
relating to such Registration Statement, the indemnity agreement
contained in this subsection (a) shall not inure to the benefit
of any person as to which there is a prospectus delivery
requirement (a "Delivering Seller") that sold the Warrant Shares
to the person asserting any such losses, claims, damages or
liabilities to the extent that any such loss, claim, damage or
liability of such Delivering Seller results from the fact that
there was not sent or given to such person, on or prior to the
written confirmation of such sale, a copy of the relevant
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prospectus, as amended and supplemented, provided that (I) the
Company shall have previously furnished copies thereof to such
Delivering Seller in accordance with this Agreement and (II) such
furnished prospectus, as amended and supplemented, would have
corrected any such untrue statement or omission or alleged untrue
statement or omission, and (iii) this indemnity agreement will be
in addition to any liability which the Company may otherwise have
to such Indemnified Party.
(b) In connection with any Registration Statement, the Holders of the
Warrants and/or Warrant Shares will indemnify and hold harmless
the Company and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act and
the directors, officers, agents and employees of such controlling
persons from and against any losses, claims, damages or
liabilities or any actions in respect thereof to which the
Company or any such controlling person or director, officers,
agent or employee of such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out
of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in such Registration
Statement or preliminary or final prospectus or in any amendment
or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information
pertaining to the Holders and furnished to the Company by or on
behalf of the Holders specifically for inclusion therein; and,
subject to the limitation set forth immediately preceding this
clause, shall reimburse, as incurred, the Company or any legal or
other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending
any loss, claim, damage, liability or action in respect thereof.
This indemnity agreement will be in addition to any liability
which the Holders may otherwise have to the Company or any of its
controlling persons.
(c) Promptly after receipt by an indemnified party under this section
of notice of the commencement of any action or proceeding
(including a governmental investigation), such indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying
party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph
(a) or (b) above, except to the extent that it is prejudiced or
harmed in any material respect by failure to give such prompt
notice. In case any such
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action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with one counsel (and local counsel as necessary)
reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to
the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof the indemnifying party will not be liable to such
indemnified party under this section for any legal or other
expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without
the prior written consent of the indemnified party, not to be
unreasonably withheld, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from
all liability on any claims that are the subject matter of such
action. No indemnifying party shall be liable for any amounts
paid in settlement of any action or claim without its written
consent, which consent shall not be unreasonably withheld, but if
settled in accordance with its written consent or if there be a
final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this section is
unavailable or insufficient to hold harmless an indemnified party
under subsections (a) or (b) above for any reason other than as
provided in subsection (c) above, then each indemnifying party
shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified
party on the other or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative
fault of the indemnifying party or parties on the one hand and
the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof) as well as
any other relevant equitable considerations. The relative fault
of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to
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information supplied by the Company on the one hand or the
Holders or such other indemnified person, as the case may be, on
the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission. The amount paid by an indemnified party as a result
of the losses, claims, damages or liabilities referred to in the
first sentence of this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section 5(d), the
Holders shall not be required to contribute any amount in excess
of the amount by which the net proceeds received by the Holders
from the sale of the Warrant Shares pursuant to the Registration
Statement exceeds the amount of damages which the Holders would
have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d),
each officer, director, employee, representative and agent of an
indemnified party and each person, if any, who controls such
indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such
indemnified party, and each officer, director, employee,
representative and agent of the Company and each person, if any,
who controls the Company within the meaning of the Securities Act
or the Exchange Act shall have the same rights to contribution as
the Company.
(e) The agreements contained in this section shall survive the sale
of the Warrant Shares pursuant to the Registration Statement, as
the case may be, and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement
or any investigation made by or on behalf of any indemnified
party.
SECTION 5.05 ADDITIONAL ACTS. If the issuance or sale of any Common
Stock or other securities issuable upon the exercise of the Warrants requires
registration or approval of any governmental authority (other than the
registration requirements under the Securities Act), or the taking of any other
action under the laws of the United States of America or any political
subdivision thereof before such securities may be validly offered or sold in
compliance with such laws, then the Company covenants that it will, in good
faith and as expeditiously as reasonably possible, use all reasonable efforts to
secure and maintain such registration or approval or to take such other action,
as the case may be.
SECTION 5.06. EXPENSES. All expenses incident to the Company's
performance of or compliance with its obligations under this Article 5 will be
borne by the Company,
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including without limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
reasonable fees and expenses incurred in connection with compliance with state
securities or blue sky laws, (iii) all reasonable expenses of any Persons
incurred by or on behalf of the Company in preparing or assisting in preparing,
printing and distributing the Registration Statement or any other registration
statement, prospectus, any amendments or supplements thereto and other documents
relating to the performance of and compliance with this Article 5, (iv) the fees
and disbursements of counsel for the Company and (v) the fees and disbursements
of the independent public accountants of the Company, including the expenses of
any special audits or comfort letters required by or incident to such
performance and compliance.
