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CASDIM INTERNATIONAL SYSTEMS, INC.
and
LYDFORD LTD.
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WARRANT AGREEMENT
Dated: May 22, 1997
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THIS WARRANT AGREEMENT (this "Agreement") dated May 22, 1997 is made and
entered into by and between Casdim International Systems, Inc., a corporation
organized under the laws of the State of Delaware (the "Company"), and Lydford
Ltd.(the "Warrant Holder").
Subject to the terms and conditions hereof, the Company agrees to issue to
the Warrant Holder, warrants as hereinafter described (the "Warrants") to
purchase up to an aggregate of 200,000 shares of the common stock, par value
$.01 per share (the "Common Stock"), of the Company at a price of $.0001 per
Share. As used herein, the terms "Share" or "Shares" shall mean collectively the
Common Stock issuable upon exercise of the Warrants together with any other
securities issuable upon such exercise as provided in Section 8 of this
Agreement. Terms which are capitalized but not defined herein shall have the
same meanings as in the Placement Agreement.
For the purpose of defining the terms and provisions of the Warrants and
the respective rights and obligations thereunder, the Company and the Warrant
Holder, for value received, hereby agree as follows:
Section 1. Transferability and Form of Warrants.
1.1. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company when issued, in accordance with Delaware corporate
practice.
1.2. Transfer. The Warrants shall be transferable only on the books of the
Company maintained at its principal office in New York, New York, or wherever
its principal office may then be located, upon delivery thereof duly endorsed by
the Warrantholder seeking such transfer or by its duly authorized attorney or
representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver new Warrants to the person entitled thereto.
1.3. Form of Warrants. The form of certificate evidencing the Warrants
shall be substantially as set forth in Exhibit A attached hereto. Certificates
evidencing the Warrants shall be executed on behalf of the Company by its
Chairman or by any Vice President, shall be attested to by its Secretary or any
Assistant Secretary, and shall be dated as of the date of execution thereof.
1.4. Legend on Common Stock. The Warrants and the Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"). Each
certificate for Shares shall bear the following legend unless, at the time of
exercise, such Shares are the subject of a currently effective registration
statement under the Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH
SECURITIES MAY NOT BE SOLD, ASSIGNED, EXCHANGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE
WITH SECTION 11 OF THE AGREEMENT BY AND BETWEEN THE ISSUER AND
LYDFORD LTD. DATED MAY 22, 1997."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the Act of
the securities represented thereby) shall also bear the above legend unless, in
the opinion of the Company's counsel, the securities represented thereby need no
longer be subject to such restrictions.
Section 2. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates entitling a Warrantholder to
purchase a like aggregate number of Shares as the certificate or certificates
surrendered then entitles such Warrantholder to purchase. Any Warrantholder
desiring to exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new Warrant
certificate as so requested.
Section 3. Term of Warrants; Exercise of Warrants
(a) Subject to the terms of this Agreement, each Warrantholder shall have
the right, at any time during the period commencing at 9:00 a.m., Eastern Time,
on May 22, 1997 (the "Commencement Date") and ending at 5:00 p.m., Eastern Time,
on May 21, 2002 (the "Termination Date"), to purchase from the Company up to the
number of fully paid and nonassessable Shares which such Warrantholder may at
the time be entitled to purchase pursuant to this Agreement, upon surrender to
the Company at its principal office of the certificates evidencing the Warrants
to be exercised, with the purchase form on the reverse thereof duly completed
and signed, and upon payment to the Company of the Warrant Price (as defined in
and determined in accordance with the provisions of this Section 3 and Sections
7 and 8 hereof) for the number of Shares in respect of which such Warrants are
then exercised, but in no event for fewer than 100 Shares (unless fewer than an
aggregate of 100 Shares are then purchasable under all outstanding Warrants held
of record by a Warrantholder). Payment of the aggregate Warrant Price shall be
made in cash or by certified or cashier's check, in next day funds, or any
combination thereof.
