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WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
THE CREDIT STORE, INC.
THIS CERTIFIES THAT, for value received and subject to the terms and
provisions set forth herein, J.L.B. of Nevada, Inc. (the "Purchaser"), or
registered assigns, is entitled to subscribe for and purchase from The Credit
Store, Inc., a Delaware corporation (the "Company"), at any time from and after
June 30, 2000 to and including June 30, 2004 up to Four Million (4,000,000)
fully paid and nonassessable shares of the Company's Common Stock, par value
$.001 per share (the "Common Stock"), at the price (subject to adjustment as
noted below) of $3.25 per share. The shares which may be acquired upon exercise
of this Warrant are referred to herein as the "Warrant Shares." As used herein,
the term "Holder" means the Purchaser, any party who acquires all or a part of
this Warrant as a permitted transferee of the Purchaser, or any record holder or
holders of the Warrant Shares issued upon exercise, whether in whole or in part,
of the Warrant. This Warrant has been issued in connection with the forgiveness
of certain debt by the Purchaser and other good and valuable consideration.
This Warrant is subject to the following provisions, terms and
conditions:
1. The rights represented by this Warrant may be exercised by the
Holder, in whole or in part, by written notice of exercise delivered to the
Company 20 days prior to the intended date of exercise and by the surrender of
this Warrant at the Company's principal office and upon payment to it by check
of the purchase price for the shares. The shares so purchased will be issued to
the Holder hereof as of the close of business on the date on which this Warrant
is surrendered and payment made for the shares as aforesaid. Certificates for
the shares of stock so purchased will be delivered to the Holder within 15 days
after the rights represented by this Warrant are so exercised, and, unless this
Warrant has expired, a new Warrant representing the number of shares, if any,
with respect to which this Warrant has not been exercised will also be delivered
to the Holder hereof within such time. Notwithstanding the foregoing, however,
the Company will not be required to deliver any certificates for shares of stock
except in accordance with the provisions and subject to the limitations of
paragraph 5 hereof and the restrictive legend set forth below.
2. All shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized and issued,
fully paid and nonassessable. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of issuance or transfer upon exercise
of the subscription rights evidenced by this Warrant, a sufficient number of
shares of its Common Stock to provide for the exercise of this Warrant.
3. The foregoing provisions are, however, subject to the following:
(a) The Warrant purchase price is subject to adjustment from
time to time as provided below. Upon each adjustment of the Warrant purchase
price, the Holder of this Warrant will thereafter be entitled to purchase, at
the Warrant purchase price resulting from the adjustment, the number of shares
obtained by multiplying the Warrant purchase price in effect immediately prior
to the adjustment by the number of shares purchasable pursuant hereto
immediately prior to the adjustment and dividing the product thereof by the
Warrant purchase price resulting from the adjustment.
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(b) If the Company at any time subdivides its outstanding shares
of Common Stock into a greater number of shares or declares a dividend payable
in the Common Stock of the Company, then the Warrant purchase price in effect
immediately prior to such subdivision will be proportionately reduced, and
conversely, if the outstanding Common Stock of the Company is combined into a
smaller number of shares, then the Warrant purchase price in effect immediately
prior to such combination will be proportionately increased.
(c) If any capital reorganization or reclassification of the
Company's capital stock, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation is effected in such a way that holders of the Common Stock of the
Company are entitled to receive stock, securities or assets ("Substituted
Property") with respect to or in exchange for such Common Stock, then, as a
condition of the reorganization, reclassification, consolidation, merger or
sale, the Holder hereof will have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant and in lieu of
the shares immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby, such Substituted Property as would have been
issued or delivered to the Holder hereof if the Holder hereof had exercised this
Warrant and had received Warrant the shares immediately prior to the
effectiveness of such reorganization, reclassification, consolidation, merger or
sale.
(d) If any other event occurs as to which in the opinion of the
Board of Directors of the Company the provisions of paragraph 3(b) or 3(c)
hereof are not strictly applicable or, if strictly applicable, would not be
adequate to protect the purchase rights of the Holder of this Warrant or of
Common Stock in accordance with the essential intent and purposes of such
provisions, then the Board of Directors will make an appropriate adjustment in
the application of such provisions, in accordance with such essential intent and
principles, so as to protect such purchase rights as aforesaid.
