THE GRANT OF THIS WARRANT AND THE PURCHASE OF THE COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT AGREEMENT
This COMMON STOCK PURCHASE WARRANT AGREEMENT (the "Warrant Agreement")
is entered into effective as of the 1st day of August, l996, by and between
EMERSON RADIO CORP., a Delaware corporation (the "Company"), and ARTHUR STERN,
IV and his heirs, legal representatives and permitted assigns ("Holder"), Mr.
Stern being a consultant of STARR SECURITIES, INC., a New York corporation
("Starr").
WHEREAS, on even date herewith, the Company and Starr entered into
that certain Consulting Agreement (the "Consulting Agreement") whereby the
Company engaged Starr to render to the Company certain consulting services more
particularly described in Section 2 thereof (the "Consulting Services"); and
WHEREAS, in consideration for the Consulting Agreement and for the
Consulting Services to be provided thereunder, the Company has agreed to issue
to Starr, and/or employees or consultants of Starr designated by it upon its
execution and delivery of the Consulting Agreement, Holder being so designated
by the execution by Starr of this Warrant Agreement, Common Stock Purchase
Warrants (the "Warrants") to purchase an aggregate of 250,000 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), pursuant
to the requirements relating to the exercise thereof set forth herein;
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 respective rights and obligations thereunder,
the parties hereto agree as follows:
1. GRANT OF WARRANTS. For value received, the Company hereby grants
Holder, subject to the terms and conditions hereinafter set forth, the right to
purchase up to a maximum of 15,000 shares of the Common Stock of the Company
(the "Shares"), subject to adjustment as set forth herein.
2. EXERCISE OF WARRANTS. The Warrants will vest and may be exercised
by the Holder as to (i) 50% of the Shares covered hereby at any time after
February 1, 1997, and (ii) all or any part of the Shares covered hereby at any
time after August 1, 1997, in either event until August 1, 2001, when such
Warrants shall expire, at an exercise price of $4.00 per share ("Warrant
Exercise Price"). The Holder shall deliver to the Company written notice of
Holder's intent to exercise the Warrants at Nine Entin Road, Parsippany, New
Jersey 07054-0430, or at such other address as the Company shall designate in
writing to the Holder, together with this Warrant Agreement and a check payable
to the order of the Company for the aggregate purchase price of the Shares so
purchased. Upon exercise of the Warrants as aforesaid, the Company shall as
promptly as practicable, and in any event within 10 days thereafter, execute and
deliver to the Holder a certificate or certificates in the name of the Holder
for the total number of whole Shares for which the Warrants are being exercised.
If the Warrants shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a similar warrant of like tenor and date
covering the number of Shares in respect of which the Warrants were not
exercised. The Warrants covered by this Warrant Agreement shall lapse and be
null and void if not exercised by the Holder on or before 5:00 p.m., New York
City time, on August 1, 2001.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees that
all the Shares which may be issued upon the exercise of the Warrants represented
by this Warrant Agreement will, upon issuance, be fully paid and nonassessable
and free from all taxes, liens, and charges with respect to the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue). The Company further covenants and agrees that during the period
within which the Warrants represented by this Warrant Agreement may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of Shares to provide for the exercise of the Warrants
represented by this Warrant Agreement.
4. ADJUSTMENTS OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES.
(a) If the Company shall, without the payment of new value, at any
time declare a stock dividend on its outstanding shares of Common Stock or
effectuate a stock split or reverse stock split, by subdivision or consolidation
in any manner, regarding the number of shares of the Common Stock then
outstanding into a different number of shares of the Common Stock, with or
without par value, then thereafter the number of Shares which the holder shall
have the right to purchase (calculated immediately prior to such change), shall
be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of the Common Stock of the Company
issued and outstanding by reason of such dividend or change, and the Warrant
Exercise Price of the Shares after such change shall in the event of an increase
in the number of shares of the Common Stock be proportionately reduced, and in
the event of a decrease in the number of shares of the Common Stock be
proportionately increased.
(b) Notwithstanding anything herein to the contrary, for purposes
of this Section 4, the Holder agrees that no adjustment shall be made to the
Warrant Exercise Price or the number of Shares issuable upon the exercise of
this Warrant Agreement upon issuance of Common Stock (or any other securities)
of the Company for any purposes other than as set forth in Sections 4(a) and 5
herein.