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(b) Upon surrender of Warrant certificates, payment of the Warrant Price,
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of a Warrantholder, and (subject to Section 11
hereof) in such name or names as such Warrantholder may designate, a certificate
or certificates for the number of full Shares so acquired upon the exercise of
the Warrant, together with cash, as provided in Section 9 hereof, in respect of
any fractional Shares otherwise issuable upon such surrender. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Shares as of the date of surrender of the Warrants being exercised payment of
the Warrant Price notwithstanding that the certificate or certificates
representing such securities shall not actually have been delivered or that the
stock transfer books of the Company shall then be closed. The Warrants shall be
exercisable at the election of a Warrantholder either in full or from time to
time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of fewer than all of the Shares specified therein at any
time prior to the Termination Date, a new certificate evidencing the remaining
portion of the Warrants shall be issued by the Company.
Section 4. Payment of Taxes. The Company will pay all taxes and fees, if
any, attributable to the initial issuance of the Warrants or the issuance of
Shares upon exercise of the Warrants; provided that the Company shall not be
required to pay any tax or fee which may be payable in respect of any secondary
transfer of the Warrants or such Shares.
Section 5. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing any Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the affected Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant certificate
or certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of the loss, theft
or destruction of such Warrant and, if requested, at the cost and expense of the
Warrantholder, a bond of indemnity in form and amount satisfactory to the
Company. Applicants for such substitute Warrants certificate shall also comply
with such other reasonable regulations as the Company may prescribe.
Section 6. Reservation of Common Stock. There has been reserved, and the
Company shall at all times keep reserved so long as any Warrants remain
outstanding, out of its authorized share capital, such number of Common Stock as
shall be subject to purchase under all outstanding Warrants. Every transfer
agent for the Common Stock and other securities of the Company issuable upon the
exercise of Warrants will be irrevocably authorized and directed at all times to
reserve such number of authorized shares of Common Stock and other securities as
shall be requisite for such purpose. The Company will keep a copy of this
Agreement on file with every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Warrants. The
Company will supply every such transfer agent with duly executed
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stock and other certificates, as appropriate, for such purpose and will provide
or otherwise make available any cash which may be payable as provided in Section
9 hereof.
Section 7. Warrant Price. "Warrant Price" shall mean the price per Share at
which Shares shall at any time be purchasable upon the exercise of the Warrants.
The initial Warrant Price shall be $1.00, subject to adjustment pursuant to
Section 8 hereof.
Section 8. Adjustment of Number and Kind of Securities. The number and kind
of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
8.1. Adjustments.
(a) In case the Company shall (i) pay a dividend in Common Stock
or make a distribution in Common Stock, (ii) subdivide its outstanding
Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock, or (iv) issue, by
reclassification of its Common Stock, other securities of the Company,
the number of Shares or other securities purchasable upon exercise of
the Warrants immediately prior thereto shall be adjusted so that each
Warrantholder shall be entitled to receive the kind and number of
shares of Common Stock or other securities of the Company which it
would have owned or would have been entitled to receive immediately
after the happening of any of the events described above, had the
Warrants been exercised immediately prior to the happening of such
event or any record date with respect thereto. Any adjustment made
pursuant to this subsection 8.1(a) shall become effective immediately
on the effective date of such event retroactive to the record date, if
any, for such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its
Common Stock without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price per share
which, at the record date mentioned below, is lower than the then
effective Warrant Price (calculated pursuant to this Section 8), the
number of Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon exercise of the Warrant by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional
Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of shares which the aggregate
offering price of the total number of shares offered would purchase at
such then effective Warrant Price. Such adjustment shall be made
whenever such rights, options, warrants or convertible securities are
issued, and shall become effective immediately and retroactive to the
record date for the determination of
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shareholders entitled to receive such rights, options, warrants or
convertible securities, provided no such adjustment shall be made for
rights issued in connection with what is customarily referred to as a
"poison pill" or "shareholder rights plan."
(c) In case the Company shall distribute to all or substantially
all holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions out of earnings) or
rights, options, warrants or convertible securities containing the
right to subscribe for or purchase Shares (excluding those referred to
in subsection 8.1(b) above and rights in connection with a shareholder
rights plan), then in each case the number of Shares thereafter
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise
of the Warrants by a fraction, of which the numerator shall be the
then effective Warrant Price as of the date of such distribution
calculated pursuant to this Section 8, and of which the denominator
shall be such then effective Warrant Price on such date minus the then
fair value (determined as provided in subparagraph (f) below) of the
portion of the assets or evidences of indebtedness so distributed or
of such subscription rights, options, warrants or convertible
securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on
the date of distribution retroactive to the record date for the
determination of shareholders entitled to receive such distribution.