(e) Following any adjustment of the Warrant purchase price,
the Company will give written notice thereof, by first-class mail, postage
prepaid, addressed to the Holder hereof at the address of the Holder as shown on
the books of the Company, which will state the Warrant purchase price resulting
from the adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
the calculation is based.
4. This Warrant does not entitle the Holder hereof to any voting
rights or other rights as a shareholder of the Company.
5. The Holder hereof, by acceptance hereof, represents and warrants
that (a) it is acquiring this Warrant for its own account for investment
purposes only and not with a view to its resale or distribution and (b) it has
no present intention to resell or otherwise dispose of all or any part of this
Warrant. This Warrant has not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), nor any state or foreign securities laws. As
a result, neither this Warrant nor the shares of Common Stock to be issued upon
exercise of this Warrant may be offered for sale, sold, pledged, assigned or
otherwise disposed of, and no transfer of this Warrant or such shares will be
made by the Company or its transfer agent without appropriate registration under
the Securities Act and any applicable state securities laws or an opinion of
counsel acceptable to the Company with respect to the availability of an
exemption from registration. Further, other than pursuant to registration under
the Securities Act and any applicable state securities laws or an opinion of
counsel acceptable to the Company with respect to the availability of or an
exemption from such registration, the Company will not accept the exercise of
this Warrant or issue certificates for shares to be issued upon exercise of this
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Warrant. The Company may also condition such issuance or sale, pledge,
assignment or other disposition on the receipt from the party to whom this
Warrant is to be so transferred or to whom any shares of Common Stock are to be
issued or so transferred of any representations and agreements requested by the
Company in order to permit such issuance or transfer to be made pursuant to
exemptions from registration under federal and applicable state securities laws.
Each certificate representing the Warrant (or any part thereof) and any shares
of Common Stock to be issued upon exercise of this Warrant will be stamped with
appropriate legends setting forth these restrictions on transferability to the
extent then applicable.
6. The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such items and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereof against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any shares of stock receivable on
the exercise of this Warrant above the amount payable therefor on such exercise,
and (b) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of stock on the exercise of this Warrant.
7. Following the occurrence of:
(a) any taking by the Company of a record of the holders of the
Common Stock of the Company for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to or
consolidation or merger of the Company with or into any other entity; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then and in each such event the Company will give notice to the Holder hereof
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, (ii) the amount and character of such
dividend, distribution or right, and (iii) the date on which any such
reorganization, reclassification, capitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any, to be fixed, as of which the holders of record of Common Stock (or other
securities) are entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up
8. No fractional shares of Common Stock will be issued upon the
exercise of this Warrant, but, instead of any fraction of a share that would
otherwise be issuable, the Company will pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the Holder hereof upon such
exercise) in respect of the fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" for purposes of
this paragraph 8 means, if the Common Stock is
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traded on a securities exchange or on the NASDAQ National Market, the closing
price of the Common Stock on the exchange or the NASDAQ National Market, or, if
the Common Stock is otherwise traded in the over-the-counter market, the closing
bid price, in each case on the date prior to the date as of which "market price"
is being determined. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market, or otherwise traded in the
over-the-counter market, the "market price" will be deemed to be the fair market
value thereof determined in good faith by the Board of Directors of the Company
as of a date which is within 15 days of the date as of which the determination
is to be made.
