THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER THE SECURITIES OR "BLUE SKY" LAWS OF ANY JURISDICTION AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER, OR, TO THE EXTENT APPLICABLE, SUCH BLUE SKY LAWS, OR THE
PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 4,215,753 Warrant No. 1
AMENDED AND RESTATED WARRANT
To Purchase Common Stock of
PRECISION STANDARD INC.
THIS IS TO CERTIFY THAT BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, or any Affiliate (as hereinafter defined) thereof, or
registered assigns, is entitled, at any time prior to the Expiration Date
(as hereinafter defined), to purchase from PRECISION STANDARD INC., a
Colorado corporation (the "Company"), 4,215,753 shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in
whole or in part, including fractional parts, at an aggregate purchase
price of $0.237205492 per share, all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Company after the Distribution Date, other
than Warrant Stock and a Permitted Issuance.
"Affiliate" shall mean, with respect to any Person, (a)
each Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian, or other fiduciary, any stock
having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by, or is under common
control with, such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers, and partners. For the
purpose of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract, or otherwise.
"Bank" shall mean Bank of America National Trust and
Savings Association, a national banking association.
"Bank Credit Agreement" shall mean the Second Amended and
Restated Credit Agreement dated as of December 31, 1996 between the
Company and the Bank.
"Business Day" shall mean any day that is not a Saturday, a
Sunday, or a day on which banks are required or permitted to be closed in
New York City or San Francisco.
"Closing Date" shall have the meaning assigned to it in the
Credit Agreement.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the Securities
Act and other federal securities laws.
"Common Stock" shall mean (except where the context
otherwise indicates) the Common Stock, $0.0001 par value, of the Company
as constituted on the Closing Date, and any capital stock into which such
Common Stock may thereafter be changed, and shall also include (a) capital
stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Common Stock upon any reclassification
thereof which is also not preferred as to dividends or assets over any
other class of stock of the Company and which is not subject to redemption
and (b) shares of common stock of any successor or acquiring corporation
(as defined in Section 4.8 hereof) received by or distributed to the
holders of Common Stock in the circumstances contemplated by Section 4.8
hereof.
"Convertible Securities" shall mean evidences of
indebtedness, shares of stock, or other securities which are convertible
into or exchangeable, with or without payment of additional consideration
in cash or property, for Additional Shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified
event.
"Current Market Price" shall mean, in respect of any share
of Common Stock on any date herein specified, (a) the last sale price on
such day on the principal stock exchange on which Common Stock is then
listed or admitted to trading, (b) if no sale takes place on such day on
any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, (c) if
Common Stock is not then listed or admitted to trading on any stock
exchange, the last sale price on such day reported by NASDAQ, (d) if no
such price is reported by NASDAQ, the average of the high and low prices
reported for such day by the National Quotation Bureau, (e) if neither
such corporation at the time is engaged in the business of reporting such
prices, as furnished by any similar firm then engaged in such business, or
(f) if there is no such firm, the fair value of a share of Common Stock as
determined in good faith by the Board of Directors after consultation with
an investment banking firm of recognized national standing.
"Distribution Date" shall mean September 30, 1988.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of
Common Stock may be purchased pursuant to this Warrant on such date.
"Expiration Date" shall mean September 9, 2000 or such
later date as may be specified pursuant to Section 14.2(b) hereof.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares
thereof is to be determined, all shares of Common Stock Outstanding at
such date and all shares of Common Stock issuable in respect of this
Warrant and other options or warrants to purchase, or securities
convertible into, shares of Common Stock outstanding on such date which
would be deemed outstanding in accordance with GAAP for purposes of
determining net income per share.
"GAAP" shall mean generally accepted accounting principles
in the United States of America as from time to time in effect.
"Holder" shall mean any Person in whose name a Warrant or
Warrant Stock is registered on the books of the Company maintained for
such purpose.
"Installment Date" shall have the meaning given such term
in Section 14.1 hereof.
"Majority Holders" shall mean the holders of Warrants
exercisable for in excess of 50% of the aggregate number of shares of
Common Stock then purchasable upon exercise of all Warrants, whether or
not then exercisable.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Other Property" shall have the meaning assigned to it in
section 4.8 hereof.
"Outstanding" shall mean, when used in reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or
held by or for the account of the Company or any subsidiary thereof, and
shall include all shares issuable in respect of outstanding scrip or any
certificates representing fractional interests in shares of Common Stock.
"Permitted Issuances" shall mean the issuances of options
to purchase shares of Common Stock pursuant to employee or management
stock option plans in an aggregate amount during the period between
December 31, 1996 and the Expiration Date not to exceed 2% of the Fully
Diluted Outstanding Common Stock; provided, however, that no such issuance
shall be a Permitted Issuance to the extent that, at any time, unexercised
options issued pursuant to employee or management stock option plans
represent more than 1% of the Fully Diluted Outstanding Common Stock.
"Person" shall mean any individual, sole proprietor-ship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity,
or government (whether federal, state, county, city, municipal, or
otherwise, including, without limitation, any instrumentality, division,
agency, body, or department thereof).
"Registration Statement" shall have the meaning assigned to
it in Section 9.3(a) hereof.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which, upon their issuance on the exercise of this Warrant
would be, evidenced by a certificate bearing the restrictive legend set
forth in Section 9.1(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Subordinated Loan Agreement" shall mean the Second Amended
and Restated Senior Subordinated Loan Agreement, dated as of December 31,
1996 between the Company and the Bank.
"Trading Day" shall mean a day on which a sale of Common
Stock has been reported by a stock exchange or an NASD quotation system.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute
a sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning assigned to it in
Section 9.2 hereof.
"Warrant" shall mean this Warrant and any Warrant issued
upon transfer, division, or combination of, or in substitution for, this
Warrant.
"Warrant Price" shall mean an amount equal to (a) the
number of shares of Common Stock being purchased upon exercise of this
Warrant pursuant to Section 2.1 hereof multiplied by (b) the Exercise
Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof until
such time as it is released from restrictions pursuant to the first
sentence of Section 9.8 hereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the
Distribution Date and until 5:00 P.M., New York City time, on the
Expiration Date, the Holder hereof may exercise this Warrant, on any
Business Day, for all or any part of the number of shares of Common Stock
purchasable pursuant hereto.
(a) In order to exercise this Warrant, in whole or in
part, the Holder hereof shall deliver to the Company at its executive
office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, or at the office or agency
designated by the Company pursuant to Section 12 hereof, (i) a written
notice of such Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (ii)
except as provided in subsection (b) below, payment of the Warrant Price,
and (iii) this Warrant. Such notice shall be substantially in the form of
the subscription form appearing as Exhibit A annexed hereto, duly executed
by such Holder or its agent or attorney. Upon receipt thereof, the
Company shall, as promptly as practicable, and in any event within five
Business Days thereafter, execute or cause to be executed and deliver or
cause to be delivered to such Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable
upon such exercise, together with cash in lieu of any fraction of a share,
as hereinafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denominations as such
Holder shall request in the notice and shall be registered in the name of
such Holder or, subject to Section 9.2 hereof, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been
exercised and 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 shares for all purposes,
as of the date the notice, together with payment for such shares (except
as provided in subsection (b) below) and this Warrant, is received by the
Company as described above, and all taxes required to be paid by such
Holder, if any, pursuant to Section 2.2 hereof prior to the issuance of
such shares have been paid. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to such Holder a new
Warrant evidencing the right of such Holder to purchase the unpurchased
shares of Common Stock called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant or, at the request of
such Holder, appropriate notation may be made on this Warrant and the same
returned to such Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares in the name
of any Person who acquired this Warrant (or any part hereof) or any
Warrant Stock otherwise than in accordance with this Warrant.
(b) The Holder may also exercise this Warrant in whole or
in part in a "cashless" or "net-issue" exercise of this Warrant. In such
event, the Holder will deliver this Warrant to the Company with a notice
stating the number of shares of Warrant Stock to be delivered to the
Holder and the number of shares with respect to which the Warrant is being
surrendered in payment of the aggregate Exercise Price for the Warrant
Stock to be delivered to the Holder. For purposes of this provision, all
Warrant Stock as to which the Warrant is surrendered will be valued at the
average daily Current Market Price of a share of Common Stock for the
thirty consecutive Trading Days preceding the exercise date. The notice
accompanying the Warrant shall also set forth the number of shares of
Warrant Stock for which the Warrant will remain exercisable.