(d) No adjustment in the number of Shares purchasable pursuant to
the Warrants shall be required unless such adjustment would require an
increase or decrease of at least one percent in the number of Shares
then purchasable upon the exercise of the Warrants or, if the Warrants
are not then exercisable, the number of Shares purchasable upon the
exercise of the Warrants on the first date thereafter that the
Warrants become exercisable; provided that any adjustments which by
reason of this subsection 8.1(d) are not required to be made
immediately shall be carried forward and taken into account in any
subsequent adjustment.
(e) Whenever the number of Shares purchasable upon the exercise
of a Warrant is adjusted, as herein provided, the Warrant Price
payable upon exercise of such Warrant shall be adjusted by multiplying
such Warrant Price immediately prior to such adjustment by a fraction,
of which the numerator shall be the number of Shares purchasable upon
the exercise of the Warrant immediately prior to such adjustment, and
of which the denominator shall be the number of Shares so purchasable
upon the exercise of the Warrant immediately thereafter.
(f) Whenever the number of Shares purchasable upon the exercise
of Warrants is adjusted as herein provided, the Company shall cause to
be promptly mailed to the Warrantholders by first class mail, postage
prepaid, notice of such adjustment and a certificate of the chief
financial officer of the Company setting forth the number of Shares
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purchasable upon the exercise of the Warrants after such adjustment, a
brief statement of the facts requiring such adjustment and the
computation by which such adjustment was made.
(g) For the purpose of this subsection 8.1, the term Common Stock
shall mean (i) the class of Common Stock designated as the Common
Stock of the Company at the date of this Agreement, or (ii) any other
class of shares resulting from successive changes or reclassification
of such Common Stock consisting solely of changes in par value, or
from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant
to this Section 8, a Warrantholder shall become entitled to purchase
any securities of the Company other than Common Stock, (i) if the
Warrantholders' right to purchase is on any other basis than that
available to all holders of the Common Stock, the Company shall obtain
an opinion of an independent investment banking firm valuing such
other securities and (ii) thereafter the number of such other
securities so purchasable upon exercise of the Warrants shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section 8.
(h) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the
number of Shares purchasable upon exercise of the Warrants, to the
extent the Warrants have not then been exercised, shall, upon such
expiration, be readjusted and shall thereafter be such as they would
have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) on the basis of (A)
the fact that the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion privileges,
and (B) the fact that such shares of Common Stock, if any, were issued
or sold for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options,
warrants or conversion privileges whether or not exercised; provided,
however, that no such readjustment shall have the effect of decreasing
the number of Shares purchasable upon exercise of the Warrants by an
amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant of such rights, options,
warrants or conversion privileges.
8.2. No Adjustment for Dividends. Except as provided in subsection 8.1, no
adjustment to the Warrants or any provision or condition thereof in respect of
any dividends or distributions out of earnings shall be made during the term of
the Warrants or upon the exercise of Warrants.
8.3. No Adjustment in Certain Cases. No adjustments to the Warrants or any
provision or condition thereof shall be made pursuant to Section 3 or Section 8
hereof in connection with (i) the issuance of any Securities sold as part of the
Offering pursuant to the Placement Agreement, or the issuance of Common Stock
upon exercise of the Warrants, or (ii) the grant or exercise of
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the options to purchase Common Stock under the Company's Share Option Plan or
any future option plan for the sole benefit of the Company's employees and
directors.