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ARTICLE 6
MISCELLANEOUS
SECTION 6.01. SEC REPORTS AND OTHER INFORMATION. Notwithstanding that
the Company may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall file with the SEC and thereupon
provide the Holders with such annual reports and such information, documents and
other reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
SECTION 6.02. PERSONS BENEFITTING. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Company
and the Holders any right, remedy or claim under or by reason of this agreement
or any part hereof.
SECTION 6.03. RIGHTS OF THE HOLDERS. The Holders of the unexercised
Warrants are not entitled to (i) receive dividends or other distributions, (ii)
receive notice of or vote at any meeting of the stockholders, (iii) consent to
any action of the stockholders, (iv) receive notice as stockholders of any other
proceedings of the Company, (v) exercise any preemptive rights or (vi) exercise
any other rights whatsoever as stockholders of the Company.
SECTION 6.04. AMENDMENT. This Agreement may be amended by the parties
hereto without the consent of the Holders for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Agreement as the Company may deem
necessary or desirable (including without limitation any addition or
modification to provide for compliance with the transfer restrictions set forth
herein); provided, however, that such action shall not adversely affect the
rights of the Holders. Any amendment or supplement to this Agreement that has an
adverse effect on the interest of the Holders shall require the written consent
of the Holders of a majority of the then outstanding Warrants. The consent of
the Holders affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares issuable upon
exercise of the Warrants would be decreased (other than pursuant to adjustments
provided herein) or the exercise period with respect to the Warrants would be
shortened. In determining whether the Holders of the required number of Warrants
have concurred in any direction, waiver or consent, Warrants owned by the
Company or by any Affiliate of the Company shall be disregarded and deemed not
to be outstanding. Subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
SECTION 6.05. NOTICES. Any notice or communication shall be in writing
and delivered in Person or mailed by first-class mail addressed as follows:
22
26
if to the Company:
TrueTime, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. Still, Esq.
Fulbright & ▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
if to the Underwriter:
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin
Swiss Bank Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: A. ▇▇▇▇▇▇ ▇▇▇▇▇▇
The Company or the Underwriter by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to the Holders shall be mailed to
Holders's address as it appears on the Certificate Register and shall be
sufficiently given if so mailed within the time prescribed. Failure to mail a
notice or communication to any Holder or any defect in it shall not affect its
sufficiency with respect to other Holders, if any. If a notice or communication
is mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
SECTION 6.06. GOVERNING LAW. The laws of the State of New York shall
govern this Agreement and the Warrant Certificates.
SECTION 6.07. SUCCESSORS. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors.
SECTION 6.08. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 6.09. TABLE OF CONTENTS. The table of contents and headings of
the Articles and Sections of this Agreement have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
23
27
SECTION 6.10. SEVERABILITY. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
24
28
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TRUETIME, INC.
By:
----------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
▇.▇. ▇▇▇▇▇▇▇▇▇, TOWBIN
By:
----------------------------------------
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Co-Chairman
Warrant Agreement Signature Page
29
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF TRUETIME, INC. FOR WHICH
THIS WARRANTS ARE EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
ANY APPLICABLE STATE SECURITIES LAWS, OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS OR IN CONFORMITY WITH REGULATION S UNDER THE
SECURITIES ACT. ACCORDINGLY, THE HOLDER SHALL NOT BE ENTITLED TO EXERCISE ITS
WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE, (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT RELATING TO THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP
ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN
ISSUED BY THE SEC, OR (ii) THE ISSUANCE OF SUCH SHARES IS PERMITTED PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT, OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
WITHIN THE "UNITED STATES" OR TO "U.S. PERSONS" (AS DEFINED IN REGULATION S
UNDER THE SECURITIES ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER IS RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT.
No. [ ]
Certificate for __________ Warrants
to Purchase ________ shares of Common Stock
VOID AFTER 5:00 P.M. NEW YORK TIME ON [DECEMBER] ____, 2004
WARRANT TO PURCHASE COMMON STOCK OF TRUETIME, INC.
THIS CERTIFIES THAT [ ], or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant entitles the registered holder thereof (the "Holder"), at its
option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from TrueTime, Inc., a Delaware
corporation (the "Company"), [ ] shares of Common Stock, par value of $.01 per
share, of the Company (the "Common Stock") at the per share exercise price of $[
] (the "Exercise Price"), or by Cashless Exercise referred to below. This
Warrant Certificate shall terminate and become void as of the close of business
on [December] ___, 2004 (the "Expiration Date") or upon the exercise hereof as
to all the shares of Common Stock subject hereto. The number of shares issuable
upon exercise of the Warrants and the Exercise Price per share shall be subject
to adjustment from time to time as set forth in the Warrant Agreement.
30
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of [December] ____, 1999 (the "Warrant Agreement"),
between the Company and ▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin (the "Underwriter"), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of rights,
duties and obligations of the Company and the Holder of the Warrants.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to the Company
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: [ ].