2.2. PAYMENT OF TAXES. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof
shall be validly issued, fully paid, and nonassessable and without any
preemptive rights. The Company shall pay all expenses in connection with,
and all taxes and other governmental charges that may be imposed with
respect to, the issue or delivery thereof, unless such tax or charge is
imposed by law upon the Holder hereof, in which case such taxes or charges
shall be paid by such Holder. The Company shall not be required, however,
to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of such
Holder, and in such case the Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid
or it has been established to the satisfaction of the Company that no such
tax or other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be
required to issue a fractional share of Common Stock upon exercise of any
Warrant. As to any fraction of a share which the Holder of one or more
Warrants, the rights pursuant to which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise,
the Company shall pay a cash adjustment in respect of such final fraction
in an amount equal to the same fraction of the Current Market Price on the
date of exercise.
2.4. CONTINUED VALIDITY. A holder of shares of
Warrant Stock issued upon the exercise of this Warrant, in whole or in
part (other than a holder who acquires such shares after the same have
been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall continue to
be entitled with respect to such shares to all rights to which it would
have been-entitled as Holder under Sections 9, 10, and 17 hereof.
Following the exercise of this Warrant, a holder of Warrant Stock shall
continue to be subject to the obligations set forth in Sections 2.4, 9.1,
9.2, 9.3, 9.6, 17.2, and 17.5 hereof. The Company will, at the time of
each exercise of this Warrant, in whole or in part, upon the request of
the Holder of the shares of Warrant Stock issued upon such exercise
hereof, acknowledge in writing, in form reasonably satisfactory to such
Holder, its continuing obligation to afford to such Holder all such
rights; provided, however, that if such Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to such Holder all such rights.
3. TRANSFER, DIVISION, AND COMBINATION
3.1. TRANSFER. Subject to compliance with Sections 9
and 14 hereof, transfer of this Warrant and all rights pursuant hereto, in
whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 hereof or the
office or agency designated by the Company pursuant to Section 12 hereof,
together with a written assignment of this Warrant substantially in the
form of Exhibit B annexed hereto duly executed by the Holder hereof or its
agent or attorney and, if such transfer is not to be made pursuant to
section 14 hereof, upon delivery to the Company of funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall, subject to
compliance by the transferor with the requirements of Section 9.2 hereof,
execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly
be cancelled. A Warrant, if properly assigned in compliance with this
Section 3.1 and Section 9.2 hereof, may be exercised by a new Holder for
the purchase of shares of Warrant Stock without having a new Warrant
issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9
hereof, this Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by the Holder hereof or its
agent or attorney. Subject to compliance with Sections 3.1 and 9 hereof,
as to any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3. EXPENSES. The Company shall prepare, issue, and
deliver, at its own expense (other than transfer taxes), any new Warrant
or Warrants required to be issued pursuant to this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to
maintain, at its aforesaid office or agency, books for the registration
and the registration of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant
is exercisable, or the price at which such shares may be purchased upon
exercise of this Warrant, shall be subject to adjustment from time to time
as set forth in this Section 4. The Company shall give each Holder
notice, at the address set forth for such Holder on the books of
registration maintained by the Company, of any event described in this
Section 4 which requires an adjustment pursuant to this Section 4 at the
time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS, AND COMBINATIONS.
If, at any time, the Company shall:
(a) take a record of the holders of Common Stock for the
purpose of entitling them to receive, without payment therefor,
a dividend payable in, or other distribution of, any Additional
Shares of Common Stock,
(b) subdivide its Outstanding shares of Common Stock into
a larger number of shares of Common Stock, or
(c) combine its Outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately following the occurrence of any such event shall
be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the occurrence of such event would own
or be entitled to receive following the occurrence of such event, and (ii)
the Exercise Price shall be adjusted to equal (A) the Exercise Price
multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately
following such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If, at any time,
the Company shall take a record of the holders of Common Stock for the
purpose of entitling them to receive, without payment therefor, any
dividend or other distribution (other than of Additional Shares of Common
Stock or other securities for which adjustments are made pursuant to
Section 4.1, 4.3, 4.4, or 4.5 hereof) of:
(a) cash or other property of any nature whatsoever (other
than a distribution of cash or other property or a dividend
payable out of earnings or surplus legally available for the
payment of dividends under the laws of the jurisdiction of
incorporation of the Company),
(b) any evidences of its indebtedness, any shares of its
stock, or any other of its securities or property of any nature
whatsoever (other than cash or other property subject to clause
(a) of this Section 4.2, Convertible Securities, or Additional
Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its
stock, or any other of its securities or property of any nature
whatsoever (other than cash or other property subject to clause
(a) of this Section 4.2, Convertible Securities, or Additional
Shares of Common Stock),
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product of the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
such adjustment by a fraction (A) the numerator of which shall be the
average daily Current Market Price for the thirty consecutive Trading Days
preceding the date of taking such record, and (B) the denominator of which
shall be such average Current Market Price minus the amount allocable to
one share of Common Stock of any such cash so distributable and of the
fair value (as determined in good faith by the Board of Directors of the
Company) of any and all such evidences of indebtedness, shares of stock,
other securities or property, or warrants or other subscription or
purchase rights so distributable and (ii) the Exercise Price shall be
adjusted to equal (x) the Exercise Price multiplied by the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to such adjustment divided by (y) the number of shares for which
this Warrant is exercisable immediately following such adjustment.
A reclassification of Common Stock (other than a change in
par value, or from par value to no par value or from no par value to par
value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of Common
Stock of such shares of such other class of stock within the meaning of
this Section 4.2 and, if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1 hereof.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(a) If, at any time, the Company shall issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, for
consideration in an amount per share of less than the average Current
Market Price for the thirty Trading Days preceding the date of issuance,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such issuance or sale by a fraction (A) the numerator
of which shall be the number of shares of Fully Diluted Outstanding Common
Stock immediately following such issuance or sale and (B) the denominator
of which shall be the number of shares of Fully Diluted Outstanding Common
Stock immediately prior to such issuance or sale plus the number of shares
of Common Stock which the aggregate offering price (or, in an underwritten
public offering, the aggregate offering price to the public) of the total
number of such Additional Shares of Common Stock would purchase at the
Current Market Price for the thirty Trading Days preceding the date of
issuance and (ii) the Exercise Price as to the number of shares for which
this Warrant is exercisable prior to such adjustment shall be adjusted by
multiplying such Exercise Price by a fraction (x) the numerator of which
shall be the number of shares for which this Warrant is exercisable prior
to such issuance or sale and (y) the denominator of which shall be the
number of shares for which this Warrant is exercisable immediately
following such issuance or sale.
(b) The provisions of Section 4.3(a) hereof shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided pursuant to Section 4.1 or 4.2 hereof. No
adjustment of the number of shares of Common Stock for which this Warrant
shall be exercisable shall be made pursuant to Section 4.3(a) hereof upon
the issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any warrants, options, or other subscription
or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any Convertible Securities, if any such adjustment
shall previously have been made upon the issuance of such warrants,
options, or other rights or upon the issuance of such Convertible
Securities (or upon the issuance of any warrants, options, or other rights
therefor) pursuant to Section 4.4 or 4.5 hereof.