9. (a) In addition to and without limiting the rights of the Holder
of this Warrant under the terms of this Warrant, the Holder of this Warrant has
the right (the "Conversion Right") to convert this Warrant or any portion
thereof into shares of Common Stock as provided in this paragraph 9 at any time
or from time to time prior to its expiration. Upon exercise of the Conversion
Right with respect to a particular number of shares (the "Converted Warrant
Shares"), the Company will deliver to the Holder of this Warrant, without
payment by the Holder of any exercise price or any cash or other consideration,
that number of shares of Common Stock equal to the quotient obtained by dividing
the Net Value (as defined below) of the Converted Warrant Shares by the fair
market value (as defined in paragraph (c) below) of a single share of Common
Stock, determined in each case as of the close of business on the Conversion
Date (as defined below). The "Net Value" of the Converted Warrant Shares is
determined by subtracting the aggregate Warrant purchase price of the Converted
Warrant Shares from the aggregate fair market value of the Converted Warrant
Shares. Notwithstanding anything in this paragraph 9 to the contrary, the
Conversion Right may not be exercised with respect to a number of Converted
Warrant Shares having a Net Value below $100. No fractional shares are issuable
upon exercise of the Conversion Right, and if the number of shares to be issued
in accordance with the foregoing formula is other than a whole number, the
Company shall pay to the Holder of this Warrant an amount in cash equal to the
fair market value of the resulting fractional share.
(b) The Conversion Right may be exercised by the Holder of this
Warrant by the surrender of this Warrant at the principal office of the Company
together with a written statement, substantially in the form attached hereto as
Schedule 1, specifying that the Holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in paragraph (a) above as the Converted
Warrant Shares) in exercise of the Conversion Right. The conversion will be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), but not later than the expiration date of this Warrant.
Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right, together with a check in payment of any fractional share and,
in the case of a partial exercise, a new Warrant evidencing the shares remaining
subject to this Warrant, will be issued as of the Conversion Date and will be
delivered to the Holder of this Warrant within 15 days following the Conversion
Date.
(c) For purposes of this paragraph 9, the "fair market value" of
a share of Common Stock as of a particular date shall be its "market price,"
calculated as described in paragraph 8 hereof.
10. The Holder shall have the registration rights described in
Exhibit A hereto.
11. This Warrant is transferable only on the books of the Company by
the Holder hereof in person, or by duly authorized attorney, on surrender of the
Warrant, properly assigned.
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12. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
13. All questions concerning this Warrant will be governed under the
laws of the State of South Dakota, without giving effect to its choice-of-law
principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and to be dated as of May 29, 1999.
THE CREDIT STORE, INC.
By /s/ Martin Burke
--------------------------------
Its Chief Executive Officer
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF THE SECURITIES
WILL BE MADE BY THE COMPANY OR ITS TRANSFER AGENT IN THE ABSENCE OF REGISTRATION
OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED.
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SCHEDULE 1
NOTICE OF EXERCISE
FOR WARRANTS
To: THE CREDIT STORE, INC.
The undersigned hereby irrevocably elects to purchase
shares of Common Stock of The Credit Store, Inc. under to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of the
shares in full.
Please issue a certificate or certificates representing the shares in
the name of the undersigned or, subject to compliance with the restrictions on
transfer set forth in the Warrant, in such other name or names as are specified
below:
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Print Name(s), if joint
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Address
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City, State, Zip Code
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Taxpayer ID Number(s), if joint
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Social Security Number(s), if joint
The undersigned represents that the shares resulting from the exercise
of the Warrant are acquired for the account of the undersigned for investment
and not with a view to, or for resale in connection with, the distribution
thereof and that the undersigned has no present intention of distributing or
reselling the shares.
Date:
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Signature(s), if joint
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EXHIBIT A
1. Registration Rights.
(a) Certain Definitions. As used in this Section 1, the
following terms have the following definitions:
"Common Stock" means the Company's Common Stock, par value
$0.001 per share.
"Commission" means the Securities and Exchange Commission.
"Company" means The Credit Store, Inc., a Delaware
corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Indemnified Party" and "Indemnifying Party" have the
meanings set forth in Section 1(f)(iii).
"JLB" means J.L.B. of Nevada, Inc.
"Registrable Stock" means: (i) all Warrant Shares which are
issuable to the Warrantholders pursuant to the Warrant, whether or not the
Warrant has in fact been exercised and whether or not such Warrant Shares have
in fact been issued, (ii) all Warrant Shares acquired by the Warrantholders
pursuant to the Warrant, (iii) any shares of Common Stock, whether or not such
shares of Common Stock have in fact been issued, and stock or other securities
of the Company issued upon conversion of, in a stock split or reclassification
of, or a stock dividend or other distribution on, or in substitution or exchange
for, or otherwise in connection with, such Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant(s)" means this Warrant and any warrants issued in
exchange or replacement of this Warrant or upon transfer hereof.
