EXHIBIT 10.37
FORM OF WARRANT
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE
SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
SAC TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance; Certain Definitions.
In consideration of good and valuable consideration, the receipt
of which is hereby acknowledged by SAC TECHNOLOGIES, INC., a Minnesota
corporation (the "Company"), THE SHAAR FUND LTD. or registered assigns (the
"Holder") is hereby granted the right to purchase at any time until 5:00 P.M.,
New York City time, on November 25, 2006(the "Expiration Date") Four Million
(4,000,000) fully paid and nonassessable shares of the Company's Common Stock,
par value $0.01 per share (the "Common Stock") at an initial exercise price per
share (the "Exercise Price") of $ 1.00, subject to further adjustment as set
forth herein. This Warrant is being issued pursuant to the terms of that certain
Funding Agreement, dated as of November 26, 2001(the "Funding Agreement"), to
which the Company and Holder (or Holder's predecessor in interest) are parties.
2. Exercise of Warrants.
2.1 General. (a) This Warrant is exercisable in whole or in part
at the Exercise Price per share of Common Stock payable hereunder, (i)payable in
cash or by certified or official bank check, or (ii) by "cashless exercise", by
means of tendering this Warrant Certificate to the Company to receive a number
of shares of Common Stock equal in Market Value to the difference between the
aggregate Market Value of the shares of Common Stock issuable upon exercise of
this Warrant and the total cash exercise price thereof divided by the Market
Value. Upon surrender of this Warrant Certificate with the annexed Notice of
Exercise Form duly executed, together with payment of the Exercise Price for the
shares of Common Stock purchased, the Holder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. For the
purposes of this Section 2, "Market Value" shall be an amount equal to the
average closing bid price of a share of Common Stock for the ten (10) days
preceding the Company's receipt of the Notice of Exercise Form duly executed
multiplied by the number of shares of Common Stock to be issued upon surrender
of this Warrant Certificate.
______________ (b) The Holders right to exercise this warrant pursuant to the
foregoing Section (a) (ii) shall commence on the earlier of (X) one year after
date of issuance or (Y) repayment of fifty (50%) percent of the principal amount
of the Initial Notes issued pursuant to the Funding Agreement (the "CE Date")
(c) For purposes of Rule 144 promulgated under the Securities
Act, it is intended, understood and acknowledged that, pursuant to applicable
law as of the date hereof, the Warrant Shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder and the holding
period for the Warrant Shares shall be deemed to have been commenced on the CE
Date.
2.2 Limitation on Exercise. Notwithstanding the provisions of
this Warrant, the Funding Agreement or of the other Transaction Agreements (as
defined in the Funding Agreement), in no event (except (i) with respect to an
automatic conversion, if any, of the Preferred Stock as provided in its
Certificate of Designations, (ii) as specifically provided in this Warrant as an
exception to this provision, or (iii) while there is outstanding a tender offer
for any or all of the shares of the Company's Common Stock) shall the Holder be
entitled to exercise this Warrant, or shall the Company have the obligation to
issue shares upon such exercise of all or any portion of this Warrant, to the
extent that, after such exercise the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Preferred Stock or unexercised portion of the
Warrants), and (2) the number of shares of Common Stock issuable upon the
exercise of the Warrants with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock (after
taking into account the shares to be issued to the Holder upon such exercise).
For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), except as otherwise provided
in clause (1) of such sentence. The Holder, by its acceptance of this Warrant,
further agrees that if the Holder transfers or assigns any of the Warrants to a
party who or which would not be considered such an affiliate, such assignment
shall be made subject to the transferee's or assignee's specific agreement to be
bound by the provisions of this Section 2.2 as if such transferee or assignee
were the original Holder hereof.
3. Reservation of Shares. From and after the date of filing of
Certificate of Amendment pursuant to Section 7(j) of the Funding Agreement, the
Company hereby agrees that at all times during the term of this Warrant there
shall be reserved for issuance upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance upon exercise of
this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date and any such lost, stolen,
destroyed or mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Protection Against Dilution.
6.1 Adjustment Mechanism. If an adjustment of the Exercise
Price is required pursuant to this Section 6, the Holder shall be entitled to
purchase such number of shares of Common Stock as will cause (i) the total
number of shares of Common Stock Holder is entitled to purchase pursuant to this
Warrant after such adjustment, multiplied by (ii) the adjusted Exercise Price
per share, to equal (iii) the dollar amount of the total number of shares of
Common Stock Holder is entitled to purchase before adjustment multiplied by the
total Exercise Price before adjustment.
6.2 Capital Adjustments. In case of any stock split or
reverse stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company (each, an "Adjustment"), the Exercise Price in
effect at the time of the effective date for such Adjustment shall be
proportionally adjusted so that the Holder of this Warrant exercised after such
date shall be entitled to receive the aggregate number and kind of shares which,
if this Warrant had been exercised by such Holder immediately prior to such
date, the Holder would have owned upon such exercise and been entitled to
received upon such Adjustment (and for such purposes the Holder shall, to the
extent relevant, be deemed to have exercised this Warrant immediately prior to
the record date or the effective date, as the case may, for the Adjustment). For
example, if the Company declares a 2:1 stock dividend or stock split and the
Exercise Price immediately prior to the record date for such Adjustment was
$5.00 per share, the adjusted Exercise Price immediately after the Adjustment
would be $2.50 per share. Such adjustment may be made successively if there is
more than one Adjustment. In all other respects the provisions of this Section
shall be applied in a fair, equitable and reasonable manner so as to give
effect, as nearly as may be, to the purposes hereof. A rights offering to
stockholders shall be deemed a stock dividend to the extent of the bargain
purchase element of the rights.
