WARRANT AGREEMENT
AGREEMENT, dated as of this ____th day of ___________, 1997, by and among
TEKGRAF, INC., a Delaware corporation ("Company"), AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent (the "Warrant Agent"), and ▇.▇. ▇▇▇▇▇ INVESTMENT
BANKING CORP., a New York corporation ("▇▇▇▇▇" or the "Underwriter").
W I T N E S S E T H
WHEREAS, in connection with a public offering of up to 2,500,000 units
("Units"), each unit consisting of one (1) share of the Company's Class A Common
Stock, $.001 par value ("Common Stock") and one (1) redeemable Warrant
("Warrants") pursuant to an underwriting agreement (the "Underwriting
Agreement") dated _______________, 1997 between the Company and the Underwriter
and the issuance to the Underwriter or its designees of Unit Purchase Options to
purchase an aggregate of 250,000 additional Units, to be dated as of __________,
1997 (the "Unit Purchase Options"), the Company may issue up to ______ Warrants;
and
WHEREAS, each Warrant initially entitles the Registered Holder thereof to
purchase one (1) share of Common Stock; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the Registered Holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Aggregate Per Share Price" shall mean the Purchase Price per share
multiplied by the number of shares of Common Stock purchasable upon the exercise
of a Warrant.
(b) "Class A Aggregate Per Share Price" shall mean $7.00.
(c) "Common Stock" shall mean stock of the Company of any class, whether
now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of ______ shares of Class A Common
Stock, $.001 par value and _______ shares of Class B Common Stock, $.001 par
value.
(d) "Corporate Office" shall mean the office of the Warrant Agent (or its
successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
(e) "Exercise Date" shall mean, as to any Warrant, the date on which the
Warrant Agent shall have received both (a) the Warrant Certificate representing
such Warrant, with the exercise form thereon duly executed by the Registered
Holder thereof or his attorney duly authorized in writing, and (b) payment in
cash, or by official bank or certified check made payable to the Company, of an
amount in lawful money of the United States of America equal to the applicable
Purchase Price.
(f) "Initial Warrant Exercise Date" shall mean __________, 1997.
(g) "Market Price" shall mean shall mean (i) the average closing bid price
of the Common Stock, for thirty (30) consecutive business days ending on the
Calculation Date as reported by Nasdaq, if the Common Stock is traded on the
Nasdaq SmallCap Market, or (ii) the average last reported sale price of the
Common Stock, for thirty (30) consecutive business days ending on the
Calculation Date, as reported by the primary exchange on which the Common Stock
is traded, if the Common Stock is traded on a national securities exchange, or
by Nasdaq, if the Common Stock is traded on the Nasdaq National Market.
(h) "Purchase Price" shall mean the purchase price to be paid upon exercise
of each Warrant in accordance with the terms hereof, which price shall be $7.00,
subject to adjustment from time to time pursuant to the provisions of Section 9
hereof, and subject to the Company's right to reduce the Purchase Price upon
notice to all Registered Holders of Warrants.
(i) "Redemption Price" shall mean the price at which the Company may, at
its option in accordance with the terms hereof, redeem the Warrants, which price
shall be $0.05 per Warrant.
(j) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(i) "Transfer Agent" shall mean American Stock Transfer & Trust Company, as
the Company's transfer agent, or its authorized successor, as such.
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(l) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
_________, 2002 (subject to extension as provided herein and in Section 9(e) or,
with respect to Warrants which are outstanding as of the applicable Redemption
Date (as defined in Section 8) and specifically excluding Warrants issuable upon
exercise of Unit Purchase Options if the Unit Purchase Options have not been
exercised, the Redemption Date, whichever is earlier; provided that if such date
shall in the State of New York be a holiday or a day on which banks are
authorized or required to close, then 5:00 P.M. (New York time) on the next
following day which in the State of New York is not a holiday or a day on which
banks are authorized or required to close. Upon notice to all Registered
Holders, the Company shall have the right to extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant initially shall entitle the Registered Holder of the Warrant
Certificate representing such Warrant to purchase one share of Common Stock upon
the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) The Warrants included in the offering of Units will be detachable and
separately transferable immediately from the shares of Common Stock constituting
part of such Units.