"Warrantholder(s)" means JLB and its successors and assigns.
"Warrant Shares" means shares of Common Stock issuable to
Warrantholders pursuant to the Warrant.
(b) Required Registration.
(i) One Time Right. After six (6) months
following the date of consummation of the Company's first public offering of its
securities to the public pursuant to a general form of registration statement
under the Securities Act, whenever the Company shall receive a written request
therefor from any holder or holders of at least 10% of the Registrable Stock,
the Company shall promptly prepare and file a registration statement under the
Securities Act covering the Registrable Stock which is the subject of such
request and shall use its best efforts to cause such registration statement to
become effective as expeditiously as possible, provided that the Company shall
not be obligated to effect a registration pursuant to this subsection 1(b)(i) if
it shall provide a certificate signed by the President or other officer of the
Company stating that in the good faith judgment of the Board of
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Directors of the Company, it would be severely detrimental to the Company and
its stockholders for such registration to be effected at such time, in which
event the Company shall have the right to defer the filing of a registration
statement for a period of not more than 180 days after receipt of the request of
the holder or holders under this Section 1(b)(i). Upon the receipt of such
request, the Company shall promptly give written notice to all holders of
Registrable Stock that such registration is to be effected. The Company shall
include in such registration statement such Registrable Stock for which it has
received written requests to register such shares by the holders thereof within
thirty (30) days after the effectiveness of the Company's written notice to such
other holders. Notwithstanding the above, the Company is obligated to effect
only one (1) registration pursuant to this Section 1(b)(i) and any other
agreement providing similar "demand registration rights" to holders of other
options, warrants or other rights to purchase or acquire the Company's Common
Stock.
(ii) Form S-3 Registration. Subject to the
conditions herein, in case the Company shall receive from the holders of
Registrable Stock, a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Stock owned by such holders, the
Company will:
(A) promptly give written notice of
the proposed registration, and any related qualification or compliance, to all
other holders; and
(B) as soon as practicable, effect
such registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such holder's Registrable Stock as are specified in such
request, together with all or such portion of the Registrable Stock of any other
holder or holders joining in such request as are specified in a written request
given within 20 days after receipt of such written notice from the Company;
provided that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1(b)(ii):
(1) if Form S-3 is not available for such offering by the holders; (2) if the
holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable Stock
and such other securities (if any) at an aggregate price to the public (net of
any underwriters discounts or commissions) of less than $1,000,000; (3) if the
Company shall furnish to the holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 180 days after receipt of
the request of the holder or holders under this Section 1(b)(ii); (4) if the
Company has, within the six month period preceding the date of such request,
already effected one registration on Form S-3 for the holders pursuant to this
Section 1(b)(ii); (5) if the Company has, within the six month period preceding
the date of such request, already effected one "demand registration" pursuant to
Section 1(b)(i) or any other agreement; or(6) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(C) Subject to the foregoing, the
Company shall file a registration statement covering the Registrable Stock and
other securities so requested to be registered as soon as practicable after
receipt of the request or requests of the holders. Registrations effected
pursuant to this Section 1(b)(ii) shall not be counted as demands for
registration effected pursuant to Section 1(b)(i).
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(D) In the event that the underwriters
of the requested Form S-3 Registration advise the holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall include in such registration only the
number of shares of Registrable Stock that the underwriters determine in their
sole discretion will not jeopardize the success of the offering. If the number
of shares of Registrable Stock requested to be sold in a Form S-3 Registration
exceeds the number of shares of Registrable Stock that can be sold, the Company
shall include in such Form S-3 Registration (i) first, the Registrable Stock
requested to be included in such registration by the holders of Registrable
Stock, and if two or more holders of Registrable Stock are included in the Form
S-3 Registration, pro rata among the holders on the basis of the number of
Registrable Stock owned by each such holder, and (ii) second, the Registrable
Stock requested to be included in such registration by any holders other than
the holders who made the request for the Form S-3 Registration, pro rata among
such holders on the basis of the number of Registrable Stock owned by each such
holder.