8.4. Preservation of Purchase Rights upon Reclassification, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another entity or in case of any sale or conveyance to another entity of
the property, assets or business of the Company as an entirety or substantially
as an entirety, the Company or such successor or purchasing entity, as the case
may be, shall execute with the Warrantholders an agreement that the
Warrantholders shall have the right thereafter, upon exercise of the Warrants
and payment of the Warrant Price in effect immediately prior to such
consolidation, merger or sale, to purchase the kind and amount of shares and
other securities and property which it would have been entitled to receive after
the happening of such consolidation, merger, sale or conveyance had the Warrants
been exercised immediately prior thereto. In the event of a merger described in
Section 368(a)(2)(E) of the Internal Revenue Code of 1986 (or any successor
provision), in which the Company is the surviving corporation, the right to
purchase Shares under the Warrants shall terminate on the date of such merger
and thereupon the Warrants shall become null and void, but only if the
controlling corporation (after such event) shall agree to substitute for the
Warrants its warrants entitling the holder thereof to purchase the kind and
amount of shares and other securities and property which it would have been
entitled to receive had the Warrants been exercised immediately prior to such
merger. Any such agreements referred to in this subsection 8.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 8 hereof, and shall contain substantially
the same terms, conditions and provisions as are contained herein immediately
prior to such event. The provisions of this subsection 8.4 shall similarly apply
to successive consolidations, mergers, sales or conveyances.
8.5. Nominal Value of Common Stock. Before taking any action which would
cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each Share below the then nominal value per Share issuable upon
exercise of the Warrants, the Company will take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Shares upon exercise of
the Warrants.
8.6. Independent Public Accountants. The Company may retain a firm of
independent public accountants in the United States (which may be any such firm
regularly employed by the Company) to make any computation required under this
Section 8, and a certificate signed by such firm shall be evidence of the
correctness of any computation made under this Section 8.
8.7. Statement on Warrant Certificates. Irrespective of any adjustments in
the number of securities issuable upon exercise of Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its reasonable discretion, make any change in the form of Warrant certificate
that it may deem
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appropriate and that does not affect the substance thereof; and any Warrant
certificate hereafter issued, whether upon registration of transfer of, or in
exchange or substitution for, an outstanding Warrant certificate, may be in the
form so changed.
Section 9. Fractional Interests; Market Price. The Company shall not be
required to issue fractional Shares upon the exercise of any Warrant. If any
fraction of a Share would, except for the provisions of this Section 9, be
issuable on the exercise of any Warrant (or specified portion thereof), the
Company shall pay an amount in cash equal to the Market Price multiplied by such
fraction. For all purposes of this Agreement, the term Market Price as of any
specified date shall mean (i) if the Common Stock is traded in the United States
over-the-counter market and not on the Nasdaq System or on any United States
national securities exchange, the average of the mean between the bid and asked
prices of the Common Stock on each of the five consecutive trading days
immediately preceding the date in question, as reported by the National
Quotation Bureau Incorporated or an equivalent generally accepted reporting
service, or (ii) if the Common Stock is traded on the Nasdaq System or on one or
more United States national securities exchanges, the average, for the five
consecutive trading days immediately preceding the date in question, of the
daily closing price of the Common Stock on the Nasdaq System or the daily
closing price for consolidated transactions on the principal United States
national securities exchange on which the Common Stock is listed, or (iii) if
the Common Stock is not traded in the United States over-the-counter market, the
Nasdaq System or any United States national securities exchange, the average,
for the five consecutive trading days immediately preceding the date in
question, of the daily closing price of the Common Stock on the principal
non-United States exchange on which the Common Stock is listed. The daily
closing price referred to in clauses (ii) and (iii) above shall be the last
reported sale price on the day in question or, if no reported sale takes place
on such day, the average of the reported closing bid and asked prices.
Section 10. No Rights as Shareholder; Notices to Warrantholders. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or any transferee of a Warrant any rights as a
shareholder of the Company, including (without limitation) the right to vote,
receive dividends, consent or receive notices as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or any
other matter. If, however, at any time prior to the expiration of the Warrants
and prior to their exercise in full, any one or more of the following events
shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1 or 8.4; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety or substantially as an
entirety) shall be proposed;
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then the Company shall give notice in writing of such event to each of the
Warrantholders, as provided in Section 14 hereof, at least 20 days prior to the
date fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
shareholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive such notice
or any defect therein shall not affect the validity of any action taken with
respect thereto.
Section 11. Restrictions on Transfer; Registration Rights.
