EXHIBIT 4.3
FORM OF WARRANT
[THE FOLLOWING PARAGRAPH SHALL APPEAR ON THE FACE OF EACH RESTRICTED WARRANT:]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
[THE COMPANY SHALL PLACE THE FOLLOWING PARAGRAPH ON THE FACE OF EACH WARRANT
HELD BY OR TRANSFERRED TO AN "AFFILIATE" (AS DEFINED IN RULE 501(B) OF
REGULATION D UNDER THE SECURITIES ACT) OF THE COMPANY:]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE
DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY BE
SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A VALID EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.
ROCKFORD CORPORATION
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: [__] Number of Shares: [_________]
CUSIP No.: [___________] (subject to adjustment)
Date of Issuance: June 10, 2004
Rockford Corporation, an Arizona corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, ________________, the registered holder hereof
or its permitted assigns is entitled, subject to the terms and conditions set
forth below, to purchase from the Company upon surrender of this Warrant (as
defined below), at any time or times on or after the date hereof, but not after
5:00 p.m., Eastern Standard Time, on the Expiration Date (as defined below),
_________________ fully paid nonassessable shares of Common Stock (as defined
below) of the Company at the Exercise Price per share provided in Section 1(c)
of this Warrant, subject to adjustment as provided below. Capitalized terms used
herein but not defined shall have the same meanings assigned to them in the
Securities
Purchase Agreement dated as of June 10, 2004, by and between the Company and the
parties listed on the Schedule of Buyers attached thereto as Exhibit A (as such
agreement may be amended, supplemented and modified from time to time as
provided in such agreement, the "Securities Purchase Agreement").
This Warrant (as defined below) is one of a series of Warrants issued in
connection with the transactions described in (i) the Securities Purchase
Agreement and (ii) certain other related documents and agreements including,
without limitation, the Transaction Documents (as defined in the Securities
Purchase Agreement). The Warrant Shares (as defined below) issued upon exercise
of this Warrant and the holder hereof and thereof shall be entitled to all of
the rights and privileges set forth in the Transaction Documents. The Warrants
are issued under and pursuant to a Warrant Agent Agreement dated as of June 10,
2004 (herein called the "Warrant Agent Agreement"), between the Company and BNY
Western Trust Company (herein called the "Warrant Agent").
SECTION 1. DEFINITIONS. The following terms as used in this Warrant shall have
the following meanings:
(a) "Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in the City of New York and Los Angeles are required
by law or executive order to remain closed.
(b) "Common Stock" means (i) the common stock, $0.01 par value per share,
of the Company, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(c) "Exercise Price" shall be equal to $5.75, subject to further
adjustment as hereinafter provided.
(d) "Expiration Date" means June 10, 2009 or, if such date does not fall
on a Business Day or on a Trading Day, then the next Business Day.
(e) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a joint stock company, a trust, an
unincorporated organization or association and a government or any department or
agency thereof.
(f) "Principal Market" means The Nasdaq National Market ("NASDAQ") or if
the Common Stock is not traded on NASDAQ, then the principal securities exchange
or trading market for the Common Stock.
(g) "Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of June 10, 2004, among the Company, Piper Jaffray & Co. and
the initial purchasers of the Notes and the Warrants as such agreement may be
amended, supplemented and modified from time to time in a writing signed by all
of the signatories thereto.
-2-
(h) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. (i) "Shelf Registration Statement"
means the Shelf Registration Statement contemplated by the Registration Rights
Agreement.
(j) "Trading Day" shall mean (x) a day on which the Principal Market is
open for business or (y) if the applicable security is not so listed on a
Principal Market or admitted for trading or quotation, a Business Day.
(k) "Warrant" means this Warrant and the other warrants to purchase shares
of Common Stock issued pursuant to the Securities Purchase Agreement and all
warrants issued in exchange, transfer or replacement thereof.
(l) "Warrant Shares" means all shares of Common Stock issuable upon
exercise of the Warrants.