(c) Upon execution of this Agreement, Warrant Certificates representing the
number of Warrants sold pursuant to the Underwriting Agreement shall be executed
by the Company and delivered to the Warrant Agent. Upon written order of the
Company signed by its President or Chairman or a Vice President and by its
Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent as part of the Units.
(d) From time to time, up to the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of __________ shares of Common
Stock, subject to adjustment as described herein, upon the exercise of Warrants
in accordance with this Agreement.
(e) From time to time, up to the Warrant Expiration Date, the Warrant Agent
shall countersign and deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer or
exchange permitted under this Agreement; provided that no Warrant Certificates
shall be issued except (i) those initially issued hereunder, (ii) those issued
on or after the Initial Warrant Exercise Date, upon the exercise of fewer than
all Warrants represented by any Warrant Certificate, to evidence any unexercised
Warrants held by the exercising Registered Holder, (iii) those issued upon any
transfer or exchange pursuant to Section 6; (iv) those issued in replacement of
lost, stolen, destroyed or
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mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant
to the Unit Purchase Option; and (vi) at the option of the Company, in such form
as may be approved by the its Board of Directors, to reflect any adjustment or
change in the Purchase Price, the number of shares of Common Stock purchasable
upon exercise of the Warrants or the Target Price(s) therefor made pursuant to
Section 8 hereof.
(f) Pursuant to the terms of the Unit Purchase Options, the Underwriter may
purchase up to ____ Units, which include up to ______ Warrants. Notwithstanding
anything to the contrary contained herein, the Warrants underlying the Unit
Purchase Option shall not be subject to redemption by the Company except under
the terms and conditions set forth in the Unit Purchase Options.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) and
may have such letters, numbers or other marks of identification or designation
and such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage or to the requirements of Section 2(d). The Warrant Certificates shall be
dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrant Certificates shall be
numbered serially with the letter W on Warrants of all denominations.
(b) Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President and by its Secretary or
an Assistant Secretary, by manual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a facsimile of the Company's seal.
Warrant Certificates shall be manually countersigned by the Warrant Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Warrant Certificates shall cease
to be an officer of the Company or to hold the particular office referenced in
the Warrant Certificate before the date of issuance of the Warrant Certificates
or before countersignature by the Warrant Agent and issue and delivery thereof,
such Warrant Certificates may nevertheless be countersigned by the Warrant
Agent, issued and delivered with the same force and effect as though the person
who signed such Warrant Certificates had not ceased to be an officer of the
Company or to hold such office. After countersignature by the Warrant Agent,
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder without further action by the Company, except as otherwise provided by
Section 4(a) hereof.
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SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof at any
time on or after the Initial Exercise Date, but not after the Warrant Expiration
Date, upon the terms and subject to the conditions set forth herein and in the
applicable Warrant Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date and the person
entitled to receive the securities deliverable upon such exercise shall be
treated for all purposes as the holder of those securities upon the exercise of
the Warrant as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date, the Warrant Agent shall deposit the
proceeds received from the exercise of a Warrant and shall notify the Company in
writing of the exercise of the Warrants. Promptly following, and in any event
within five days after the date of such notice from the Warrant Agent, the
Warrant Agent, on behalf of the Company, shall cause to be issued and delivered
by the Transfer Agent, to the person or persons entitled to receive the same, a
certificate or certificates for the securities deliverable upon such exercise,
(plus a Warrant Certificate for any remaining unexercised Warrants of the
Registered Holder) unless prior to the date of issuance of such certificates the
Company shall instruct the Warrant Agent to refrain from causing such issuance
of certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Notwithstanding the foregoing, in the case of
payment made in the form of a check drawn on an account of the Underwriter or
such other investment banks and brokerage houses as the Company shall approve in
writing to the Warrant Agent, certificates shall immediately be issued without
prior notice to the Company or any delay. Upon the exercise of any Warrant and
clearance of the funds received, the Warrant Agent shall promptly remit the
payment received for the Warrant (the "Warrant Proceeds") to the Company or as
the Company may direct in writing, subject to the provisions of Sections 4(b)
and 4(c) hereof.