4.4. ISSUANCE OF WARRANTS, OPTIONS, OR OTHER RIGHTS.
If, at any time, the Company shall take a record of the holders of Common
Stock for the purpose of entitling them to receive a distribution of, or
shall in any manner (whether directly or by assumption in a merger in
which the Company is the surviving corporation) issue, grant, or sell to
any Person any warrants, options, or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible
Securities, whether or not the rights to exchange or convert pursuant
thereto are immediately exercisable, other than in connection with a
Permitted Issuance, or shall change the terms of any outstanding warrants,
options, or rights to entitle the holders thereof to subscribe for or
purchase a greater number of Additional Shares of Common Stock, other than
in connection with a Permitted Issuance, and, at the time of such
issuance, grant, or sale, the sum of the purchase price for such warrants,
options, or other rights plus the price per share for which Common Stock
is issuable upon the exercise of such warrants, options, or rights or upon
conversion or exchange of such Convertible Securities shall be less than
the average Current Market Price for the thirty Trading Days preceding the
issuance, grant or sale then in effect, then (a) the number of shares of
Common Stock for which this Warrant is exercisable shall be adjusted to
equal the product obtained by multiplying the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
issuance or sale by a fraction (A) the numerator of which shall be the
number of shares of Fully Diluted Outstanding common Stock immediately
following such distribution, issuance, grant or sale on the basis that the
maximum number of Additional Shares of Common Stock issuable pursuant to
all such warrants, options, or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed
to have been issued and outstanding at the time of the issuance or sale of
such warrants, options, or other rights and (B) the denominator of which
shall be (i) the number of shares of Fully Diluted Outstanding Common
Stock immediately prior to such distribution, issuance, grant or sale plus
(ii) the number of shares of Common Stock which the sum of the aggregate
exercise price of such warrants, options, other rights, or Convertible
Securities and the aggregate consideration received for such warrants,
options, or other rights by the Company would purchase at such average
Current Market Price, and (b) the Exercise Price shall be adjusted to
equal (x) the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (y) the number of shares for which this Warrant is
exercisable immediately following such adjustment. Except as specified in
Section 4.6 hereof, no further adjustment of the number of shares for
which this Warrant is exercisable shall be made upon the actual issuance
of such Common Stock upon exercise of such warrants, options or other
rights or upon conversion or exchange of such Convertible Securities.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. If, at any
time, the Company shall take a record of the holders of Common Stock for
the purpose of entitling them to receive a distribution of, or shall in
any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell to any Person any
Convertible Securities, whether or not the rights to exchange or convert
pursuant thereto are immediately exercisable, other than in connection
with a Permitted Issuance, or shall adjust the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock so as to entitle the holders of such Convertible Securities to
acquire a greater number of Additional Shares of Common Stock, and, at the
time of such issuance or sale, the price per share for which Common Stock
is issuable upon such conversion or exchange shall be less than the
average Current Market Price for the thirty Trading Days preceding the
issuance, sale or adjustment, then (a) the number of shares of Common
Stock for which this Warrant is exercisable shall be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such issuance, sale
or adjustment by a fraction (A) the numerator of which shall be the number
of shares of Fully Diluted Outstanding Common Stock immediately following
such distribution, issuance, grant, sale or adjustment on the basis that
the maximum number of Additional Shares of Common Stock necessary to
effect the conversion or exchange of all such Convertible Securities shall
be deemed to have been issued and outstanding at the time of the issuance
of such Convertible Securities and (B) the denominator of which shall be
(i) the number of shares of Fully Diluted Outstanding Common Stock
immediately prior to such distribution, issuance, grant or sale plus (ii)
the number of shares of Common Stock which the aggregate exercise price of
such Convertible Securities would purchase at such average Current Market
Price and (b) the Exercise Price shall be adjusted to equal (x) the
Exercise Price multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment
divided by (y) the number of shares for which this Warrant is exercisable
immediately following such adjustment. Except as specified in Section 4.6
hereof, no further adjustment of the number of shares for which this
Warrant is exercisable shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after
any adjustment of the number of shares of Common Stock for which this
Warrant is exercisable shall have been made pursuant to Section 4.4 or 4.5
hereof as the result of any issuance of warrants, options, rights, or
Convertible Securities, such warrants, options, or rights, or the right of
conversion or exchange in such other Convertible Securities, shall expire,
and all or a portion of such warrants, options, or rights, or the right of
conversion or exchange with respect to all or a portion of such other
Convertible Securities, as the case may be, shall not have been exercised,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such warrants, options, rights, or other Convertible
Securities on the basis of treating the number of Additional Shares of
Common Stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such warrants, options,
or rights or any such right of conversion or exchange, as having been
issued on the date of any such exercise and for the consideration actually
received and receivable upon exercise of such right plus the
consideration, if any, received by the Company for such warrants, rights,
options, or Convertible Securities, whereupon a new adjustment of the
Exercise Price and/or number of shares of Common Stock for which this
Warrant is exercisable shall be made, which new adjustment shall supersede
the previous adjustment so rescinded and annulled.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS
PURSUANT TO THIS SECTION. The following provisions shall be applicable to
the making of adjustments of the number of shares of Common Stock for
which this Warrant is exercisable provided for in this Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that
any adjustment of the number of shares of Common Stock for which
this Warrant is exercisable that would otherwise be required may
be postponed (except in the case of a subdivision or combination
of shares of Common Stock, as provided for in Section 4.1
hereof) up to, but not beyond, the date of exercise if such
adjustment, either by itself or with other adjustments not
previously made, adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except
as aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result
in a minimum adjustment on the date of exercise. 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.
(b) FRACTIONAL INTERESTS. In computing adjustments
required by this Section 4, fractional interests in Common Stock
shall be taken into account to the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall
take a record of the holders of Common Stock for the purpose of
entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and before
the distribution to stockholders thereof, legally abandon its
plan to pay or deliver such dividend, distribution,
subscription, or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) ADJUSTMENTS PRIOR TO OCCURRENCE OF EVENT. If, after
any adjustment occurs pursuant to this Section 4 by reason of
the taking of any record of the holders of Common Stock, but
prior to the occurrence of the event for which such record is
taken, the Holder hereof exercises this Warrant, any Additional
Shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for
which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other
property shall be issued or delivered to such Holder upon and to
the extent that the event actually takes place, upon payment of
the then Exercise Price. Notwithstanding any other provision to
the contrary herein, if the event for which such record was
taken fails to occur or is rescinded, then such shares shall be
cancelled by the Company.
(e) GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a
determination in good faith of the fair value of any item
pursuant to this Section 4, such determination shall be
conclusive if the Board of Directors relied upon an opinion of
an investment banking firm of recognized national standing in
making such determination or, if the Board of Directors did not
so rely, such determination may be challenged in good faith by
the Holder hereof and any dispute shall be resolved by an
investment banking firm of recognized national standing selected
by the Company and acceptable to such Holder.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION, OR DISPOSITION OF ASSETS. In case the Company shall
reorganize its capital, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation), or sell,
transfer, or otherwise dispose of all or substantially all of its
property, assets, or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation, or
disposition of assets, shares of common stock of the successor or
acquiring corporation, or any cash, shares of stock, evidences of
indebtedness, or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition
to or in lieu of common stock of the successor or acquiring corporation
("Other Property"), are to be received by or distributed to the holders of
Common Stock, then each Holder shall have the right thereafter to receive,
upon exercise of such Warrant following such event, the number of shares
of common stock of the successor or acquiring corporation and Other
Property receivable upon or as a result of such reorganization, merger,
consolidation, or disposition of assets by a holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, merger,
consolidation, or disposition of assets, the successor or acquiring
corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and
liabilities pursuant hereto, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of Directors
of the Company) in order to provide for adjustments of shares of the
Common Stock for which this Warrant is exercisable which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Section 4. For purposes of this Section 4.8, "common stock of the
successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject
to redemption and shall also include any evidences of indebtedness, shares
of stock, or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified
date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing
provisions of this Section 4.8 shall apply to successive reorganizations,
mergers, consolidations or dispositions of assets.
4.9. CERTAIN LIMITATIONS. Notwithstanding anything
herein to the contrary, the Company shall not modify the Common Stock,
make any distribution or enter into any transaction if the effect thereof
would be to cause the Exercise Price to be less than the par value per
share of Common Stock.
4.10. PERMITTED ISSUANCES. Notwithstanding anything
herein to the contrary, there shall be no adjustment in the Exercise Price
or the number of shares of Warrant Stock as a result of any Permitted
Issuance.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of
shares of Common Stock for which this Warrant is exercisable, or whenever
the price at which a share of Common Stock may be purchased upon exercise
of the Warrants, shall be adjusted pursuant to Section 4 hereof, the
Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company 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 the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property, warrants, or
other subscription or purchase rights referred to in Section 4.2 or 4.4
hereof), specifying the number of shares of Common Stock for which this
Warrant is exercisable and (if such adjustment was made pursuant to
Section 4.8 hereof) describing the number and kind of any other shares of
stock or Other Property for which this Warrant is exercisable, and any
change in the purchase price thereof, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of
such certificate to be delivered to each Holder at its address set forth
in the registration books maintained by the Company in accordance with
Section 17.2 hereof. The Company shall keep at its office or agency
designated pursuant to Section 12 hereof copies of all such certificates
and cause the same to be available for inspection at such office or agency
during normal business hours by any Holder or prospective purchaser of a
Warrant designated by a Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. Each Holder
of Warrants shall be entitled to the same rights to receive notice of
corporate action as any holder of Common Stock.
6. NO IMPAIRMENT
The Company shall not, by any action, including, without
limitation, through amendment of its certificate of incorporation or any
reorganization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant (and shall not amend its certificate of incorporation to authorize
any of the foregoing), but will at all times in good faith assist in the
carrying out of all such terms and the taking of all such actions as may
be necessary or appropriate to protect the rights of Holder against
impairment. Without limiting the generality of the foregoing, the Company
will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par
value, (b) 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,
and (c) use its best efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body as may be
necessary to enable the Company to perform its obligations pursuant to
this Warrant.