SECTION 2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, including the early
termination of this Warrant pursuant to Section 3(b) of this Warrant, this
Warrant may be exercised by the holder hereof then registered on the books of
the Company, in whole or in part, at any time on any Business Day on or after
the opening of business on the date hereof and prior to 5:00 p.m., Eastern Time,
on the Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto or a reasonable facsimile
thereof (the "Exercise Notice"), to the Company at the principal corporate trust
office of the Warrant Agent and to the Company's designated transfer agent (the
"Transfer Agent"), of such holder's election to exercise all or a portion of
this Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) (A) payment to the Warrant Agent of an amount equal to the
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the "Aggregate Exercise Price") in cash or delivery
of a certified check or bank draft payable to the order of the Warrant Agent or
wire transfer of immediately available funds or (B) notification to the Company
at the principal corporate trust office of the Warrant Agent and to the Transfer
Agent that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 2(e) of this Warrant), and (iii) the surrender of this
Warrant to a common carrier for overnight delivery to the Warrant Agent as soon
as practicable following such date (or an indemnification undertaking or other
form of security reasonably satisfactory to the
-3-
Company with respect to this Warrant in the case of its loss, theft or
destruction, or an affidavit of lost Warrant, in accordance with Section 11);
provided, however, that if such Warrant Shares are to be issued in any name
other than that of the registered holder of this Warrant, such issuance shall be
deemed a transfer and the provisions of Section 8 of this Warrant shall be
applicable. In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), the Company shall use its best
efforts on or before the third Business Day, but in no event later than the
fifth Business Day (the "Warrant Share Delivery Date") following the date of
receipt by the Warrant Agent of the Exercise Notice, the Aggregate Exercise
Price (or notice of Cashless Exercise) and this Warrant (or an indemnification
undertaking or other form of security reasonably satisfactory to the Company
with respect to this Warrant in the case of its loss, theft or destruction, or
an affidavit of lost Warrant, in accordance with Section 11) (the "Exercise
Delivery Documents"), (A) in the case of a public resale of such Warrant Shares,
at the holder's request, to credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder's or its designee's
balance account with The Depository Trust Company ("DTC") through its Deposit
Withdrawal Agent Commission system or (B) to issue and deliver to the address as
specified in the Exercise Notice, a certificate or certificates in such
denominations as may be requested by the holder in the Exercise Notice,
registered in the name of the holder or its designee, for the number of shares
of Common Stock to which the holder shall be entitled upon such exercise. Upon
delivery of the Exercise Delivery Documents, the holder of this Warrant shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of this Warrant as required by clause (iii)
above or the certificates evidencing such Warrant Shares. In the case of a
dispute as to the determination of the Exercise Price or the arithmetic
calculation of the number of Warrant Shares, the Company shall promptly issue to
the holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determination or arithmetic calculation to the holder via
facsimile within two (2) Business Days after receipt of the holder's Exercise
Notice. If the holder and the Company are unable to agree upon the determination
of the Exercise Price or arithmetic calculation of the number of Warrant Shares
within two (2) Business Days of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall immediately
submit via facsimile (i) the disputed determination of the Exercise Price or the
Closing Price (as defined in Section 9(f) of this Warrant) to an independent,
reputable investment banking firm selected jointly by the Company and the holder
or (ii) the disputed arithmetic calculation of the number of Warrant Shares to
its independent, outside auditor. The Company shall cause the investment banking
firm or the auditor, as the case may be, to perform the determination or
calculation and notify the Company and the holder of the results no later than
ten (10) Business Days from the time it receives the disputed determination or
calculation. Such investment banking firm's or auditor's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error. All fees and expenses of such determinations shall be borne solely by the
Company.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable but
in no event later than five (5) Business Days after any exercise (the "Warrant
Delivery Date") and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase
the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised.
(c) Notwithstanding anything contained in this Warrant to the contrary,
the Company shall not be required to issue fractions of shares of Common Stock
upon exercise of this Warrant or to distribute certificates which evidence such
fractional shares. If more than one Warrant shall be presented for exercise in
full at the same time by the same holder, the number of full shares of Common
Stock which shall be issuable upon the exercise thereof shall be computed on the
basis of the aggregate number of shares of Common Stock purchasable on exercise
of all Warrants so presented. In lieu of any fractional shares, there shall be
paid to the holder an amount of cash equal
-4-
to the same fraction of the current market value of a share of Common Stock. For
purposes of this Section 2(c) of this Warrant, the current market value of a
share of Common Stock shall be the Closing Price of a share of Common Stock for
the Trading Day immediately prior to the date of such exercise or if not listed
on a Principal Market, then as determined in good faith by a majority of the
Company's Board of Directors, whose determination shall be final, binding and
conclusive.