(b) If, at the Exercise Date in respect of the exercise of any Warrant
after __________, 1998, (i) the market price of the Company's Common Stock is
greater than the then Purchase Price of the Warrant, (ii) the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD") as designated in writing on the Warrant Certificate
Subscription Form, (iii) the Warrant was not held in a discretionary account,
(iv) disclosure of compensation arrangements was made both at the time of the
original offering and at the time of exercise; and (v) the solicitation of the
exercise of the Warrant was not in violation of Regulation M (as such rule or
any successor rule may be in effect as of such time of exercise) promulgated
under the Securities Exchange Act of 1934, then the Warrant Agent,
simultaneously with the distribution of the Warrant Proceeds to the Company
shall, on behalf of the Company, pay from the Warrant Proceeds, a fee of 5% (the
"Exercise Fee") of the Purchase Price to the Underwriter (of which a portion may
be reallowed by the Underwriter to the dealer who solicited the exercise, which
may also be the Underwriter or ▇.▇. ▇▇▇▇▇ & Co., Inc.). In the event the
Exercise Fee is not received within five days of the date on which the Company
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receives Warrant Proceeds, then the Exercise Fee shall begin accruing interest
at an annual rate of prime plus four percent (4%), payable by the Company to the
Underwriter at the time the Underwriter receives the Exercise Fee. Within five
days after exercise the Warrant Agent shall send to the Underwriter a copy of
the reverse side of each Warrant exercised. The Underwriter shall reimburse the
Warrant Agent, upon request, for its reasonable expenses relating to compliance
with this section 4(b). The Company shall pay all fees and expenses including
all blue sky fees and expenses and all out-of-pocket expenses of the
Underwriter, including legal fees, in connection with the solicitation,
redemption or exchange of the Warrants. In addition, the Underwriter and the
Company may at any time during business hours, examine the records of the
Warrant Agent, including its ledger of original Warrant Certificates returned to
the Warrant Agent upon exercise of Warrants. The provisions of this paragraph
may not be modified, amended or deleted without the prior written consent of the
Underwriter.
(c) In order to enforce the provisions of Section 4(b) above, in the event
there is any dispute or question as to the amount or payment of the Exercise
Fee, the Warrant Agent is hereby expressly authorized to withhold payment to the
Company of the Warrant Proceeds unless and until the Company establishes an
escrow account for the purpose of depositing the entire amount of the Exercise
Fee, which amount will be deducted from the net Warrant Proceeds to be paid to
the Company. The funds placed in the escrow account may not be released to the
Company without a written agreement from the Underwriter that the required
Exercise Fee has been received by the Underwriter.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery, be duly and validly issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, (other than those which the Company shall promptly pay or
discharge) and that upon issuance such shares shall be listed on each national
securities exchange, on which the other shares of outstanding Common Stock of
the Company are then listed or shall be eligible for inclusion in the Nasdaq
National Market or the Nasdaq SmallCap Market if the other shares of outstanding
Common Stock of the Company are so included.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration
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or approval. The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws. With respect
to any such securities, however, Warrants may not be exercised by, or shares of
Common Stock issued to, any Registered Holder in any state in which such
exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and other
governmental charges that may be imposed with respect to the issuance of
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition the
Company's Transfer Agent from time to time for certificates representing shares
of Common Stock issuable upon exercise of the Warrants, and the Company will
authorize the Transfer Agent to comply with all such proper requisitions. The
Company will file with the Warrant Agent a statement setting forth the name and
address of the Transfer Agent of the Company for shares of Common Stock issuable
upon exercise of the Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, and upon satisfaction
of the terms and provisions hereof, the Company shall execute and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant
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Agent, duly executed by the Registered Holder or his attorney-in-fact duly
authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any exchange
or registration of transfer of Warrant Certificates. In addition, the Company
may require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or, with the prior written
consent of the Underwriter, disposed of or destroyed, at the direction of the
Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Warrants, which are being publicly offered in Units with
shares of Common Stock pursuant to the Underwriting Agreement, will be
immediately detachable from the Common Stock and transferable separately
therefrom.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction or mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to them, and (in the case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or
Warrant Agent that the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. Redemption.