Upon the request of the Holder hereof, the Company will, at
any time during the period this Warrant is outstanding, acknowledge in
writing, in form satisfactory to such Holder, the continuing validity of
this Warrant and the obligations of the Company pursuant hereto.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK AND OTHER
SECURITIES AND PROPERTY; REGISTRATION WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all
times reserve and keep available for issuance and/or distribution upon the
exercise of Warrants such number of the authorized but unissued shares of
Common Stock and such amount of other securities and property as will be
sufficient to permit the exercise in full of all outstanding Warrants.
All shares of Common Stock and such other securities and property which
shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to
preemptive rights.
Before taking any action which would result in an
adjustment in the number of shares of Common Stock for which this Warrant
is exercisable or in the Exercise Price, the Company shall obtain all
authorizations or exemptions therefor, or consents thereto, as may be
necessary from any public regulatory body.
If any shares of Common Stock to be issued upon exercise of
Warrants require registration or qualification with any governmental
authority under any federal or state law (otherwise than as provided in
Section 9 hereof) before such shares may be so issued, the Company will in
good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered; provided, however, that the
Company shall have no obligation to so register or qualify if the
requirement for such registration or qualification is solely attributable
to any Holder's breach of Sections 3.1, 9.1, or 9.2 hereof or to the sale
by any Holder of Warrants in violation of law.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of Common Stock with respect to which any provision
of Section 4 hereof refers to the taking of a record of such holders, the
Company will in each case take such a record and will take such record as
of the close of business on a Business Day. Except as contemplated by
Section 3.1 or 9.2 hereof, the Company will not at any time, except upon
dissolution, liquidation, or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
9. TRANSFERS AND REGISTRATION RIGHTS
The Warrants and the Warrant Stock shall not be
transferred, hypothecated, or assigned prior to satisfaction of the
conditions specified in this Section 9, which conditions are intended to
ensure compliance with the provisions of the Securities Act with respect
to the Transfer of any Warrant or Warrant Stock. The Holder hereof, by
acceptance of this Warrant, agrees to be bound by the provisions of this
Section 9.
The Holders shall have the right to request registration of
such Warrant Stock pursuant to Sections 9.3 and 9.4 hereof.
9.1. RESTRICTIVE LEGEND. (a) Except as otherwise
provided in Section 9.8 hereof, each certificate for Warrant Stock
initially issued upon the exercise of this Warrant, and each certificate
for Warrant Stock,issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and are subject to the conditions specified in a
certain Amended and Restated Warrant dated as of December
31, 1996 issued by PRECISION STANDARD INC. No transfer of
the shares represented by this certificate shall be valid
or effective until such conditions have been fulfilled. A
copy of the form of such Warrant is on file with the
Secretary of PRECISION STANDARD INC. The holder of this
certificate, by acceptance of this certificate, agrees to
be bound by the provisions of such Warrant."
(b) Except as otherwise provided in Section 9.8 hereof,
each Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933,
as amended, and may not be transferred in violation of such
Act, the rules and regulations thereunder, or the
provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS; REQUESTS FOR
REGISTRATION. In addition to complying with section 3.1 hereof as to
Transfers of Warrants, prior to any Transfer or attempted Transfer of any
Warrant or any share of Restricted Common Stock, the holder of such
Warrant or Restricted Common Stock shall give ten days' prior written
notice (a "Transfer Notice") to the Company of such Holder's intention to
effect such Transfer, describing the manner and circumstances of the
proposed Transfer, and obtain from counsel to such Holder, who shall be
reasonably satisfactory to the Company, an opinion in form and substance
reasonably acceptable to the Company to the effect that the proposed
Transfer of such Warrant or such Restricted Common Stock may be effected
without registration under the Securities Act. After receipt of the
Transfer Notice and opinion, the Company shall, within five days thereof,
so notify such Holder and such Holder shall thereupon be entitled to
Transfer such Warrant or such Restricted Common Stock in accordance with
the terms of the Transfer Notice. Each certificate, if any, evidencing
such shares of Restricted Common Stock issued upon such Transfer shall
bear the restrictive legend set forth in Section 9.1(a) hereof, and each
Warrant issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1(b) hereof, unless, in the opinion of such counsel and
counsel to the Company, such legend is not required in order to ensure
compliance with the Securities Act. The holder of the Warrant or the
Restricted Common Stock, as the case may be, giving the Transfer Notice
shall not be entitled to transfer such Warrant or Restricted Common Stock
until receipt of notice from the Company pursuant to this Section 9.2.
9.3. REQUIRED REGISTRATION. (a) Subject to the
limitations contained in the last paragraph of Section 9.6 hereof, after
receipt of a written request from Holders of Warrants and/or Warrant Stock
representing the lesser of (A) an aggregate of 30% of the total of (i) all
shares of Warrant Stock then subject to purchase upon exercise of all
Warrants and (ii) all shares of Warrant Stock then outstanding and (B) a
number of shares of Warrant Stock which the Company reasonably believes
will, if sold in a public offering, yield proceeds of at least $500,000,
requesting that the Company effect the registration of Warrant Stock and
Warrant Stock issuable upon the exercise of any of such Holders' Warrants
under the Securities Act and specifying the intended method of disposition
thereof, the Company shall promptly notify all Holders in writing of the
receipt of such request and each such Holder, in lieu of exercising its
rights pursuant to Section 9.4 hereof, may elect (by written notice sent
to the Company within 15 days from the date of such Holder's receipt of
the aforementioned Company's notice) to have its shares of Warrant Stock
included in such registration pursuant to this Section 9.3. Thereupon, the
Company shall, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act of the Warrant Stock
which the company has been so requested to register by such Holders for
sale, by filing a registration statement with the Commission (a
"Registration Statement"), all to the extent required to permit the
disposition (in accordance with the intended method thereof, as aforesaid)
of the Warrant Stock so registered; provided, however, that the Company
shall not be required to effect more than three registrations of the
Warrant Stock pursuant to this Section 9.3, except that the Company shall
be required to effect one additional registration if the Holders
requesting such registration agree to assume all of the costs of such
registration.
(b) The Company shall be entitled to include in any
registration statement referred to in this Section 9.3, for sale in
accordance with the method of disposition specified by the requesting
Holders, shares of Common Stock to be sold by the Company for its own
account, except as and to the extent that in the opinion of the managing
underwriter selected by such Holder (if such method of disposition shall
be by an underwritten public offering) such inclusion would materially and
adversely affect the distribution of the Warrant Stock to be sold.
9.4. PIGGYBACK REGISTRATION. If the Company, at any
time following the Distribution Date, proposes to register any of its
Common Stock or any other class of equity securities (as defined in
Section 3(a)(ii) of the Exchange Act), or any of its securities
convertible into or exchangeable for its Common Stock or such equity
securities, under the Securities Act with a view towards the public
offering of such securities solely for cash (other than a registration on
Form ▇-▇, ▇-▇ or S-18, or any successor or other forms promulgated for
similar purposes), whether or not for sale for its own account, in a
manner which would permit registration of Warrant Stock for sale to the
public under the Securities Act, it shall each such time give written
notice to all Holders of its intention to do so and of such Holders'
rights under this Section 9.4 at least 30 days prior to the initial filing
with the Commission of the Registration Statement with respect thereto.
Upon the written request of any such Holder made within 20 days following
the receipt of any such notice (which request shall specify the Warrant
Stock intended to be disposed of by such Holder and included in such
Registration Statement), the Company shall use its best efforts to include
in such registration under the Securities Act all Warrant Stock which the
Company has been so requested to register by the Holders, to the extent
requisite to permit the disposition of the Warrant Stock so to be
registered; provided, however, that (a) if, at any time after giving
written notice of its intention to register any securities and prior to
the effective date of such Registration Statement, the Company shall
determine for any reason not to proceed with the proposed registration and
sale of the securities to be sold, the Company may, at its election, give
written notice of such determination to each Holder and, thereupon, shall
be relieved of its obligation to register any Warrant Stock in connection
with such proposed registration (but not from its obligation to pay the
registration expenses in connection therewith), and (ii) if such
registration involves an underwritten offering, all Holders requested to
be included in the registration must sell their Warrant Stock to the
underwriters selected by the Company or the sellers prompting such
registration on the same terms and conditions as apply to the Company or
such other sellers, with, if the offering is a combined primary and
secondary offering, only such differences (including any with respect to
liability insurance) as may by customary in combined primary and secondary
offerings. If a registration requested pursuant to this Section 9.4
involves an underwritten public offering, any Holder requested to be
included in such registration agrees to execute and deliver such powers of
attorney and custody or escrow agreements as may be customary or
appropriate for a secondary offering; provided, however, that any such
Holder may elect in writing prior to the initial distribution of a
preliminary prospectus (or a final prospectus if no preliminary prospectus
is distributed) in connection with such registration not to register or
sell such securities in connection with such registration.