5. SURVIVAL IN THE EVENT OF MERGERS AND REORGANIZATIONS. In the
event of the reclassification or change in the outstanding 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, or as a result of a subdivision, combination or stock
dividend), or in the event of a sale of all or substantially all of the assets
of the Company, or in the event of any consolidation of the Company with, or
merger of the Company into, another corporation, the Company, or such successor
corporation, as the case may be, shall provide that, the Holder shall thereafter
be entitled to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, sale, or merger by a holder of the number of Shares which this
Warrant Agreement entitled the holder thereof to purchase immediately prior to
such reclassification, change, consolidation, sale, or merger. Such
corporation, which thereafter shall be deemed to be the Company for purposes of
this Warrant Agreement, shall provide for adjustments, if any, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Warrant Agreement.
6. SALE OF ASSETS, DISSOLUTION. In the event of a sale of all or
substantially all the assets of the Company, or in the event of any distribution
of all or substantially all of its assets in dissolution or liquidation, or in
the event of any other distribution or dividend (other than cash dividends), the
Company shall mail notice thereof by registered mail to the Holder and shall
make no distribution to the stockholders of the Company until the expiration of
10 days from the date of mailing of the aforesaid notice; provided, however,
that in any such event, if the Holder shall not exercise the Warrants within 10
days from the date of mailing such notice, all rights herein granted and not so
exercised within such 10 day period shall thereafter become null and void. The
Company shall not, however, be prevented from consummating any such merger,
consolidation, sale or distribution without awaiting the expiration of such 10
day period, it being the intent and purpose hereof to enable the Holder, upon
exercise of the Warrants, to participate in the distribution of the
consideration to be received by the Company upon any such merger,
consolidation, or sale or in the distribution of assets upon any
dissolution or liquidation or in the event of any other distribution or dividend
(as provided above).
7. NO FRACTIONAL SHARES. The number of Shares subject to issuance
upon the complete exercise of the Warrants shall be rounded down to the nearest
whole number of Shares so that no fractional Shares shall be issued upon the
complete exercise of the Warrants. The Holder shall not be entitled to receive
any compensation or property for such fractional Share to which it may have been
entitled to in the absence of this provision.
8. NOTICES. If there shall be any adjustment in accordance with this
Warrant Agreement, or if securities or property other than Shares of the Company
shall become purchasable in lieu of Shares upon exercise of the Warrants, the
Company shall forthwith cause written notice thereof to be sent by registered
mail, postage prepaid, to the Holder at its address shown on the books of the
Company, which notice shall be accompanied by a certificate of either
independent public accountants of recognized standing or the Chairman,
President, or any Vice President of the Company setting forth in reasonable
detail the basis for the Holder becoming entitled to purchase such Shares and
the number of Shares which may be purchased and the exercise price thereof, or
the facts requiring any such adjustment, or the kind and amount of any such
securities or property so purchasable upon the exercise of the Warrants, as the
case may be.
9. TAXES. The issue of any stock or other certificate upon the
exercise of the Warrant shall be made without charge to the Holder for any
stamp, duty, excise, or similar tax (but not including the Holder's income or
similar taxes) in respect of the issue of such certificate. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder, as the registered holder of this Warrant Agreement, and
the Company shall not be required to issue or deliver any such certificate
unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
10. NON-TRANSFERABILITY OF WARRANTS. The Warrants shall be non-
transferable without the express written consent of the Company.
11. WARRANT HOLDER NOT STOCKHOLDER. This Warrant Agreement does not
confer upon the Holder any right to vote or to consent or to receive notice as a
stockholder of the Company, as such in respect of any matters whatsoever, or any
other rights or liabilities as a stockholder, prior to the exercise hereof as
provided herein.
12. INVESTMENT REPRESENTATIONS. The Holder, by acceptance hereof,
and with reference to the Warrants and the Shares issuable upon exercise of the
Warrants, represents and warrants that:
(a) The Holder is acquiring such securities for investment purposes
only, for its own account, and not with a view toward resale or other
distribution thereof, and has no present intention of selling or otherwise
disposing of such securities.