(a) The Warrant Holder agrees and undertakes that if it proposes to sell or
otherwise transfer any Warrants or Shares and if such Warrants or Shares are not
then registered for resale pursuant to an effective registration statement under
the Act, the Warrantholder proposing to make such transfer shall give written
notice to the Company describing briefly the manner in which any such proposed
transfer is to be made; and no such transfer shall be made unless the Company
shall notify such Warrantholder that in the opinion counsel reasonably
satisfactory to such Warrantholder, registration under the Act is not required
with respect to such transfer.
(b) Within 30 days of the date of this Agreement the Company shall be
obligated to the Warrant Holder to file a Registration Statement under the the
Act covering the Shares issuable upon exercise of the Warrants in conformity
with the provisions of a certain Registration Rights Agreement entered into by
the Warrant Holder and the Company on May 21, 1997.
(c) In connection with any Registration Statement filed pursuant to
paragraph (b) of this Section 11, the Company shall take such action as may be
necessary or appropriate to comply with the securities or blue sky laws of such
states of the United States as shall reasonably be requested by the Warrant
Holder, and shall do any and all other acts which may be necessary or advisable
to permit the proposed sale or other disposition of the Shares in any such
state; provided that in no event shall the Company be obligated in connection
therewith to qualify as a foreign corporation or as a dealer in any jurisdiction
where it is not already so qualified, or to execute a general consent for
service of process in suits other than those arising out of the offer and sale
of the Shares, or to take any action which would subject it to taxation in any
jurisdiction where it is not then so subject.
(d) The Company's obligations under paragraph (b) of this Section 11 with
respect to the Warrant Holder shall be conditioned in each instance upon the
timely receipt by the Company in writing of (i) information from such Warrant
Holder as to the proposed plan of distribution of such Warrant Holder's Shares
to be included in a Registration Statement, (ii) such other information as may
be required by law from such holder, or its underwriter or other agent,
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for inclusion in such Registration Statement, and (iii) if such holder is not
the Warrant Holder, an agreement to be bound by the provisions of Sections 12
and 13 of this Agreement.
(e) The Warrant Holder will not make any sale of the Shares, pursuant to
the registration statement referred to in this Section 11 without effectively
causing the prospectus delivery requirements under the Securities Act to be
satisfied. The Warrant Holder acknowledges that there may occasionally be times
when the Company must suspend the use of the prospectus forming a part of the
Registration Statement until such time as an amendment to such registration
statement has been field by the Company and declared effective by the Commission
or until the Company has amended or supplemented such prospectus. The Company
will use its best efforts to cause such amended registration statement to be
declared effective and/or to deliver such amended or supplemented prospectus as
soon as possible. The Warrant Holder hereby covenants that it will not sell any
Shares pursuant to said prospectus during the period commencing at the time at
which the Company gives the Warrant Holder notice of the suspension of the use
of said prospectus and ending at the time the Company gives the Warrant Holder
notice that the Warrant Holder may thereafter effect sales pursuant to said
prospectus.
(f) The Company shall pay all fees, disbursements and out-of-pocket
expenses (other than the Warrant Holder's brokerage fees and commissions and
legal fees) payable in connection with (i) any Registration Statement filed
under paragraph 11(b) and (ii) compliance with applicable state securities and
blue sky laws. The Company at its expense will supply the Warrant Holders of
Shares included in a Registration Statement with copies of such Registration
Statement and the prospectus included therein and other related documents and
opinions and no-action letters, in such quantities as may be reasonably
requested by such Warrantholders. In connection with each Registration
Statement, the Company shall furnish to holders of Shares included therein such
opinions of counsel, comfort letters of accountants, certificates and other
documents that are customary in connection with underwritten public offerings
and that are reasonably requested by such Warrantholders.
Section 12. Indemnification.
(a) In the event that any Registration Statement is filed pursuant to
Section 11 hereof, the Company will indemnify and hold harmless the
Warrantholder identified as a selling security holder therein, and each person,
if any, who controls such Warrantholder within the meaning of the Act, against
any and all losses, claims, damages or liabilities, joint or several (including
any reasonable investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they or any of them may become subject under the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
other federal or state law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement, any
related preliminary prospectus, final prospectus,
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or amendment thereof or supplement thereto, or any related blue sky filing, or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided that the
Company shall not be liable under this section 12(a) in any such case to the
extent that any such losses, claims, damages or liabilities arise solely out of
or are based upon an untrue statement of a material fact contained in, or any
omission of a material fact from, such Registration Statement, preliminary
prospectus, final prospectus or amendment thereof or supplement thereto in
reliance upon, and in conformity with, information furnished in writing to the
Company by such Warrant Holder specifically for use therein. This indemnity will
be in addition to any liability which the Company may otherwise have.