9.5. REGISTRATION PROCEDURES. If the Company is
required by the provisions of this Section 9 to use its best efforts to
effect the registration of any of its securities under the Securities Act,
the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement and such amendments and supplements to such
Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration
Statement effective for a period of at least 45 days and, upon
the written request of Holders of a majority of the Warrant
Stock covered thereby, up to 180 days as necessary to complete
the distribution of the Warrant Stock as described therein;
provided, however, that before filing a Registration Statement
or prospectus, or any amendments or supplements thereto, the
Company, upon the prompt written request of the Holders of a
majority of the shares of Warrant Stock to be covered by such
Registration Statement or prospectus, will furnish to counsel
(selected by the Holders of a majority of the Warrant Stock
covered by such Registration Statement to represent all Holders
covered by such Registration Statement) copies of all documents
proposed to be filed, which documents will be subject to the
review of such counsel;
(b) furnish to each Holder of Warrant Stock covered by
such Registration Statement such number of copies of the
Registration Statement and of each amendment and supplement
thereto (in each case including all exhibits), such number of
copies of the prospectus included in such Registration Statement
(including each preliminary prospectus and summary prospectus),
in conformity with the requirements of the Securities Act, and
such other documents as such Holder may reasonably request in
order to facilitate the disposition of the Warrant Stock by such
Holder in accordance with the plan of distribution set forth for
such Holder therein;
(c) use its best efforts to register or qualify such
Warrant Stock covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions in the
United States as each Holder thereof shall reasonably request,
and do any and all other acts and things which may be reasonably
necessary or advisable to enable in such jurisdictions the sale
of the Warrant Stock owned by such Holder, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this clause (c),
it would not be obligated to be so qualified, to subject itself
to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(d) notify each Holder of any Warrant Stock covered by
such Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in
Section 9.5(a), of the Company's becoming aware that the
prospectus included in such 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 not misleading in light
of the circumstances then existing, and, at the request of any
such Holder, prepare and furnish to such Holder a reasonable
number of copies of any amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the
purchasers of such Warrant Stock, such prospectus shall not
include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing;
(e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of any 12-month period
(or 90 days, if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Warrant Stock is sold to
underwriters in a firm or best efforts underwritten offering, or
(ii) if not sold to underwriters in such an offering, beginning
with the first month of the Company's first fiscal quarter
commencing following the effective date of the Date of the
Registration Statement, which statements shall cover such 12-
month periods;
(f) obtain a "cold comfort" letter or letters from the
Company's independent public accountants addressed to the
underwriters, if any, and to the selling Holders which are in
the form and substance customarily given by independent public
accountants to underwriters in a public offering;
(g) make available for inspection (upon receipt of
appropriate assurances of confidentiality) by any seller of such
Warrant Stock covered by such Registration Statement, and to any
attorney, accountant, or other agent retained by such Holder in
connection with the registration, the financial and other
records and properties of the Company reasonably requested by
them in connection with the preparation of the Registration
Statement and which are pertinent to the disclosure requirements
for the registration and distribution of the Warrant Stock
thereunder;
(h) cause appropriate officers and employees of the
Company to be made available (upon receipt of appropriate
assurances of confidentiality) to any Holder of Warrant Stock
covered by such Registration Statement, and to any attorney,
accountant, or other agent retained by such Holder in connection
with the registration, at such reasonable times and locations as
may be requested by any such Holder in connection with the
preparation of the Registration Statement and as pertinent to
the disclosure requirements for the registration and
distribution of the Warrant Stock thereunder;
(i) furnish, at the request of any Holder requesting
registration of Warrant Stock pursuant to Section 9.3 hereof, on
the date that such Warrant Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Warrant Stock is not being sold through underwriters, on the
date that the Registration Statement with respect to such
Warrant Stock becomes effective, an opinion dated such date of
the independent counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if
any and, if such Warrant Stock is not being sold through
underwriters, then to the Holders making such request,
substantially to the effect that such Registration Statement has
become effective under the Securities Act and that (A) to the
best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for
that purpose have been instituted or are pending or threatened
under the Securities Act, (B) the Registration Statement, the
related prospectus, and each amendment or supplement thereto,
comply as to form in all material respects with the requirements
of the Securities Act (except that such counsel need express no
opinion as to financial statements or other financial data
contained therein), and (C) the descriptions in the Registration
Statement or the prospectus, or any amendment or supplement
thereto, of all legal matters and contracts and other legal
documents or instruments are accurate and fairly present the
information required to be shown. Such counsel shall also
state, on the basis of its examination and participation in
conferences in connection with the preparation of the
Registration Statement, that it has no reason to believe that
either the Registration Statement, on the effective date
thereof, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make a statement therein not misleading or that
the prospectus, or any amendment or supplement thereto (other
than financial material as to which such counsel need make no
statement), on the date thereof, contains any untrue statement
of a material fact or omits to state a material fact required to
be stated therein or necessary to make any statement therein, in
light of the circumstances under which it was made, not
misleading, except that such counsel need express no opinion as
to financial statements or notes thereto or the other financial
or statistical data contained in such Registration Statement,
prospectus, amendment, or supplement. Such counsel may state,
however, that it has not verified the accuracy, completeness, or
fairness of the statements therein and that it does not assume
any responsibility for the accuracy, completeness, or fairness
of such statements. Such opinion of counsel shall additionally
cover such other legal matters with respect to the registration
in respect of which such opinion is being given as is customary
in secondary offerings and as such Holders may reasonably
request; and
(j) enter into customary agreements (including any
underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such securities.
9.6. EXPENSES; LIMITATIONS ON REGISTRATION. All
expenses incurred in complying with this Section 9, including, without
limitation, all registration and filing fees (including all expenses
incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and expenses of
one counsel for the selling security holders (selected by those holding a
majority of Warrant Stock being registered), expenses of any special
audits (except provided in clause (d) below) incident to or required by
any such registration, and expenses of complying with the securities or
blue sky laws of any jurisdictions pursuant to Section 9.5(d) hereof,
shall be paid by the Company, except that:
(a) all such expenses in connection with any amendment or
supplement to the Registration Statement or prospectus filed
more than 120 days following the effective date of such
Registration Statement because any Holder of Warrant Stock has
not effected the disposition of the securities requested to be
registered shall be paid by such Holder;
(b) the Company shall not be liable for any fees,
discounts, or commissions to any underwriter or any fees or
disbursements of counsel for any underwriter in respect of the
securities sold by such Holder;
(c) notwithstanding the foregoing, if any jurisdiction in
which securities are to be qualified shall require that expenses
incurred in connection with the qualifications of securities in
that jurisdiction be borne by selling shareholders, then the
expenses of qualification of Warrant Stock in such jurisdiction
shall be payable by the selling Holders pro rata; and
(d) the Holders requesting registration pursuant to
Section 9.3 hereof shall bear the additional fees and costs of
the Company's auditors resulting from the Company's inability to
use year-end financial statements in the Registration Statement
filed at their request if such request is made at a time not
within 45 days following the end of the Company's fiscal year.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 9 in respect of the
securities which are to be registered at the request of any Holder that
such Holder shall furnish to the Company such information regarding the
securities held by such Holder and the intended method of disposition
thereof as the Company shall reasonably request and as shall be required
in connection with the action taken by the Company.
9.7. INDEMNIFICATION. (a) In the event of any
registration of any of the Warrant Stock under the Securities Act pursuant
to this Section 9, the Company shall indemnify and hold harmless the
Holder of such Warrant Stock, such Holder's directors and officers, and
each other Person (including each underwriter) who participated in the
offering of such Warrant Stock and each other Person, if any, who controls
such Holder or such participating Person within the meaning of the
Securities Act, against any and all losses, claims, damages, or
liabilities, joint or several, to which such Holder, director, officer,
participating Person, or controlling Person may become subject under the
Securities Act or any other statute or at common law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any alleged untrue statement of any
material fact contained, on the effective date thereof, in any
Registration Statement pursuant to which such securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or (ii) any
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
shall reimburse such holder, director, officer, participating Person, or
controlling Person for any legal or any other expenses reasonably incurred
by such holder, director, officer, participating Person, or controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any alleged untrue
statement or alleged omission made in such Registration Statement,
preliminary prospectus, prospectus, amendment, or supplement in reliance
upon and in conformity with written information furnished to the Company
by such Holder or such other indemnified Person specifically for use
therein or (in the case of any registration pursuant to Section 9.3
hereof) so furnished for such purposes by any underwriter. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or on behalf of such holder, director, officer, participating Person,
or controlling Person and shall survive the transfer of such securities by
such Holder.