(d) If the Company shall fail for any reason or for no reason (except in
the case of a dispute as to the Exercise Price or the Closing Price which is
being resolved in accordance with Section 2(a) of this Warrant) to issue to the
holder within five (5) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder is entitled or to credit the holder's or its designee's balance account
with DTC, in accordance with Section 2 of this Warrant, for such number of
shares of Common Stock to which the holder is entitled upon the holder's
exercise of this Warrant or a new Warrant for the number of shares of Common
Stock to which such holder is entitled pursuant to Section 2(b) of this Warrant,
the Company shall, in addition to any other remedies under this Warrant or the
Securities Purchase Agreement or otherwise available to such holder, including
any indemnification under Section 8 of the Securities Purchase Agreement, pay as
additional damages in cash to such holder on each day after the Warrant Share
Delivery Date if such exercise is not timely effected and/or each day after the
Warrant Delivery Date if such Warrant is not delivered, as the case may be, an
amount equal to one-half percent (0.5%) per month multiplied by the product of
(I) the sum of the number of shares of Common Stock not issued to the holder on
or prior to the Warrant Share Delivery Date and to which such holder is entitled
and, in the event the Company has failed to deliver a Warrant to the holder on
or prior to the Warrant Delivery Date and to which such holder is entitled, the
number of shares of Common Stock issuable upon exercise of the Warrant as of the
Warrant Delivery Date and (II) the Closing Price of the Common Stock on the
Warrant Share Delivery Date, in the case of failure to deliver Common Stock, or
on the Warrant Delivery Date, in the case of failure to deliver a Warrant,
provided that if the Common Stock is not listed on a Principal Market, then the
Closing Price shall be as determined in good faith by a majority of the
Company's Board of Directors, whose determination shall be final, binding and
conclusive.
(e) Notwithstanding anything contained herein to the contrary, the holder
of this Warrant may, at its election exercised in its sole discretion, exercise
this Warrant as to all or a portion of the Warrant Shares and, in lieu of making
the cash payment otherwise contemplated to be made to the Company upon such
exercise in payment of the Aggregate Exercise Price, elect instead to receive
upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this Warrant
is then being exercised.
B= the Closing Price of the Common Stock on the Trading Day
immediately preceding the date of the Exercise Notice.
-5-
C= the Exercise Price then in effect for the applicable Warrant
Shares at the time of such exercise.
(f) [INCLUDE THE FOLLOWING PARAGRAPH ONLY IF HOLDER HAS ELECTED TO BE
GOVERNED BY SECTION 2(k)(A) OF THE SECURITIES PURCHASE AGREEMENT:]
[The registered holder hereby agrees that in no event will it exercise any
of the Warrants in excess of the number of such Warrants upon the exercise of
which (x) the number of shares of Common Stock beneficially owned by such holder
(other than the shares which would otherwise be deemed beneficially owned except
for being subject to a limitation on exercise analogous to the limitation
contained in this Section 2(f)) plus (y) the number of shares of Common Stock
issuable upon the exercise of such Warrants, would be equal to or exceed 9.99%
of the number of shares of Common Stock then issued and outstanding (after
giving effect to such exercise), it being the intent of the Company and the
holder that the holder not be deemed at any time to have the power to vote or
dispose of greater than 9.99% of the number of shares of Common Stock issued and
outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). To the extent that the limitation contained in this
Section 2(f) applies (and without limiting any rights the Company may otherwise
have), the Company may rely on the registered holder's determination of whether
the Warrants are exercisable pursuant to the terms hereof, the Company having no
obligation whatsoever to verify or confirm the accuracy of such determination,
and the submission of the Exercise Notice by the holder shall be deemed to be
the holder's representation that the Warrants specified therein are exercisable
pursuant to the terms hereof. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise the Warrants at such time as the
exercise thereof will not violate the provisions of this Section 2(f).]
[INCLUDE THE FOLLOWING PARAGRAPH ONLY IF HOLDER HAS ELECTED TO BE GOVERNED BY
SECTION 2(k)(B) OF THE SECURITIES PURCHASE AGREEMENT:]
[The registered holder hereby agrees that in no event will it exercise any
of the Warrants in excess of the number of such Warrants upon the exercise of
which (x) the number of shares of Common Stock beneficially owned by such holder
(other than the shares which would otherwise be deemed beneficially owned except
for being subject to a limitation on exercise analogous to the limitation
contained in this Section 2(f)) plus (y) the number of shares of Common Stock
issuable upon the exercise of such Warrants, would be equal to or exceed 4.99%
of the number of shares of Common Stock then issued and outstanding (after
giving effect to such exercise), it being the intent of the Company and the
holder of Warrants that the holder not be deemed at any time to have the power
to vote or dispose of greater than 4.99% of the number of shares of Common Stock
issued and outstanding. As used herein, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). To the extent that the limitation contained in
this Section 2(f) applies (and without limiting any rights the Company may
otherwise have), the Company may rely on the registered holder's determination
of whether the Warrants are exercisable pursuant to the terms hereof, the
Company having no obligation whatsoever to verify or confirm the accuracy of
such determination, and the submission of the Exercise Notice by the holder
shall be deemed to be the holder's representation that the Warrants
-6-
specified therein are exercisable pursuant to the terms hereof. Nothing
contained herein shall be deemed to restrict the right of a Holder to exercise
the Warrants at such time as the exercise thereof will not violate the
provisions of this Section 2(f).]