(b) The Warrant Holder will indemnify and hold harmless the Company, each
other person referred to in subparts (1), (2) and (3) of Section 11(a) of the
Act in respect of the Registration Statement, and each person, if any, who
controls the Company or any such person within the meaning of Section 15 of the
Act, against any and all losses, claims, damages or liabilities (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other federal or state law or regulation, at common
law, or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in such
Registration Statement, any related preliminary prospectus, final prospectus or
amendment thereof or supplement thereto, or any related blue sky filing, or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in such Registration Statement, preliminary prospectus, final prospectus or
amendment thereof or supplement thereto in reliance upon, and in conformity
with, information furnished in writing to the Company by such Warrant Holder
specifically for use therein. This indemnity will be in addition to any
liability which the Warrant Holder may otherwise have to the Company.
(c) Any party that proposes to assert the right to be indemnified under
this Section 12 shall, promptly after receipt of notice of the commencement of
any action, suit or proceeding against such party in respect of which a claim is
to be made against an indemnifying party or parties under this Section, notify
each such indemnifying party of the commencement thereof, enclosing a copy of
all papers served. No indemnification provided for in Section 12(a) or 12(b)
shall be available to any party who shall fail to give notice as provided in
this Section 12(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially prejudiced
by the failure to give such notice, but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall not relieve it
from any liability that it may have to any indemnified party otherwise than
under this Section 12 or Section 13. In case any such action, suit or proceeding
is brought against any
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indemnified party and it notifies the indemnifying party of the commencement
thereof, such indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and the
approval by the indemnified party of such counsel (which approval shall not
unreasonably be withheld), the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, except as provided below and
except for the reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified party
shall have the right to employ its own counsel in any such action, suit or
proceeding but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the employment of counsel by such indemnified
party has been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be differing or
additional defenses available to it and not to one or more of the indemnifying
parties in such action, suit or proceeding (in which case the indemnifying
parties shall not have the right to direct the defense of such action, suit or
proceeding on behalf of the indemnified party), or (iii) the indemnifying
parties shall not have employed counsel to assume the defense of such action
within a reasonable time after notice of the commencement thereof, in each of
which cases the fees and expenses of the indemnified party's counsel shall be at
the expense of the indemnifying parties; however, the indemnifying party shall
not, in connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the Warrant Holders and controlling persons, which firm shall be
designated in writing by a majority in interest of such Warrant Holders and
controlling persons (based upon the value of the Shares included in the
Registration Statement). An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its written
consent.