(b) The Holder is aware that the offer and sale of the securities
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), or any state securities law, that upon exercise of the
Warrants, the Shares must be held indefinitely unless they are subsequently
registered or an exemption from such registration is available and that the
Company is under no obligation to register the offer and sale of the Shares
under the Securities Act or any applicable state securities laws, except as
otherwise set forth in Section 14 hereof.
(c) The Holder acknowledges that the Warrants may not be made
subject to a security interest, pledged, hypothecated, sold, or otherwise
transferred in the absence of an effective registration statement for such
Warrants under the Securities Act and such applicable state securities laws or
there is an applicable exemption therefrom. The Holder further acknowledges
that, unless the offer and sale of the Shares issuable upon exercise of the
Warrants have been registered under the Securities Act, the Shares issued upon
the exercise of the Warrants shall be restricted in the same manner and to the
same extent as the Warrants and the certificates representing such Shares shall
bear the following legend:
"THE OFFER AND SALE OF THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED ("SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES
LAWS, BUT HAVE BEEN ACQUIRED FOR THE PRIVATE INVESTMENT OF THE HOLDER
HEREOF AND MAY NOT BE OFFERED, SOLD, OR TRANSFERRED UNTIL A
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO,
OR THERE IS AN AVAILABLE EXEMPTION THEREFROM."
In making the above representations and warranties, the Holder intends
that the Company rely thereon and understands that, as the result of such
reliance, such securities are not being registered under the Securities Act or
any applicable state securities laws in reliance upon the applicability of
certain exemptions relating to transactions not involving a public offering.
13. LOST WARRANTS. In case this Warrant Agreement shall be
mutilated, lost, stolen, or destroyed, the Company will issue a new Warrant
Agreement of like date, tenor, denomination and terms and conditions, and
deliver the same in exchange and substitution for and upon surrender and
cancellation of the mutilated Warrant Agreement, or in lieu of any Warrant
Agreement lost, stolen, or destroyed, upon receipt of evidence satisfactory to
the Company of the loss, theft, or destruction of such Warrant Agreement, and
upon receipt of indemnity satisfactory to the Company.
14. REGISTRATION RIGHTS.
(a) The Company agrees that if at any time hereafter the Company
files with the Securities and Exchange Commission ("Commission") a registration
statement ("Registration Statement") under the Securities Act on a form suitable
for registering the Shares (including Form S-8, if available) issuable upon
exercise of the Warrants (other than on Form S-4, (S-8 if unavailable), or
comparable registration statement; other than any registration statement which
has been declared effective by the Commission prior to the date hereof or has
been filed with the Commission prior to the date hereof but has not yet been
declared effective; and, other than any registration statement arising pursuant
to the terms of that certain Stipulation of Settlement and Order, dated June 11,
l996, entered in the United States District Court for the District of New
Jersey, Hon. Nicholas H. Politan presiding, in the action entitled Emerson Radio
Corp. v. Donald K. Stelling, et al., Civil Action No. 94-3393 (NHP) ), it will
give written notice to such effect to the Holder, at least 30 days prior to such
filing, and, at the written request of the Holder, made within 10 days after the
receipt of such notice, will include therein at the Company's cost and expense
(except for the fees and expenses of counsel to the Holder and underwriting
discounts and commissions attributable to the Shares of Warrant Common Stock [as
hereinafter defined] included therein) such of the Shares of Warrant Common
Stock held by the Holder as it shall request. If the registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriter(s) advise the Company in writing that in their good faith opinion,
based upon market conditions, the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering, the
Company will include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Warrant Common Stock (as hereinafter defined)
requested to be included in such registration and other securities requested to
be included in such registration pursuant to contractual arrangements between
Company and such other security holders ("Registration Rights Holders"), pro
rata among the holders of the Warrant Common Stock and the Registration Rights
Holders on the basis of the number of securities requested to be included in
such registration by such holders and the Registration Rights Holders, and (iii)
third, other securities requested to be included in such registration. The
Company, at its own expense, will use its best efforts to file and seek the
effectiveness of such Registration Statement with the Commission and will cause
the prospectus included in such Registration Statement to meet the requirements
of the Securities Act necessary to effect the sale of the Shares included at
the request of the Holder and keep such Registration Statement effective for a
period of 180 days thereafter. The term "Warrant Common Stock" shall mean the
Shares issuable and issued pursuant to this Warrant Agreement and all other
Warrants originally granted to Starr and/or its employees or consultants as
contemplated in the second recital hereof and pursuant to all Warrants issued
upon transfer, division, or combination of, or in substitution for, any thereof.