(a) Subject to the provisions of paragraph 2(g) hereof, on not less than
thirty (30) days notice given at any time after __________, 1998, (the
"Redemption Notice"), to Registered Holders of the Warrants being redeemed at
any time after _____________, 1998, the Warrants may be redeemed, at the option
of the Company, at a redemption price of $0.05 per Warrant, provided the Market
Price shall exceed $9.80 (the "Target Price"), subject to adjustment as set
forth in Section 8(f), below. All Warrants must be redeemed if any are redeemed,
provided that the Warrants
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underlying the Unit Purchase Option may only be redeemed in compliance with and
subject to the terms and conditions of the Unit Purchase Option. For purposes of
this Section 8, the Calculation Date shall mean a date within 15 days of the
mailing of the Redemption Notice. The date fixed for redemption of the Warrants
is referred to herein as the "Redemption Date."
(b) If the conditions set forth in Section 8(a) are met, and the Company
desires to exercise its right to redeem the Warrants, it shall request the
Underwriter to mail a Redemption Notice to each of the Registered Holders of the
Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth day before the date fixed for redemption, at their last address as
shall appear on the records maintained pursuant to Section 6(b). Any notice
mailed in the manner provided herein shall be conclusively presumed to have been
duly given whether or not the Registered Holder receives such notice.
(c) The Redemption Notice shall specify (i) the redemption price, (ii) the
Redemption Date, (iii) the place where the Warrant Certificates shall be
delivered and the redemption price paid, (iv) that the Underwriter will assist
each Registered Holder of a Warrant in connection with the exercise thereof and
(v) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant
Secretary of the Underwriter or the Company that notice of redemption has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date. On and
after the Redemption Date, Registered Holders of the Warrants shall have no
further rights except to receive, upon surrender of the Warrant, the Redemption
Price.
(e) From and after the Redemption Date, the Company shall, at the place
specified in the Redemption Notice, upon presentation and surrender to the
Company by or on behalf of the Registered Holder thereof of one or more Warrant
Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum in cash
equal to the Redemption Price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the Redemption Price, shall
cease.
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(f) If the shares of the Company's Common Stock are subdivided or combined
into a greater or smaller number of shares of Common Stock, the Target Price
shall be proportionally adjusted by the ratio which the total number of shares
of Common Stock outstanding immediately prior to such event bears to the total
number of shares of Common Stock to be outstanding immediately after such event.
SECTION 9. Adjustment of Exercise Price and Number of Shares of Common
Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9(g) below, in the
event the Company shall, at any time or from time to time after the date hereof,
sell any shares of Common Stock for a consideration per share less than the
Market Price on the date of the sale or issue any shares of Common Stock as a
stock dividend to the holders of Common Stock, or subdivide or combine the
outstanding shares of Common Stock into a greater or lesser number of shares
(any such sale, issuance, subdivision or combination being herein called a
"Change of Shares"), then, and thereafter upon each further Change of Shares,
the Purchase Price in effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent) determined by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the issuance of such additional
shares and the number of shares of Common Stock which the aggregate
consideration received (determined as provided in subsection 9(f)(F) below) for
the issuance of such additional shares would purchase at the Market Price and
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made. For
purposes of this Section 9, the Calculation Date shall mean the date of the
sale, issuance, modification or other transaction referred to in this Section 9.