(b) Each Holder, by acceptance hereof, agrees to indemnify
and hold harmless the Company, its directors, and officers and each other
Person, if any, who controls the Company within the meaning of the
Securities Act, against any and all losses, claims, damages, or
liabilities, joint or several, to which the Company or any such director,
officer, or Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based
upon information in writing provided to the Company by such Holder
contained, on the effective date thereof, in any Registration Statement
pursuant to which securities were registered under the Securities Act at
the request of such Holder, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto; provided,
however, that any such Holder shall not be required to indemnify the
Company in an amount exceeding the net proceeds, after fees, commissions,
and other selling expenses, actually received by such Holder from the
offering of Warrant Stock.
(c) If the indemnification provided for in this section
9.7 is unavailable to hold harmless an indemnified party under subsection
(a) or (b) of this Section 9.7 in respect of any losses, claims, damages,
or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, or
liabilities (or actions in respect thereof) in proportion to its fault as
compared to the total fault of all persons who caused or contributed to
the loss. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to in this Section 9.7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. 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 Section 9.7, each Person, if any, who controls the
Holder hereof within the meaning of the Securities Act shall have the same
rights to contribution as such Holder, and each Person, if any, who
controls the company within the meaning of the Securities Act, each
officer of the Company who has signed the Registration Statement, and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to this Section 9.7(c). The contribution
agreements set forth above shall be in addition to any liabilities which
any indemnifying party may have pursuant to this Warrant, at common law,
or otherwise.
(d) Any party entitled to indemnity or contribution will,
promptly upon receipt of notice of commencement of any action, suit, or
proceeding against such party in respect of which a claim for
indemnification or contribution may be made against another party pursuant
to this Section 9.7, notify such party from whom indemnification or
contribution may be sought, but the omission so to notify such party shall
not relieve the party from whom contribution may be sought from any other
obligation it may have pursuant to this Section 9.7, or otherwise, except
to the extent that such party was actually prejudiced by such omission.
In case any such action is brought against an indemnified party, unless in
such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties exists in respect of
such claim, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation.
9.8. TERMINATION OF RESTRICTIONS. Notwithstanding the
foregoing provisions of this Section 9, the restrictions imposed by this
Section upon the transferability of Warrants, Warrant Stock, and
Restricted Common Stock (or Common Stock issuable upon the exercise of
Warrants) and the legend requirements of Section 9.1 hereof shall
terminate as to any particular Warrant, share of Warrant Stock, or
Restricted Common Stock (or Common Stock issuable upon the exercise of
Warrants) (a) when and so long as such security shall have been
effectively registered under the Securities Act and disposed of pursuant
thereto, (b) when the Company shall have received an opinion of counsel
reasonably satisfactory to it that such legend is not required in order to
ensure compliance with the Securities Act or (c) when otherwise validly
transferred pursuant to Rule 144 or any similar exemption from
registration under the Securities Act such that such security may
thereafter be transferred by a Person who is not an Affiliate of the
Company without registration under the Securities Act. Whenever the
restrictions imposed by this Section 9 shall terminate, as hereinabove
provided, the Company's obligations to register Warrants or Warrant Stock
pursuant to Section 9.3 or 9.4 hereof shall terminate and each Holder
shall be entitled to receive from the Company, at the expense of the
Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON -------
-----, 19---, AND ARE OF NO FURTHER FORCE AND EFFECT."
Each Warrant issued upon registration of transfer, division, or
combination of, or in substitution for, any Warrant or Warrants entitled
to bear such legend shall have a similar legend endorsed thereon.
Whenever the restrictions imposed by this Section 9.8 shall terminate as
to any share of Restricted Common Stock, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive
legend set forth in Section 9.1(a) hereof.
9.9. LISTING ON SECURITIES EXCHANGE. If the Company
shall list any shares of Common Stock on any securities exchange, it will,
at its expense, list thereon, maintain, and, when necessary, increase such
listing of, all shares of Common Stock issued or, to the extent
permissible under the securities exchange rules, issuable upon the
exercise of this Warrant so long as any shares of Common Stock shall be so
listed.
9.10. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.
Notwithstanding any other provisions of this Section 9:
(a) the Company shall not be obligated to register the
Warrant Stock of any Holder if, in the opinion of counsel to the
Company reasonably satisfactory to the Holder and its counsel
(or, if the Holder has engaged an investment banking firm, to
such investment banking firm and its counsel), the public sale
of such Warrant Stock in the manner proposed by such Holder (or
by such investment banking firm) may be promptly effected
without registering such Warrant Stock under the Securities Act;
(b) the Company shall not be obligated to register the
Warrant Stock of any Holder pursuant to Section 9.3 hereof if
the Company has had a registration statement, pursuant to which
such Holder had a right to have its Warrant Stock included
pursuant to Section 9.3 or 9.4 hereof, declared effective within
six months prior to the date of the request pursuant to Section
9.3 hereof; provided, however, that if any Holder elected to
have shares of its Warrant Stock included pursuant to such
registration statement but some or all of such shares were
excluded pursuant to Section 9.10 hereof, then this subsection
(b) shall be inapplicable;
(c) the Company shall not at any time grant any Person the
right to request that the Company effect the registration of its
Common Stock under the Securities Act on terms and conditions
more favorable than those rights granted pursuant hereto to
Holders;
(d) the Company shall not be required to file a
registration statement requested pursuant to Section 9.3 hereof
on any date which shall be after the last day of a fiscal year
of the Company and prior to the earlier of (i) the date on which
the Company's audited financial statements for such fiscal year
are first available, and (ii) the date 120 days following the
last day of such fiscal year;
(e) if the Company shall furnish to Holders requesting a
registration under Section 9.3 hereof a certificate signed by
the President of the Company and stating that in the good faith
judgment of the Board of Directors of the Company it would be
seriously detrimental to the Company or its shareholders for a
Registration Statement to be filed in the near future, then the
Company's obligations to register Warrant Stock pursuant to
Section 9.3 hereof shall be deferred for a period of not more
than 90 days; provided, however, that the Company may not
furnish such a certificate to Holders more than once during any
consecutive 12-month period;
(f) if a registration pursuant to Section 9.4 hereof
involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, marketing
factors require a limitation of the number of securities to be
underwritten, then the Company will include in such registration
(i) first, 100% of the securities the sellers prompting such
registration propose to sell, and (ii) second, to the extent of
the remaining securities proposed to be sold by the Company and
the number of shares of Warrant Stock requested to be included
in such registration which, in the opinion of such managing
underwriter, can be sold without adversely affecting the
marketing of such underwriting, the securities proposed to be
sold by the Company and the number of shares of Warrant Stock
which the Holders have requested to be included in such
registration shall be allocated pro rata among the Company and
all requesting Holders on the basis of the relative number of
shares requested to be included in such registration by the
Company and all such Holders; and for purposes of this Section
9.10(f) only, the term Holders shall include (in addition to a
"Holder" as defined in Section 1 hereof) all other persons, if
any, who have been granted and have elected to exercise
registration rights under any other agreement with the Company
and the term Warrant Stock shall include (in addition to the
term "Warrant Stock" as defined in Section 1 hereof) Common
Stock which Holders (other than any seller prompting such
registration) elect to include in such registration pursuant to
such other agreements with the Company;
(g) if any registration shall be made in connection with a
sale to the general public of Common Stock, whether by the
Company or pursuant to the exercise of registration rights
granted by the Company, each Holder, agrees that, upon request
of the Company or the managing underwriter thereof, the Holder
shall not, without the prior written consent of the Company or
such underwriter, effect any public sale or public distribution,
including any sale pursuant to Rule 144 under the Securities
Act, of any Common Stock, or of any security convertible into or
exchangeable or exercisable for Common Stock (in each case other
than as part of such underwritten public offering) within seven
days prior to or 90 days (or such lesser period as the Company
and the managing underwriter may permit) following the effective
date of such registration; the foregoing is conditioned,
however, on the Company's agreeing not to so sell, and to cause
its executive officers not to so sell, any Common Stock during
any such 90-day period, and its further agreement that it shall
not enter into any agreement with any prospective holder of
Common Stock providing registration rights to such holder unless
such agreement includes a term equivalent to the first sentence
of this paragraph (g);
(h) the obligation of the Company to honor a request to
register Warrant Stock under Section 9 of this Agreement shall
terminate on the Expiration Date provided, that any registration
duly requested prior to the Expiration Date must be completed;
and
(i) the Company shall not be obligated to pay the expenses
of any registration proceeding begun pursuant to Section 9.3
hereof if the registration request is subsequently withdrawn,
unless the Holders agree to forfeit their right to make one
demand registration pursuant to such Section 9.3.