(c) Incidental Registration. Each time the Company shall
determine to file a registration statement under the Securities Act (other than
on Form S-8 or Form S-4) in connection with the proposed offer and sale for
money of any of its securities by it or by any of its security holders, the
Company will give written notice of its determination to all holders of
Registrable Stock. Upon the written request of a holder of any Registrable
Stock, the Company will cause all such Registrable Stock, the holders of which
have so requested registration thereof, to be included in such registration
statement, all to the extent requisite to permit the sale or other disposition
by the prospective seller or sellers of the Registrable Stock to be so
registered in accordance with the terms of the proposed offering. If the
registration statement is to cover an underwritten distribution, the Company
shall use its best efforts to cause the Registrable Stock requested for
inclusion pursuant to this Section 1(c) to be included in the underwriting on
the same terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter of such
public offering, the inclusion of all of the Registrable Stock requested to be
registered would materially and adversely affect the successful marketing of the
other shares proposed to be offered, then the amount of the Registrable Stock to
be included in the offering shall be reduced and the Registrable Stock and the
other shares to be offered shall participate in such offering as follows: first,
the shares to be sold by the Company, second the Registrable Stock and the other
shares of Common Stock to be included in such offering shall each be reduced pro
rata by each holder of such shares to equal in the aggregate the remaining
number of shares of Common Stock proposed to be included in such offering.
(d) Registration Procedures. If and whenever the Company
is required by the provisions of Section 1(b) or 1(c) to effect the registration
of Registrable Stock under the Securities Act, the Company will at its expense,
as expeditiously as possible:
(i) In accordance with the Securities Act and
the rules and regulations of the Commission, prepare and file with the
Commission a registration statement on the form of registration statement
appropriate with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective until the earlier of
(x) the date on which the securities covered by such registration statement have
been sold, or (y) one hundred eighty (180) days after the effective date
thereof, and prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective and such
registration statement and prospectus accurate and complete until the earlier of
(x) or (y) above;
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(ii) If the offering is to be underwritten,
in whole or in part, enter into a written underwriting agreement with the
holders of the Registrable Stock participating in such offering and the
underwriter in form and substance reasonably satisfactory to the managing
underwriter of the public offering and the holders of the Registrable Stock
participating in such offering;
(iii) Furnish to the holders of securities
participating in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters and holders may reasonably request in order to facilitate the
public offering of such securities;
(iv) Use its best efforts to register or qualify
the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating holders
and underwriters may reasonably request provided that the Company shall not be
required to qualify in a particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration or qualification if the Company was not
otherwise required to do so;
(v) Notify the holders participating in such
registration, promptly after it shall receive notice thereof, of the date and
time when such registration statement and each post-effective amendment thereto
has become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(vi) Notify such holders promptly of any request
by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or supplements to such
registration statement or prospectus relating to the Registrable Stock or the
holders thereof which, in the reasonable opinion of counsel for such holders, is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Stock by such holders;
(viii) Prepare and promptly file with the Commission,
and promptly notify such holders of the filing of, such amendments or
supplements to such registration statement or prospectus as may reasonably be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event has occurred as the result of which any such
prospectus or any other prospectus as then in effect may include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(ix) In case any of such holders or any
underwriter for any such holders is required to deliver a prospectus at a time
when the prospectus then in circulation is not in compliance with the Securities
Act or the rules and regulations of the Commission, prepare promptly such
amendments or supplements to such registration statement and such prospectus as
may reasonably be necessary in order for such prospectus to comply with the
requirements of the Securities Act and such rules and regulations;
(x) Advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the Commission suspending the effectiveness
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of such registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued;
(xi) If requested by the managing underwriter or
underwriters or a holder of Registrable Stock being sold in connection with an
underwritten offering, immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
holders of a majority of the Registrable Stock being sold agree should be
included therein relating to the plan of distribution with respect to such
Registrable Stock, including information with respect to the Registrable Stock
being sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Stock to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment;
(xii) Cooperate with the selling holders of
Registrable Stock and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable Stock
to be sold and not bearing any restrictive legends; and enable such Registrable
Stock to be in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale of
Registrable Stock to the underwriters;
(xiii) Prepare a prospectus supplement or
post-effective amendment to the registration statement or the related prospectus
or any document incorporated therein by reference or file any other required
documents so that, as thereafter delivered to the purchasers of the Registrable
Stock, the prospectus will not contain an untrue statement of material fact or
omit to state any material fact necessary to make the statements therein not
misleading;
(xiv) Enter into such agreements (including an
underwriting agreement) and take all such other actions in connection therewith
in order to expedite or facilitate the disposition of such Registrable Stock and
in such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration:
(A) make such representations and
warranties to the holders of such Registrable Stock and the underwriters, if
any, in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings;
(B) If an underwriting agreement is entered
into, the same shall set forth in full the indemnification provisions and
procedures of Section 1(f) hereof with respect to all parties to be indemnified
pursuant to said Section; and
(C) The Company shall deliver such documents
and certificates as may be requested by the holders of the majority of the
Registrable Stock being sold and the managing underwriters, if any, to evidence
compliance with the terms of this Section 1(d) and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company.
The above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
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(xv) Make available for inspection by a
representative of the holders of a majority of the Registrable Stock, any
underwriter participating in any disposition pursuant to a registration
statement, and any attorney or accountant retained by the sellers or
underwriter, all pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all pertinent information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with the preparation of the registration statement; provided, that any records,
information or documents that are designated by the Company in writing as
confidential shall be kept confidential by such persons unless disclosure of
such records, information or documents is required by court or administrative
order;
(xvi) Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, including, without
being limited thereby, making generally available to the Company's security
holders in a timely manner, earning statements satisfying the applicable
provisions of the Securities Act; and
(xvii) At the request of any such holder furnish to
such holder promptly following the request (i) any opinion rendered by counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, and (ii) any letter from the independent certified public
accountants of the Company addressed to the underwriters, in connection with
such registration.
(e) Expenses of Registration. All expenses incident to
the Company's performance of or compliance with this Warrant, including, without
limitation, the following shall be borne by the Company, regardless of whether
the registration statement becomes effective:
(i) All registration and filing fees
(including those with respect to filings required to be made with the National
Association of Securities Dealers, Inc.);
(ii) Fees and expenses of compliance with all
securities or blue sky laws (including fees and disbursements of counsel for the
underwriters or selling holders in connection with blue sky qualifications of
the Registrable Stock and in determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters or holders of
a majority of the Registrable Stock being sold may designate);
(iii) Printing, messenger, telephone and delivery
expenses;
(iv) Fees and disbursements of counsel for
the Company and, for a registration under Section 1(c), the underwriters;
(v) Fees and disbursements of counsel for the
holders of Registrable Stock of up to $5,000 (provided such expenses are
related to the registration of Registrable Stock pursuant to Section 1(c));
(vi) Fees and disbursements of all
independent certified public accountants of the Company (including the
expenses of any special audit and "comfort" letters provided such expenses are
related to the registration of Registrable Stock pursuant to Section 1(c));
(vii) Fees and disbursements of underwriters
(excluding, discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry
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professionals relating to the distribution of the Registrable Stock or legal
expenses of any person other than the Company and the selling holders);
(viii) Fees and expenses of other persons retained by
the Company.
The Company will, in any event, pay its internal
expenses (including without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed, rating agency fees and the
fees and expenses of any person, including special experts, retained by the
Company.
(f) Indemnification.
(i) The Company hereby agrees to indemnify
each of the holders of Registrable Stock against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any registration statement, preliminary or final prospectus, or other document
incident to any such registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and to reimburse the holders of Registrable Stock (including officers and
directors of the same and controlling persons) for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, provided, however, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by
Warrantholders.