6.3 Adjustment for Spin Off. If, for any reason, prior to
the exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a part of its business or operations or disposes all or of a part of
its assets in a transaction (the "Spin Off") in which the Company does not
receive compensation for such business, operations or assets, but causes
securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on the
record date (the "Record Date") for determining the amount and number of Spin
Off Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the trading day
immediately before the
Record Date (the "Reserved Spin Off Shares"), and (ii) to be issued to the
Holder on the exercise of all or any of the Outstanding Warrants, such amount of
the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares
multiplied by (y) a fraction, of which (I) the numerator is the amount of the
Outstanding Warrants then being exercised, and (II) the denominator is the
amount of the Outstanding Warrants.
7. Transfer to Comply with the Securities Act; Registration
Rights.
7.1 Transfer. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 Registration Rights. (a) Reference is made to the
Registration Rights Agreement (as that term is defined in the Funding
Agreement). The Company acknowledges its obligations to the Holder under the
Registration Rights Agreement with respect to the Warrant Shares, which are
incorporated herein by reference.
(b) In addition to the registration rights referred to in
the preceding provisions of Section 7.2(a), effective after the expiration of
the effectiveness of the Registration Statement as contemplated by the
Registration Rights Agreement, the Holder shall have demand piggy-back
registration rights with respect to the Warrant Shares then held by the Holder
or then subject to issuance upon exercise of this Warrant (collectively, the
"Remaining Warrant Shares"), subject to the conditions set forth below. If, at
any time after the Registration Statement has ceased to be effective, the
Company participates (whether voluntarily or by reason of an obligation to a
third party) in the registration of any shares of the Company's stock, the
Company shall give written notice thereof to the Holder and the Holder shall
have the right, exercisable within ten (10) business days after receipt of such
notice, to demand inclusion of all or a portion of the Holder's Remaining
Warrant Shares in such registration statement. If the Holder exercises such
election, the Remaining Warrant Shares so designated shall be included in the
registration statement at no cost or expense to the Holder (other than any costs
or commissions which would be borne by the Holder under the terms of the
Registration Rights Agreement). The Holder's rights under this Section 7.2 are
subject to the following conditions: if there is a managing underwriter of the
offering of shares referred to in the registration statement and such managing
underwriter advises the Company in writing that the number of shares proposed to
be included in the offering will have an adverse effect on its ability to
successfully conclude the offering and, as a result, the number of shares to be
included in the offering is to be reduced, the number of Remaining Warrant
Shares of the Holder which were to be included in the registration (before such
reduction) will be reduced pro rata with the number of shares included for all
other parties whose shares are being registered.
8. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage pre-paid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission, or, if mailed, two days after the date of deposit in the United
States mails, as follows:
(i) if to the Company, to:
SAC TECHNOLOGIES, INC.
1285 Corporate Center Drive
Suite 175
Eagan, Minnesota 55121
Telephone No.: (651) 687-0414
Telecopier No.:
with a copy to:
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103-2895
Attn: Vincent A. Vietti, Esq.
Telephone No.: (215) 665-3860
Telecopier No.: (215) 665-8760
(ii) if to the Holder, to:
The Shaar Fund Ltd.
c/o CITCO FUND SERVICES (CURACAO) N.V.
Kaya Flamboyan 9
Curacao
Netherlands Antilles
(Tel: 599-9-732-2222)
(Fax: 599-9-732-2225)
with copies to:
Levinson Capital Management, LLC 35 East
Grassy Sprain Road Suite 300 Yonkers, NY
10710 Fax number: 914-395-0059
and
Krieger & Prager, Esqs.
39 Broadway
New York, New York 10006
Telephone No.: (212)363-2900
Telecopier No. (212)363-2999
Any party may, by notice given in accordance with this Section to the other
parties, designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant may
be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant contains the full understanding of the parties
hereto with respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
10. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State, except to the
extent that the Minnesota Business Corporation Act would apply to the internal
corporate governance of the Company. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Warrant and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON CONVENIENS, to the bringing of any such
proceeding in such jurisdictions. To the extent determined by such court, the
Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Buyer in enforcement of or protection of any of
its rights under this Warrant.
11. Counterparts. This Warrant may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 26th day of November, 2001
SAC TECHNOLOGIES, INC.
By:_________________________________
Name:
Its:
Attest:
- ------------------------
Name:
Title:
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of , 2001, to purchase shares of
the Common Stock, par value $0.01 per share, of SAC TECHNOLOGIES, INC. and
tenders herewith payment in accordance with Section 1 of said Common Stock
Purchase Warrant.
Please deliver the stock certificate to:
Dated:
By:
___ CASH: $ _______________________
___ CASHLESS EXERCISE
AGGREGATE MARKET VALUE OF _____ SHARES $_______________
AGGREGATE CASH EXERCISE PRICE OF _______ SHARES $_______________
DIFFERENCE a MARKET VALUE $_______________
NUMBER OF SHARES ISSUABLE