9.11. SELECTION OF MANAGING UNDERWRITERS. The managing
underwriter for any offering of Common Stock to be registered pursuant to
Section 9.3 hereof shall be a nationally recognized investment banking
firm selected by the Company with the consent of the Holders of a majority
of the shares being so registered (other than any shares being registered
pursuant to Section 9.4 hereof), which consent shall not be unreasonably
withheld.
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant
or Restricted Common Stock in supplying such information as may be
reasonably necessary for such Holder to complete and file any information
reporting forms now or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale
of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction, or mutilation of this Warrant and indemnity reasonably
satisfactory to it and, in case of mutilation, upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a
new Warrant of like tenor to such Holder; provided, however, that in the
case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency (which may be the principal
executive offices of the Company) where the Warrants may be presented for
exercise, registration of transfer, division, or combination as provided
in this Warrant.
13. FILINGS
The Company will file on or before the required date all
regular or periodic reports (pursuant to the Exchange Act) with the
Commission and will deliver to each Holder, promptly upon the later of (i)
their becoming available or (ii) the date of their effectiveness, one copy
of each report, notice, or proxy statement sent by the Company to its
stockholders generally, and of each regular or periodic report (pursuant
to the Exchange Act) and any Registration Statement, prospectus, or
written communication (other than transmittal letters and without
exhibits) (pursuant to the Securities Act), filed by the Company with (a)
the Commission, or (b) any securities exchange on which shares of Common
Stock are listed.
14. REDEMPTION BY THE COMPANY
14.1. MANDATORY REDEMPTION. (a) This Warrant (or any
portion thereof from time to time remaining unexercised) shall be redeemed
in installments commencing on August 31, 1997 and continuing on October
31, 1997 and the last day of each successive January, April, July and
October until October 31, 1998, on which date this Warrant shall be fully
redeemed (each such mandatory redemption date hereinafter referred to as
an "Installment Date"). On the first Installment Date, three-eighths of
the total shares issuable upon full exercise of this Warrant as of the
date of issuance (as adjusted from time to time pursuant to Section 4
hereof) shall be cancelled and redeemed. As of each subsequent
Installment Date, one-eighth of the total shares issuable upon full
exercise of this Warrant as of the date of issuance (as adjusted from time
to time pursuant to Section 4 hereof) shall be cancelled and redeemed.
Any reduction in the shares evidenced hereby due to a partial exercise of
this Warrant prior to the date this Warrant has been fully redeemed shall
be applied to the most remote redemption installments to become due.
Nothing in this Section 14 shall limit the right of any Holder hereof to
exercise this Warrant in whole or in part at any time.
(b) The redemption price per share on any Installment Date
shall be determined as follows:
(i) the price per share for 35% of any shares
required to be redeemed and cancelled pursuant to this Section
14.1 on any Installment Date shall be the result of subtracting
(A) the Exercise Price, from (B) the average Current Market
Price of the Company's Common Stock for the thirty (30) Trading
Days following the date which is fifteen (15) Trading Days prior
to the date the Company filed its third quarter 1996 Form 10-Q
with the Commission.
(ii) the price per share for the remaining 65% of any
shares required to be redeemed and cancelled pursuant to this
Section 14.1 on any Installment Date shall be the result of
subtracting (A) the Exercise Price, from (B) the average Current
Market Price of the Company's Common Stock for the twenty-five
(25) Trading Days immediately preceding the date which is five
(5) Trading Days prior to the respective Installment Date. Such
price may not be less than zero.
(c) The aggregate redemption payment payable on any
Installment Date may be paid either in cash or in Common Stock of the
Company or a combination thereof provided, that Common Stock may be
delivered in redemption of this Warrant on any Installment Date only if
the resale of such Common Stock by the Holder is the subject of an
already-effective Registration Statement and is immediately publicly
tradable without cutback or limitation of any kind. The aggregate cash
redemption price determined pursuant to either subsection (b)(i) or
(b)(ii) of this Section may be converted into shares of Common Stock by
dividing the respective aggregate redemption price by the average Current
Market Price of the Common Stock for the twenty-five (25) Trading Days
immediately preceding the date which is five (5) Trading Days prior to the
respective Installment Date.
(d) If the Company elects to redeem all or any portion of
this Warrant with Common Stock, the Holder shall have all the rights and
benefits of Section 9 hereof as if such registration had been a demand
registration at the request of the Holder pursuant to Section 9.3 hereof
provided, that no such registration shall be counted against the maximum
number of registrations which may be required pursuant to such Section
9.3. The Company agrees that any such registration shall be commenced and
kept effective for a period following the respective Installment Date of
not less than the sum of (i) eighteen months, plus (ii) the number of
whole months between December 31, 1996 and the date the first registration
of Common Stock issued in redemption of this Warrant became effective, at
no cost to the Holder, notwithstanding the provisions of Sections 9.6(a)
and (d) hereof and without regard to the limitations described in Section
9.10 hereof.
(e) Except as provided above, the Warrant shall not be
subject to redemption without the prior written agreement of the
respective Holders thereof.
14.2. REDEMPTION DEFAULT. (a) If the Company fails to
complete a redemption required on August 31, 1997 or October 31, 1997 on
such date, if such failure has not been cured within five (5) Business
Days after written notice of such failure has been delivered to counsel to
the Company, then notwithstanding any of the foregoing to the contrary:
(i) the redemption price with respect to 100% of such
installment in default and all future installments shall change
to the higher of (i) the redemption price specified pursuant to
Section 14.1(b)(ii), or (ii) the result of subtracting (A) the
Exercise Price, from (B) the average Current Market Price of the
Company's Common Stock for the twenty-five (25) Trading Days
preceding the date which is five (5) Trading Days prior to the
date on which such redemption price is actually paid; and
(ii) interest shall accrue on the unpaid installments
in the form of cash and shares of Common Stock; the amount of
such interest shall be equal to the sum of (A) $75,000 in cash
(or the number of shares of Common Stock which is the result of
dividing $75,000 by the average Current Market Price of the
Common Stock for the twenty-five (25) Trading Days immediately
preceding the date which is five (5) Trading Days prior to
August 31, 1997), payable immediately (to compensate the holder
for previous delays in commencing the redemption), plus (B) four
ten-thousandths (.0004) of a share of Common Stock per
unredeemed Warrant share per day from the respective Installment
Date until the redemption payment is made. Such interest shall
be paid quarterly ten (10) days after the last day of each
calendar quarter. Such interest may be paid in the form of
Common Stock only if such stock is then registered and freely
tradable; otherwise, the cash equivalent shall be paid,
calculated as the Current Market Value of the stock as of the
last day of the calendar quarter.
(b) If, as of January 31, 1998, the Company is in default
with respect to the installment due on such date (and/or remains in
default with respect to any previous installment), and such failure has
not been cured within five (5) Business Days after written notice of such
failure has been delivered to counsel to the Company, then notwithstanding
any of the foregoing to the contrary:
(i) the redemption price with respect to such
installment in default shall be payable only in cash;
(ii) interest shall accrue on all installments in
default in the form of shares of Common Stock and be payable as
provided in subsection (a)(ii) above;
(iii) the Expiration Date shall be automatically
extended to September 9, 2001; and
(iv) the Company shall thereafter retain the
obligation, but not the unilateral right, to redeem the Warrant
pursuant to this Section 14. At January 31, 1998 or any date
thereafter, the holder hereof may notify the Company that no
further redemption of this Warrant pursuant to this Section 14
shall be permitted, whereupon the obligations of the Company
under this Section 14 shall be limited to (A) payment of any
interest on defaulted installments accrued to such date, and (B)
maintaining the effectiveness of the registration of any stock
previously delivered in redemption of portions of this Warrant
as required in Section 14.1.
(c) If the Company fails to complete a redemption required
on April 30, 1998 or July 31, 1998 on such date, and such failure has not
been cured within five (5) Business Days after written notice of such
failure has been delivered to counsel to the Company, then notwithstanding
any of the foregoing to the contrary:
(i) the redemption price with respect to such
installment in default shall be payable only in cash; and
(ii) interest shall accrue on all installments in
default in the form of shares of Common Stock and be payable as
provided in subsection (a)(ii) above.