The rights of the Holder under this Section 14 shall apply to an unlimited
number of offerings proposed by the Company.
(b) The Company promptly shall notify the Holder, as a participating
holder of Warrant Common Stock, of the occurrence of any event as a result of
which any prospectus included in a registration statement filed pursuant to this
Section 14 includes any misstatement of a material fact or omission of any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
(c) In addition, upon written demand received at any time on or
before 5:00 p.m., New York City time, on August 1, 2001, from the Holder or
other holders of a minimum of 50% or more of the Warrant Common Stock originally
subject to the Warrants granted to Starr and/or its employees or consultants as
contemplated in the second recital hereof, that the Holder contemplates the
transfer of all or any of his or its Warrant Common Stock under such
circumstances that registration under the Securities Act will be required, the
Company shall, not more than once, at the expense of the Company, except for the
fees and expenses of counsel to the Holder and other holders and underwriting
discounts and commissions attributable to the Shares of Warrant Common Stock
included therein, as promptly as possible after receipt of such notice, file a
new registration statement or, if available, an offering statement under
Regulation A under the Securities Act, with respect to the offering and sale or
other disposition of the Warrant Common Stock with respect to which it shall
have received such notice; provided, that the Company will only be required to
file a registration statement or offering statement or amendment thereto no
later than 135 days after any fiscal year end of the Company and at such time as
it has available for utilization therein the audited consolidated financial
statements of the Company as of the preceding fiscal year end. The Company must
file a registration statement or offering statement if the Shares of Warrant
Common Stock cannot be sold under Regulation A because of the limited exemption.
The Company agrees as soon as reasonably practicable to cause the above filing
to become effective. Within 10 days after receiving such notice, the Company
shall give notice to the other holders of the Warrants and Warrant Common Stock
advising that the Company is proceeding with such registration statement or
offering statement and offering to include therein Warrant Common Stock of such
Holder. The Company shall not be obligated to any such other Holder unless such
other Holder shall accept such offer by notice in writing to the Company within
10 days thereafter.
(d) The Company's obligations under this Section 14 with respect to
the Holder, as the holder of Warrant Common Stock, are expressly conditioned
upon the Holder promptly, completely, and accurately furnishing to the Company
in writing such information concerning the Holder and the terms of the Holder's
proposed offering as the Company shall request for inclusion in the Registration
Statement.
15. INDEMNIFICATION BY COMPANY. The Company agrees that, in the
event of the registration of the offer and sale of any of the Shares of Warrant
Common Stock, the Company will indemnify and hold harmless the Holder against
any losses, claims, damages, or liabilities to which the Holder may become
subject under the Securities Act, or any similar federal statute, and state Blue
Sky and securities laws, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement under which the offer and sale of the
Shares of Warrant Common Stock were registered under such Securities Act or
similar federal statute, any state Blue Sky or securities law, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of, or are based upon, the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Holder for any
legal or any other expenses reasonably incurred by the Holder in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that to the extent that any such loss, claim, damage, or
liability arises out of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus or said final prospectus or any said amendment or
supplement in reliance upon, and in conformity with, information furnished to
the Company by the Holder, the Company will not be so liable to the Holder.
16. INDEMNIFICATION BY THE HOLDER. The 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, against any losses,
claims, damages, or liabilities, joint or several, to which the Company or any
such director or officer or any such 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 the disposition by the Holder of the Warrants or the Shares
issuable upon the exercise hereof in violation of the provisions of this Warrant
Agreement or arises out of, or is based upon, an untrue statement or alleged
untrue statement or omission or alleged omission made in any registration
statement, any preliminary prospectus, or final prospectus, or any amendment or
supplement thereto in reliance upon, and in conformity with, information
furnished to the Company by the Holder.
17. APPLICABLE LAW. This Warrant Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflict of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
Agreement effective as of the day and year first above written.
EMERSON RADIO CORP.
By: /s/ Eugene I. Davis
Eugene I. Davis, President
ARTHUR STERN, IV
/s/ Arthur Stern, IV
STARR SECURITIES, INC.
By: /s/ Martin Vegh, President
(Name) (Title)