Section 13. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 12 is due in accordance with its terms but for any reason is held to be
unavailable or insufficient to hold harmless an indemnified party, the Company
(including for this purpose any controlling person of the Company, any director
of the Company and any officer of the Company who signed the Registration
Statement) on the one hand, and the Warrant Holders (including for this purpose
any controlling persons thereof) on the other hand, shall, in lieu of
indemnifying such indemnified party, contribute to the aggregate losses, claims,
damages or liabilities referred to in Section 12 above (including any
investigation, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting any contribution received by or payable to
the Company from other persons other than the Warrant Holders, such as other
selling securityholders, persons who control the Company within the meaning of
the Act, officers of the Company who signed the Registration Statement, and
directors of the Company), (a) in such proportion as is appropriate to reflect
the
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relative benefits received by the Company and the Warrant Holders from the
offering or offerings covered by the Registration Statement or, (b) if the
allocation provided by clause (a) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (a) above but also the relative fault of the Company and
the Warrant Holders in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Warrant Holder on the other hand shall be
deemed to be in the same proportion as (x) the total proceeds (if any) received
by the Company from the offering or offerings covered by the Registration
Statement (net of underwriting discounts but before deducting expenses, if
applicable), plus all cash proceeds received by the Company from the exercise of
the Warrants for the Shares of such Warrant Holder included in the Registration
Statement, bear to (y) the total proceeds received by such Warrant Holder from
the sale of Shares included in the Registration Statement. The relative fault of
the Company and the Warrant Holder shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission related to information supplied by the Company or such Warrant
Holder, and their relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Warrant Holder agree that it would not be just and equitable if contribution
pursuant to this Section 13 were determined by pro rata allocation (even if the
Warrant Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 13, in no case
shall the Warrant Holder (except as may be provided by agreement among them) be
liable or responsible for any amount in excess of the proceeds received by such
Warrant Holder from the sale of the Shares included in the Registration
Statement; provided that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 13, each person, if any, who
controls the Warrant Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
such Warrant Holder, and each person, if any, who controls the Company within
the meaning of the Section 15 of the Act or Section 20(a) of the Exchange Act,
each director of the Company and each officer of the Company who shall have
signed the Registration Statement, shall have the same rights to contribution as
the Company, subject in each case to clauses (i) and (ii) in the immediately
preceding sentence of this Section 13. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 13, notify such
party or parties from whom contribution may be sought, and the omission so to
notify such party or parties from whom contribution may be sought shall relieve
the party or parties from whom contribution may be sought (if such party was
unaware of such action, suit or proceeding and was materially prejudiced by such
omission) from any liability under this Section 13, but not from any other
obligation it or they may have hereunder or otherwise than under this Section
13. No party shall be liable for contribution with respect to any settlement of
an action, suit, proceeding or claim effected without
-13-
its written consent. The obligations of the Warrant Holders to contribute
pursuant to this Section 13 are several in proportion to their respective number
of Shares included in the Registration Statement, and not joint.
Section 14. Notices. Any notice pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given (i) if given by facsimile
transmission on the business day on which such transmission is sent and
confirmed, (ii) if given by air courier, two business days following the date it
was sent or (iii) if mailed by certified mail, return receipt requested, ten
business days following the date it was mailed, to the following addresses
(unless another address is herein specified):
(a) If to the Warrant Holder, addressed to: Lydford Ltd., c/o
Gainsford Bell & Co., 111 Arlozorov Street, Tel Aviv Israel with a
copy to Sam Krieger, Esq., Krieger & Prager, 319 5th Avenue, New York,
New York 10016.
(b) If to the Company, addressed to: Casdim International
Systems, Inc., 150 East 58th Street, New York, New York 10155 with a
copy to: Carter, Ledyard & Milburn, 2 Wall Street, New York, New York
10005, Attention: Steven J. Glusband, Esq., Fax (212) 732-3232.
Each party may from time to time change the address or fax number to which
notices to it are to be delivered or mailed hereunder by notice in accordance
herewith to the other party.
Section 15. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company, the Warrant Holder shall bind and inure to
the benefit of their respective successors and assigns.
Section 16. Merger or Consolidation of the Company. The Company shall not
merge or consolidate with or into any other corporation or sell all or
substantially all of its property to another corporation, unless the provisions
of Section 8.4 are complied with.
Section 17. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK
AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
SAID SATE (WITHOUT REFERENCE TO ITS RULES AS TO CONFLICTS OF LAWS). The Company
hereby agrees to the exclusive jurisdiction of the courts of the State of New
York sitting in the County of New York or the federal courts sitting in the
County of New York in connection with any action arising out of this Agreement.
Section 18. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrantholder any legal or
-14-
equitable right, remedy or claim under this Agreement. This Agreement shall be
for the sole and exclusive benefit of the Company and the Warrant Holders.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the date and year first above written.
Casdim International Systems, Inc.
By: /s/Yehuda Shimshon
----------------------
Name:
Title:
Lydford Ltd.
By: /s/John Gainsford
---------------------
Name: John Gainsford
Director
-15-
EXHIBIT A
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE
SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH
WARRANTS AND SECURITIES MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN ANY MANNER EXCEPT IN
COMPLIANCE WITH SECTION 11 OF THE AGREEMENT BY AND BETWEEN THE
ISSUER AND LYDFORD LTD. DATED May 22, 1997."