(ii) The Warrantholders severally and not
jointly agree to indemnify the Company and its officers and directors and each
person, if any, who controls any thereof within the meaning of Section 15 of the
Securities Act and their respective successors against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance relating to securities purchased pursuant to the Warrants (or in any
related registration statement, notification or the like) or any 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 Company and each other person indemnified pursuant to this subsection (ii)
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided, however, that this subsection (ii) shall apply only if (and only to
the extent that) such statement or omission was made in reliance upon
information (including, without limitation, written negative responses to
inquiries) furnished in writing to the Company for use in such prospectus, or
other document (or related registration statement, notification or the like) or
any amendment or supplement thereto.
(iii) Each party entitled to indemnification
hereunder (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
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sought, and shall permit the Indemnifying Party (at such Indemnifying Party's
expense) to assume the defense of any claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall conduct
the defense of such claim or litigation, shall be satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense at
such party's expense, and provided, further, that the omission by any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1(f) except to the
extent that the omission results in a failure of actual notice to the
Indemnifying Party and such Indemnifying Party is materially damaged solely as a
result of the failure to give notice. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
(iv) If the indemnification provided for
in this Section 1(f) is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any losses, claims, damages, liabilities,
expenses or actions in respect thereof referred to herein, then the Indemnifying
Party shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liabilities, expenses or actions in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand, and the Indemnified Party on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities, expenses or actions as well as any other relevant
equitable considerations, including the failure to give the notice required
hereunder. The relative fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact relates to information
supplied by the Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Warrantholders agree
that it would not be just and equitable if contributions pursuant to this
Section 1(f) were determined by pro rata allocation or by any other method of
allocation which did not take account of the equitable considerations referred
to above. The amount paid or payable to an Indemnified Party as a result of the
losses, claims, damages, liabilities or actions in respect thereof, referred to
above, shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. Notwithstanding the contribution provisions of this
Section 1(f), in no event shall the amount contributed by any seller of
Registrable Stock exceed the aggregate net offering proceeds received by such
seller from the sale of Registrable Stock to which such contribution or
indemnification claim relates. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(v) The indemnification required by this
Section 1(f) shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
Anything contained herein to the contrary notwithstanding, the maximum aggregate
liability of any holder of Registrable Stock under this Section 1(f) shall not
exceed the amount of the net proceeds actually received by such holder from the
sale of its Registrable Stock pursuant to the registration, qualification,
notification or compliance in respect of which such liability arose.
(g) Reporting Requirements Under Exchange Act. From and
after the effective date of the first registration statement filed by the
Company under the Securities Act, the Company shall (whether or not it shall
then be required to do so) timely file such information, documents and reports
as the Commission may require or prescribe under Section 13 or 15(d)(whichever
is
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applicable) of the Exchange Act. Immediately upon becoming subject to the
reporting requirements of either Section 13 or 15(d) of the Exchange Act,the
Company shall forthwith upon request furnish any holder of Registrable Stock
(i) a written statement by the Company that it has complied with such reporting
requirements, (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents filed by the Company with
the Commission as such holder may reasonably request in availing itself of an
exemption for the sale of Registrable Stock without registration under the
Securities Act. The Company acknowledges and agrees that the purpose of the
requirements contained in this Section 1(g) is to enable any such holder to
comply with the current public information requirement contained in Rule 144
under the Securities Act should such holder ever wish to dispose of any of the
securities of the Company acquired by it without registration under the
Securities Act in reliance upon Rule 144 (or any other similar exemptive
provision). In addition, the Company shall take such other measures and file
such other information, documents and reports as shall hereafter be required by
the Commission as a condition to the availability of Rule 144 and Rule 144A
under the Securities Act (or any similar exemptive provision hereafter in
effect).
(h) Stockholder Information. The Company may
require each holder of Registrable Stock as to which any registration is to be
effected pursuant to this Section 1 to furnish the Company such information with
respect to such holder and the distribution of such Registrable Stock as shall
be required by law or by the Commission in connection therewith.
(i) Termination of Requirements to Register.
The obligations of the Company under Sections 1(b) and 1(c) hereof shall
terminate when all of the Registrable Stock may be sold by all holders without
restriction under the Securities Act.
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