Upon each adjustment of the Purchase Price pursuant to this Section 9, the
total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall (subject to the provisions contained in Section 9(b) hereof) be
such number of shares (calculated to the nearest one-hundredth; provided,
however, that in no event shall the Class A Aggregate Per Share Price increase
as a result of such rounding calculation) purchasable at the Purchase Price in
effect immediately prior to such adjustment multiplied by a fraction, the
numerator of which shall be the Purchase Price in effect immediately prior to
such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each
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Warrant held of record prior to such adjustment of the number of Warrants shall
become that number of Warrants (calculated to the nearest tenth) determined by
multiplying the number one by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately after
such adjustment. Upon each adjustment of the number of Warrants pursuant to this
Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock, or in case of any consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing transaction),
the Company shall cause effective provision to be made so that each holder of a
Warrant then outstanding shall have the right thereafter, by exercising such
Warrant, to purchase the kind and number of shares of stock or other securities
or property (including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock that might have been purchased
upon exercise of such Warrant immediately prior to such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 9. The Company shall not effect any such consolidation,
merger or sale unless prior to or simultaneously with the consummation thereof
the successor (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing assets or other appropriate corporation or
entity shall assume, by written instrument executed and delivered to the Warrant
Agent, the obligation to deliver to the holder of each Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holders may be entitled to purchase and the other obligations of the
Company under this Agreement. The foregoing provisions shall similarly apply to
successive reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
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(d) Irrespective of any adjustments or changes in the Purchase Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants, the
Warrant Certificates theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates pursuant to Section
2(f) hereof, continue to express the Purchase Price per share, the number of
shares purchasable thereunder and the Redemption Price therefor as the Purchase
Price per share, and the number of shares purchasable and the Redemption Price
therefor were expressed in the Warrant Certificates when the same were
originally issued.
(e) After each adjustment of the Purchase Price pursuant to this Section 9,
the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant after such adjustment and, if the Company shall have elected to
adjust the number of Warrants, the number of Warrants to which the Registered
Holder of each Warrant shall then be entitled, and the adjustment in Redemption
Price resulting therefrom, and (iii) a statement showing in detail the method of
calculation and the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or to be received by the
Company for any securities issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 9) on account thereof. The
Company will promptly file such certificate with the Warrant Agent and furnish a
copy thereof to be sent no later than thirty (30) days after the adjustment by
ordinary first class mail to the Underwriter and to each Registered Holder of
Warrants at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. If such mailing is not made within such 30-day period the
Warrant Expiration Date shall be extended by the period of time equal to the
period commencing on the 31st day and expires on the date such mailing is
effectuated. The Company will, upon the written request at any time of the
Underwriter, furnish to the Underwriter a report by Coopers & ▇▇▇▇▇▇▇ L.L.P., or
other independent public accountants of recognized national standing (which may
be the regular auditors of the Company) selected by the Company to verify such
computation and setting forth such adjustment or readjustment and showing in
detail the method of calculation and the facts upon which such adjustment or
readjustment is based. The Company will also keep copies of all such
certificates and reports at its principal office.
(f) For purposes of Section 9(a) and 9(b) hereof, the following provisions
(A) to (G) shall also be applicable:
12
(A) The number of shares of Common Stock outstanding at any given time
shall include shares of Common Stock owned or held by or for the account of
the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change
of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.10 in the
Purchase Price; provided that any adjustments which by reason of this
clause (B) are not required to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment
which, together with any adjustment(s) so carried forward, shall require an
increase or decrease of at least $.10 in the Purchase Price then in effect
hereunder.
(C) In case of (1) the sale by the Company for cash (or as a component
of a unit being sold for cash) of any rights or warrants to subscribe for
or purchase, or any options for the purchase of, Common Stock or any
securities convertible into or exchangeable for Common Stock without the
payment of any further consideration other than cash, if any (such
securities convertible, exercisable or exchangeable into Common Stock being
herein called "Convertible Securities"), or (2) the issuance by the
Company, without the receipt by the Company of any consideration therefor,
of any rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or Convertible Securities, in each case, if
(and only if) the consideration payable to the Company upon the exercise of
such rights, warrants or options shall consist of cash, whether or not such
rights, warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the minimum aggregate consideration
payable to the Company upon the exercise of such rights, warrants or
options, plus the consideration, if any, received by the Company for the
issuance or sale of such rights, warrants or options, plus, in the case of
such Convertible Securities, the minimum aggregate amount of additional
consideration, other than such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less
than the Market Price on the Calculation Date, then the total maximum
number of shares of Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such Convertible
Securities (as of the date of the issuance or sale of such rights, warrants
or options) shall be deemed to be outstanding shares of Common Stock for
purposes of Sections 9(a) and
13
9(b) hereof and shall be deemed to have been sold for cash in an amount
equal to such price per share.