(d) If, as of October 31, 1998, the Company is in default
with respect to the installment due on such date (and/or remains in
default with respect to any previous installment), and such default has
not been cured within five (5) Business Days after written notice of such
default has been delivered to counsel to the Company, then notwithstanding
any of the foregoing to the contrary:
(i) the redemption price with respect to such
installment in default shall be immediately payable only in
cash;
(ii) interest shall thereafter accrue on all
installments in default in cash at the rate of 13-1/2% per annum
and be payable on demand;
(iii) the Company shall thereafter retain the
obligation, but not the unilateral right, to redeem the Warrant
pursuant to this Section 14. At October 31, 1998 or any date
thereafter, the holder hereof may notify the Company that no
further redemption of this Warrant pursuant to this Section 14
shall be permitted, whereupon the obligations of the Company
under this Section 14 shall be limited to (A) payment of any
interest on defaulted installments accrued to such date, and (B)
maintaining the effectiveness of the registration of any stock
previously delivered in redemption of portions of this Warrant
as required in Section 14.1; and
(iv) all Warrant Stock outstanding shall, at the
option of and upon demand by the Holder, immediately be redeemed
at a price per share equal to the average Current Market Price
of the Company's Common Stock for the twenty-five (25) Trading
Days preceding the date which is five (5) Trading Days
immediately preceding the date of demand.
(e) The Company is aware that ▇▇▇▇▇▇▇ ▇▇▇▇ is executing a
Lockup Agreement dated as of December 31, 1996 in favor of the Bank (the
"Lockup Agreement") whereby Mr. Gold and certain of his affiliates agree
generally to limit sales of Common Stock during specified periods prior to
the Installment Dates. The Company further understands that the delivery
of the Lockup Agreement is an important part of the consideration
delivered to the Bank in connection with this Warrant, and that the Bank
would not accept this Warrant in its present form but for the delivery of
such Lockup Agreement. Mr. Gold has requested that the Company hold him
harmless from liability under the Lockup Agreement.
The Company therefore agrees that should any damages become
payable as a result of a breach or violation of the Lockup Agreement, the
Company will pay the amount of such damages to the respective Holder upon
demand.
14.3. REGISTRATION DEFAULT. If the Company fails to
maintain a continuous, effective registration statement facilitating the
sale of Common Stock issued to redeem any or all of this Warrant pursuant
to Section 14.1 (except for any blackout periods, limited to no more than
thirty (30) calendar days each, which are, in the respective circumstances
and in the reasonable opinion of counsel to the Bank and the Company,
legally mandated but are not the result of a failure to file periodic
post-effective amendments), interest shall accrue on the daily Current
Market Value of any such Common Stock at the rate of 13-1/2% per annum.
Such interest shall be payable in cash on demand.
14.4. REDEMPTION PROCEDURES. Not later than twenty
Business Days prior to each Installment Date, the Company shall notify
each Holder in writing, to the extent permitted hereby, whether the
respective redemption installment is to be paid in cash or Common Stock.
On each respective Installment Date, each Holder shall assign to the
Company such Holder's Warrant or portion thereof being redeemed, without
any representation or warranty, by the surrender of such Holder's Warrant
at the principal office of the Company referred to in Section 2.1 hereof
against payment therefor of the respective redemption price. Any cash
redemption price shall be paid, at the option of each Holder, by (a) wire
transfer to an account in a bank located in the United States designated
by such Holder for such purpose, or (b) a check payable to the order of
such Holder. Any Common Stock certificates delivered in redemption of
this Warrant shall be accompanied by a copy of the respective registration
statement and any amendments thereto, together with an appropriate written
representation that it remains effective. If less than all of any
Holder's Warrant is being redeemed, the Company shall, pursuant to Section
3 hereof, cancel such Warrant and issue in the name of, and deliver to,
such Holder a new Warrant for the portion not being redeemed.
14.5. SURVIVAL OF OBLIGATIONS. The provisions of
Sections 9, 15 and 16 hereof, the registration requirements of this
Section 14 and the provisions of Section 14.2(e) shall survive the final
redemption of this Warrant, regardless of whether or not all original
Warrants have been redelivered to the Company.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action
by the Holder to purchase shares of Common Stock, and no enumeration
herein of the rights or privileges of the Holder hereof, shall give rise
to any liability of such Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
16. MISCELLANEOUS
16.1. NONWAIVER AND EXPENSES. No course of dealing or
any delay or failure to exercise any right pursuant hereto on the part of
the Holder hereof shall operate as a waiver of such right or otherwise
prejudice such Holder's rights, powers, or remedies. If the Company fails
to make, when due, any payment provided for pursuant hereto, or fails to
comply with any other provision of this Warrant, the Company shall pay to
such Holder such amounts as shall be sufficient to cover any costs and
expenses, including, without limitation, reasonable attorneys' fees,
including those incurred in bankruptcy and appellate proceedings, incurred
by such Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers, or remedies pursuant
hereto.
16.2. NOTICE. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration, or other communication shall or may be given to or
served upon any of the parties by another, or whenever any of the parties
desires to give or serve upon another any communication with respect to
this Warrant, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing and either shall
be delivered in person with receipt acknowledged or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) If to the Holder hereof, at the address specified by
such Holder to the Company or at the address set forth in the
books of registration maintained by the Company; and
(b) If to the Company, at
Precision Standard Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required pursuant hereto may be waived
in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration, or other communication
pursuant hereto shall be deemed to have been duly given or served on the
date on which personally delivered, with receipt acknowledged, or two
Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies (other than by
personal delivery) of any notice, demand, request, consent, approval,
declaration, or other communication to each person designated herein to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration, or other
communication.
16.3. INDEMNIFICATION. The Company agrees to indemnify
and hold harmless the Holder hereof from and against any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses, and disbursements of any kind
which may be imposed upon, incurred by, or asserted against such Holder in
any manner relating to or arising out of (i) such Holder's exercise of
this Warrant and/or ownership of any shares of Warrant Stock issued in
consequence thereof or (ii) any litigation to which such Holder is made a
party in its capacity as a stockholder of the Company; provided, however,
that the Company will not be liable pursuant hereto to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, attorneys' fees, expenses, or disbursements are
found in a final non-appealable judgment by a court to have resulted from
such Holder's gross negligence, bad faith, or willful misconduct in its
capacity as a stockholder or warrantholder of the Company.
16.4. REMEDIES. Each Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights pursuant
to Section 9 of this Warrant. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
16.5. SUCCESSORS AND ASSIGNS. Subject to the pro-
visions of Sections 3.1 and 9 hereof, this Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of the Holder
hereof. The provisions of this Warrant are intended to be for the benefit
of all Holders from time to time of this Warrant and shall be enforceable
by any such Holder.
16.6. AMENDMENT. This Warrant and all other Warrants
may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Majority Holders, provided that no
Warrant may be modified or amended to reduce the number of shares of
Common Stock for which such Warrant is exercisable or to increase the
price at which such shares may be purchased upon exercise of such Warrant
(before giving effect to any adjustment provided for therein) or to reduce
the length of the Exercise Period without the prior written consent of the
Holder thereof.
16.7. SEVERABILITY. Wherever possible, each provision
of this Warrant shall be interpreted in such manner as to be effective and
valid under law, but if any provision of this Warrant shall be prohibited
by or invalid under law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Warrant.
16.8. HEADINGS. The headings used in this Warrant are
for convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
16.9. GOVERNING LAW.
This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflict of laws.
** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **
IN WITNESS WHEREOF, the Company has caused this Warrant to
be duly executed and attested by its Secretary or an Assistant Secretary.
Dated: March 19, 1997.
PRECISION STANDARD, INC.
By:/s/▇▇▇▇▇▇▇ ▇. Gold
ATTEST:
By:/s/▇▇▇▇▇▇▇▇ ▇. Page
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for the purchase of Shares of Common
Stock of Precision Standard Inc. all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for
the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and
delivered to --------------- whose address is -----------------------
---- and, if such shares of Common Stock shall not include all of the
shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common
Stock issuable pursuant hereto be delivered to the undersigned.
[Payment of the Exercise Price is enclosed.] [Please
cancel an additional -------------------- shares of the Warrant in payment
of the Exercise Price. This Warrant shall thereafter be exercisable for
an additional --------------- shares.]
----------------------------------
(Name of Registered Owner)
----------------------------------
(Signature of Registered Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within warrant in every
particular, without alteration or enlargement or any change
whatsoever.
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns, and transfers unto the Assignee named below
all of the rights of the undersigned pursuant to this Warrant, with
respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint ----------------------
attorney-in-fact to register such transfer on the books of Precision
Standard Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:---------------- Print Name:----------------------------
Signature:-----------------------------
Witness:-------------------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.