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by presentation of this Warrant Certificate
with the Election to Purchase attached hereto duly executed and with the
simultaneous payment of the Exercise Price in cash (subject to adjustment) to
the Company or its duly authorized agent for the account of the Company at the
principal office of the Company or (ii) by Cashless Exercise. Payment of the
Exercise Price in cash shall be made by certified or official bank check payable
to the order of the Company or by wire transfer of funds to an account
designated by the Company for such purpose. Payment by Cashless Exercise shall
be made without the payment of cash by reducing the amount of Common Stock that
would be obtainable upon the exercise of a Warrant and payment of the Exercise
Price in cash so as to yield a number of shares of Common Stock upon the
exercise of such Warrant equal to the product of (1) the number of shares of
Common Stock for which such Warrants are exercisable as of the Exercise Date (if
the Exercise Price were being paid in cash) and (2) a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
Exercise Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time on
or after the first anniversary of the date of the effective date of the
Company's registration statement (file No. 333-90269) on Form S-1; provided,
however, that the Holder of Warrants will be able to exercise its Warrants only
if a shelf registration statement relating to the Common Stock underlying the
Warrants is effective or the exercise of such Warrants is exempt from the
registration requirements of the Securities Act of 1933 and such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states or other jurisdictions in which the Holder resides; provided
further, however, that no Warrant shall be exercisable after the fifth
anniversary of the date of the Closing.
In the event the Company enters into a Combination, the Holder will be
entitled to receive upon exercise of the Warrants the kind and amount of shares
of capital stock or other securities or other property of such surviving entity
as the Holder would have been entitled to receive upon or as a result of the
combination had the Holder exercised its Warrants immediately prior to such
Combination; provided, however, that in the event that, in connection with such
Combination, consideration to holders of Common Stock in exchange for their
shares is payable solely in cash or in the event of the dissolution, liquidation
or winding-up of the Company, the Holder will be entitled to receive such cash
distributions as the Holder would have received had the Holder exercised its
Warrants immediately prior to such Combination, less the Exercise Price.
As provided in the Warrant Agreement, the number of shares of Common
Stock issuable upon the exercise of the Warrants and the Exercise Price are
subject to adjustment upon the happening of certain events.
31
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificate pursuant to Section 2.05 of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificate, the exercise of the
Warrants or the issuance of the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be countersigned
and issued to the Holder hereof a new Warrant Certificate representing those
Warrants which were not exercised. This Warrant Certificate may be exchanged at
the principal office of the Company by presenting this Warrant Certificate
properly endorsed with a request to exchange this Warrant Certificate for other
Warrant Certificates evidencing an equal number of Warrants. No fractional
Warrant Shares will be issued upon the exercise of the Warrants, but the Company
shall pay an amount in cash equal to the Current Market Value per Warrant Share
on the day immediately preceding the date the Warrants are exercised, multiplied
by the fraction of a Warrant Share that would be issuable on the exercise of any
Warrant.
All shares of Common Stock issuable by the Company upon the exercise of
the Warrants shall, upon such issue, be duly and validly issued and fully paid
and non-assessable.
The Company shall be entitled to treat the Holder of the Warrant as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in the Warrant on the part of any other
Person, and shall not be liable for any registration or transfer of the Warrant
which is registered or to be registered in the name of a fiduciary or the
nominee of a fiduciary.
The Warrant does not entitle any holder hereof to any of the rights of
a shareholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been attested by the Secretary or Assistant
Secretary of the Company.
TRUETIME, INC.
By:
----------------------------------
Name:
--------------------------------
Title: [President or Vice President]
DATED:
---------------------------------
Attest:
--------------------------------
Name:
----------------------------------
Title: [Secretary or Assistant Secretary]
32
FORM OF ELECTION TO PURCHASE WARRANT SHARES (to be executed only upon
exercise of Warrants)
TRUETIME, INC.
The undersigned hereby irrevocably elects to exercise Warrants at an
exercise price per Warrant (subject to adjustment) of $[ ] to acquire shares of
Common Stock, par value $0.01 per share, of TrueTime, Inc. on the terms and
conditions specified within the Warrant Certificate and the Warrant Agreement
therein referred to, surrenders this Warrant Certificate and all right, title
and interest therein to TrueTime, Inc. and directs that the shares of Common
Stock deliverable upon the exercise of such Warrants be registered or placed in
the name and at the address specified below and delivered thereto.
Date:
--------------------------
-----------------------------
(Signature of Owner)
-----------------------------
(Street Address)
-----------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
[Signature must be guaranteed
by an eligible Guarantor
Institution (banks, stock
brokers, savings and loan
associations and credit
unions) with membership in an
approved guarantee medallion
program pursuant to
Securities and Exchange
Commission Rule b 17Ad-5]
Securities and/or check to be issued to:
Please insert social security or identifying number:
-----------------------
Name:
--------------------------------
Street Address:
----------------------
City, State and Zip Code:
------------
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
Please insert social security or identifying number:
--------------------
Name:
--------------------------------
Street Address:
----------------------
City, State and Zip Code:
------------