(D) In case of the sale by the Company for cash of any Convertible
Securities, whether or not the right of conversion or exchange thereunder
is immediately exercisable, and the price per share for which Common Stock
is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by
the Company for the sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than the
Market Price on the Calculation Date, then the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities (as of the date of the sale of such Convertible
Securities) shall be deemed to be outstanding shares of Common Stock for
purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been
sold for cash in an amount equal to such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or (D)
above or any other securities of the Company convertible, exchangeable or
exercisable for shares of Common Stock, for any reason other than an event
that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is
less than the Market Price on the Calculation Date, the Purchase Price to
be in effect after such modification shall be determined by multiplying the
Purchase Price in effect immediately prior to such event by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding on the date prior to the modification plus the number of shares
of Common Stock which the aggregate consideration receivable by the Company
for the securities affected by the modification would purchase at the
Market Price and of which the denominator shall be the number of shares of
Common Stock outstanding on such date plus the number of shares of Common
Stock to be issued upon conversion, exchange or exercise of the modified
securities at the modified rate. Such adjustment shall become effective as
of the date upon which such modification shall take effect. On the
expiration of any such right, warrant or option or the termination of any
such right to convert or exchange any such Convertible Securities referred
to in Paragraph (C) or (D) above, the Purchase Price then in effect
hereunder shall forthwith be readjusted to such Purchase Price as would
have obtained (a) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total
14
consideration received therefor) upon the exercise of such rights, warrants
or options or upon the conversion or exchange of such Convertible
Securities and (b) had adjustments been made on the basis of the Purchase
Price as adjusted under clause (a) for all transactions (which would have
affected such adjusted Purchase Price) made after the issuance or sale of
such rights, warrants, options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith.
(G) In case any event shall occur as to which the provisions of
Section 9 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by the
Warrants in accordance with the essential intent and principles of Section
9, then, in each such case, the Board of Directors of the Company shall in
good faith by resolution provide for the adjustment, if any, on a basis
consistent with the essential intent and principles established in Section
9, necessary to preserve, without dilution, the purchase rights represented
by the Warrants. The Company will promptly make the adjustments described
therein.
(g) No adjustment to the Purchase Price of the Warrants or to the number of
shares of Common Stock purchasable upon the exercise of each Warrant will be
made, however,
(i) upon the exercise of any of the options presently outstanding
under the Company's 1997 Stock Option Plan (the "Plan") for officers,
directors and certain other key personnel of the Company; or
(ii) upon the issuance or exercise of any other securities which may
hereafter be granted or exercised under the Plan or under any other
employee benefit plan of the Company approved by the Company's
stockholders; or
(iii) upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants comprising the Unit
Purchase Option or upon the sale or exercise of the Unit Purchase Option;
or
(iv) upon the sale of any shares of Common Stock and/or Convertible
Securities in a firm commitment underwritten public offering, including,
without limitation, shares sold upon the exercise of any
15
overallotment option granted to the underwriters in connection with such
offering; or
(v) upon the sale by the Company of any shares of Common Stock and/or
Convertible Securities in a private placement for which the Underwriter is
the Placement Agent; or
(vi) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants or options were
outstanding on the date of the original sale of the Warrants or were
thereafter issued or sold; or
(vii) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any adjustment in
the Purchase Price was made or required to be made upon the issuance or
sale of such Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold.
(h) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase Price in
effect hereunder is required pursuant to Section 9, or as to the amount of any
such adjustment, if required, shall be binding upon the holders of the Warrants
and the Company if made in good faith by the Board of Directors of the Company.