Warrant Certificate No. 1
Casdim International Systems, Inc.
(ORGANIZED UNDER THE LAWS
OF THE STATE OF DELAWARE)
WARRANTS TO PURCHASE COMMON STOCK
This certifies that, for value received, Lydford Ltd. (the "Warrantholder")
is the registered owner of 200,000 warrants (the "Warrants") to purchase from
Casdim International Systems, Inc. (the "Company"), at any time during the
period commencing at 9:00 a.m., Eastern Time, on May 22, 1997 and ending at 5:00
p.m., Eastern Time, on May 21, 2002, at an initial purchase price per share of
$1.00 (the "Warrant Price"), an aggregate of 200,000 shares of Common Stock of
the Company. The Warrants are subject to, and each Warrantholder, by acceptance
of this certificate, consents to all the terms and provisions of the Warrant
Agreement dated as of May 22, 1997, between the Company and the Warrantholder,
pursuant to which the Warrants evidenced hereby were issued (the "Warrant
Agreement").
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form herein duly
executed (with a signature guarantee as provided therein), and simultaneous
payment of the Warrant Price for each Warrant exercised, at the principal office
of the Company. Payment of such price shall be made at the option of each
Warrantholder in cash or by certified or cashier's check, in next day funds. The
Warrantholder may also receive Common Stock without any cash payment by
presentation of this Warrant Certificate with the Cashless Exercise Form herein
duly executed (with a signature guarantee as provided therein) at the principal
office of the Company.
Upon any partial exercise of the Warrants evidenced hereby, there shall be
signed and issued to the Warrantholder effecting such partial exercise a new
Warrant Certificate in respect of the Common Stock as to which the Warrants
evidenced hereby shall not have been exercised. These Warrants may be exchanged
at the office of the Company by surrender of this Warrant Certificate properly
endorsed for one or more new Warrants of the same aggregate number of shares of
Common Stock as here evidenced by the Warrant or Warrants exchanged. No
fractional shares of Common Stock will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. These Warrants are transferable at
the office of the Company in the manner and subject to the limitations set forth
in the Warrant Agreement.
This Warrant Certificate does not entitle any Warrantholder to any of the
rights of a shareholder of the Company.
Casdim International Systems, Inc.
By: /s/Yehuda Shimshon
----------------------
Title: President
Dated: May 22, 1997
-2-
PURCHASE FORM
Casdim International Systems, Inc.
150 East 58th Street
New York, New York 10155
Pursuant to paragraphs 3(a) and (b) of the Warrant Agreement, the
undersigned hereby irrevocably elects to exercise the right of purchase
represented by this Warrant Certificate for, and to purchase thereunder,
__________ shares of Common Stock ("Common Stock") provided for therein, and
requests that certificates for such Common Stock be issued in the name of:
-----------------------------------
(Please Print or Type Name(s), Address and Taxpayer Identification Number(s))
-----------------------------------
-----------------------------------
-----------------------------------
If this Warrant Certificate is hereby being exercised with respect to fewer than
all the Common Stock specified herein, please issue a new Warrant Certificate
for the unexercised balance of the Warrants, registered in the name of the
undersigned Warrantholder or his assignee as below indicated and delivered to
the address stated below.
Dated: _______________________
Name of Warrantholder(s)
or Assignee(s) (Please Print): __________________________
--------------------------
Address (Please Print): ______________________________________
--------------------------------------------
Signature(s): ____________________________________________
--------------------------------------------
Note: The above signature(s) must correspond exactly with the name(s)
as written upon the face of this Warrant Certificate, without alteration or
enlargement or any change whatever, unless these Warrants have been
assigned.
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
-----------------------------------
-----------------------------------
-----------------------------------
(Name(s) and Address(es) of Assignee(s) Must be Printed or Typewritten)
the within Warrants, hereby irrevocably constituting and appointing
________________________ the undersigned's attorney-in-fact to transfer said
Warrants on the books of the Company, with full power of substitution.
Dated: __________ ___________________________________
-----------------------------------
Signature(s) of Registered Holder(s)
Note: The above signature(s) must correspond exactly with the name(s)
as written upon the face of this Warrant Certificate, without alteration or
enlargement or any change whatever.