(j) If and whenever the Company shall grant to the holders of Common Stock,
as such, rights or warrants to subscribe for or to purchase, or any options for
16
the purchase of, Common Stock or securities convertible into or exchangeable for
or carrying a right, warrant or option to purchase Common Stock, the Company
shall concurrently therewith grant to each Registered Holder as of the record
date for such transaction of the Warrants then outstanding, the rights, warrants
or options to which each Registered Holder would have been entitled if, on the
record date used to determine the stockholders entitled to the rights, warrants
or options being granted by the Company, the Registered Holder were the holder
of record of the number of whole shares of Common Stock then issuable upon
exercise (assuming, for purposes of this Section 9(j), that exercise of Warrants
is permissible during periods prior to the Initial Warrant Exercise Date) of his
Warrants. Such grant by the Company to the holders of the Warrants shall be in
lieu of any adjustment which otherwise might be called for pursuant to this
Section 9.
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the exercise
of each Warrant is adjusted pursuant to Section 9 hereof, the Company
nevertheless shall not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon the
exercise of any Warrant, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current market value of such fractional
share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or is traded on
the Nasdaq National Market, the current market value shall be the last
reported sale price of the Common Stock on such exchange or market on the
last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked
prices for such day on such exchange or market; or
(2) If the Common Stock is not listed or admitted to unlisted trading
privileges on a national securities exchange or is not traded on the Nasdaq
National Market, the current market value shall be the mean of the last
reported bid and asked prices reported by the Nasdaq SmallCap Market or, if
not traded thereon, by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
17
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
holder shall have exercised such Warrants and been issued shares of Common Stock
in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the Warrant
Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and cancelled by it and retired. The Warrant Agent shall also cancel the
Warrant
18
Certificate or Warrant Certificates following exercise of any or all of the
Warrants represented thereby or delivered to it for transfer or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts hereunder
as agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make any representations as to the validity, value or authorization of
the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of Warrant Certificates to make or cause to be made any adjustment
of the Purchase Price or the Redemption Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of facts contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse it for its reasonable expenses hereunder; it
further agrees to indemnify the Warrant Agent and save it harmless against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for anything done or omitted by the Warrant Agent in the execution of its
duties and
19
powers hereunder except losses, expenses and liabilities arising as a result of
the Warrant Agent's negligence or wilful misconduct.
The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of the
Warrant Agent's own negligence or wilful misconduct), after giving 30 days'
prior written notice to the Company. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of such
notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period of 15 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having a
capital and surplus, as shown by its last published report to its stockholders,
of not less than $10,000,000 or a stock transfer company that is a registered
transfer agent under the Securities Exchange Act of 1934. After acceptance in
writing of such appointment by the new warrant agent is received by the Company,
such new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the resigning Warrant Agent and shall forthwith
cause a copy of such notice to be mailed to the Registered Holder of each
Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or their
officers or directors, may buy and hold or sell Warrants or other securities of
the Company and otherwise deal with the Company in the same manner and to the
same extent and with like effects as though it were not Warrant Agent. Nothing
herein
20
shall preclude the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of
Section 4(b), the parties hereto and the Company may by supplemental agreement
make any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; (ii) to reflect an
increase in the number of Warrants which are to be governed by this Agreement
resulting from (a) a subsequent public offering of Company securities which
includes Warrants or (b) a subsequent private placement of Company securities
which includes Warrants, in either case having the same terms and conditions as
the Warrants, originally covered by or subsequently added to this Agreement
under this Section 16, provided, however, that in the case of a private
placement, the amendment to this Agreement will be effective only at such time
as the resale of such Warrants, as well as the securities underlying such
Warrants is covered by an effective registration statement under the Act; or
(iii) that they may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Warrant Certificates; provided, however,
that this Agreement shall not otherwise be modified, supplemented or altered in
any respect except with the consent in writing of the Registered Holders of
Warrant Certificates representing not less than 50% of the Warrants then
outstanding; and provided, further, that no change in the number or nature of
the securities purchasable upon the exercise of any Warrant, or the Purchase
Price therefor, or the acceleration of the Warrant Expiration Date, shall be
made without the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed by this Agreement as originally executed or are made in
compliance with applicable law.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, attention: Chairman, or at such other address as may have been furnished
to the Warrant Agent in writing by the Company; if to the Warrant Agent, at its
Corporate Office; if to the Underwriter, at ▇.▇. ▇▇▇▇▇ Investment Banking Corp.,
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and, the Warrant Agent and their respective
21
successors and assigns, and the holders from time to time of Warrant
Certificates . Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close of
business on the earlier of the Warrant Expiration Date or the date upon which
all Warrants (including the warrants issuable upon exercise of the Unit Purchase
Options) have been exercised, except that the Warrant Agent shall account to the
Company for cash held by it and the provisions of Section 15 hereof shall
survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
TEKGRAF, INC.
By:_________________________
Name:
Title:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:_________________________
Authorized Officer
▇.▇. ▇▇▇▇▇ INVESTMENT BANKING
CORP.
By:_________________________
Authorized Officer
23
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
No. W ____________ Warrants
VOID AFTER ____________, 2002
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
TEKGRAF, INC.
This certifies that FOR VALUE RECEIVED __________________ or registered
assigns (the "Registered Holder") is the owner of the number of Warrants
("Warrants") specified above. Each Warrant represented hereby initially entitles
the Registered Holder to purchase, subject to the terms and conditions set forth
in this Warrant Certificate and the Warrant Agreement (as hereinafter defined),
one fully paid and nonassessable share of Class A Common Stock, $.001 par value
("Common Stock"), of Tekgraf, Inc., a Delaware corporation (the "Company") at
any time between ____________, 1997 and the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of AMERICAN STOCK TRANSFER & TRUST COMPANY, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $7.00 for each
Warrant (the "Purchase Price") in lawful money of the United States of America
in cash or by official bank or certified check made payable to
_________________.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated ______________,
1997, by and among the Company, the Warrant Agent and ▇.▇. ▇▇▇▇▇ Investment
Banking Corp.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_______________, 2002 or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York
time) the next following day which in the State of New York is not a holiday or
a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of the Warrants represented hereby unless a registration statement
under the Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. The Warrants represented hereby shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any applicable transfer fee
per certificate in addition to any tax or other governmental charge imposed in
connection therewith, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate or Warrant Certificates representing
an equal aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
The Warrants represented hereby may be redeemed at the option of the
Company, at a redemption price of $0.05 per Warrant at any time after
__________, 1998, provided the Market Price (as defined in the Warrant
Agreement) for the Common Stock shall exceed $9.80 per share. Notice of
redemption shall be given not later than the thirtieth day before the date fixed
for redemption, all as provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no rights with respect to
the Warrants represented hereby except to receive the $0.05 per Warrant upon
surrender of this Warrant Certificate.
2
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
3
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
TEKGRAF, INC.
By:________________________
Name:
Title:
Dated: _____________________
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By ___________________________
Authorized Officer
4
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $_______ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_______ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_____________________________________
_____________________________________
_____________________________________
_____________________________________
[please print or type name and address]
and be delivered to
_____________________________________
_____________________________________
_____________________________________
_____________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the Warrants evidenced
hereby was solicited by a member of the National Association of Securities
Dealers,
Inc. If not solicited by an NASD member, please write "unsolicited" in the space
below. Unless otherwise indicated by listing the name of another NASD member
firm, it will be assumed that the exercise was solicited by ▇.▇. ▇▇▇▇▇
Investment Banking Corp. or ▇.▇. ▇▇▇▇▇ & Co., Inc.
____________________________________
(Name of NASD Member)
Dated: _______________ ____________________________________
____________________________________
____________________________________
Address
____________________________________
Taxpayer Identification Number
____________________________________
Signature Guaranteed
____________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
2
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
_________________________
_________________________
_________________________
[please print or type name and address]
_________________ of the Warrants represented by this Warrant Certificate, and
hereby irrevocably constitutes and appoints ____________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the
premises.
Dated:________________ X______________________________
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.