SECTION 3. DATE; DURATION; EARLY TERMINATION OF WARRANTS.
(a) The date of this Warrant is June 10, 2004 (the "Warrant Date"). This
Warrant, in all events, shall be wholly void and of no effect at 5:00 pm,
Eastern Standard Time, on the Expiration Date or the Termination Date (as
defined below), if applicable, as the case may be, except that notwithstanding
any other provisions hereof, the provisions of Section 8(c) of this Warrant
shall continue in full force and effect after such date as to any Warrant Shares
or other securities issued upon the exercise of this Warrant.
(b) If at any time after December 15, 2007 if (1) the Closing Price per
share of the Common Stock has exceeded two hundred and twenty five percent
(225%) of the Exercise Price then in effect for any fifteen (15) Trading Days
within a period of twenty (20) consecutive Trading Days (the "Determination
Period") and (2) either (x) a shelf registration statement covering resales of
the Common Stock issuable upon exercise of the Warrants is effective and
available for use at all times during the period beginning thirty (30) days
prior to the Notice Date (as defined below) and ending on the Termination Date,
and is expected to remain effective and available for use until at least the
earlier of thirty (30) days following the Termination Date or the last date on
which the shelf registration statement is required to be kept effective under
the terms of the Registration Rights Agreement or (y) the Warrant Shares
issuable upon a Cashless Exercise may be sold pursuant to Rule 144 under the
Securities Act, then the Company may, at its option, terminate the Warrants. By
following the procedures set forth below, the Company may exercise this right of
termination only if, within ten (10) days following the Determination Period,
the Company shall mail or cause to be mailed a notice of such termination (the
"Termination Notice," and the date such Termination Notice is mailed, the
"Notice Date") to the holder of the Warrant at the address set forth for such
holder in Section 12 of this Warrant. Such notice shall be irrevocable. The
Company shall mail the Termination Notice by first class mail and
contemporaneously issue a press release through PRNewswire or Bloomberg
Financial Markets containing substantially the same information as the
Termination Notice described below. Each Termination Notice shall specify the
CUSIP number of the Warrant, the Termination Date, that the Warrants may not be
exercised after 5:00 p.m., Eastern Standard Time, on the Termination Date and
the current Exercise Price.
If all of the conditions described in the preceding paragraph have been
met, and if no Event of Default (as that term is defined in the Indenture) shall
have occurred and be continuing under the Indenture, dated as of June 10, 2004
between the Company and BNY Western Trust Company , as trustee, any Warrant not
exercised before the close of business on the ninetieth (90th) day after the
mailing date of the Termination Notice (such ninetieth (90th) day, the
"Termination Date") shall automatically be deemed exercised in a Cashless
Exercise in accordance with Section 2(e) and the Company will deliver the number
of Warrant Shares to the holder upon receipt of a completed Exercise Notice
along with the original copy of the Warrant for cancellation (or an
indemnification undertaking or other form of security reasonably satisfactory to
the Company with respect to this
-7-
Warrant in the case of its loss, theft or destruction, or an affidavit of lost
Warrant, in accordance with Section 11).
SECTION 4. COVENANTS AS TO COMMON STOCK. The Company hereby covenants and agrees
as follows:
(a) Issuance of Warrants and Warrant Shares. This Warrant is, and any
Warrants issued in substitution for or replacement of this Warrant will, upon
issuance, be, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof, and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company. All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and payment hereof or Cashless
Exercise in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by or through
the Company with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Stock.
(b) Reservation of Shares. During the period within which the rights
represented by this Warrant may be exercised, the Company will take all actions
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than one hundred five percent (105%) of the number
of shares of Common Stock needed to provide for the issuance of the Warrant
Shares upon exercise of all of the Warrants without regard to any limitations on
conversions or exercise.
(c) Listing. The Company shall promptly use reasonable efforts to secure
the listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall use reasonable efforts to
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock issuable from time to time upon the
exercise of this Warrant; and the Company shall use reasonable efforts to list
on the Principal Market or automated quotation system, as the case may be, and
shall use reasonable efforts to maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if and
so long as any shares of the same class shall be listed on such Principal Market
or automated quotation system. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(c).
(d) Certain Actions. The Company will not, by amendment of its Articles 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 to be
observed or performed by it hereunder. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock issuable upon the exercise of this Warrant above the Exercise Price
then in effect, (ii) will take all such actions as may be reasonably necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
-8-
Warrant and (iii) will not take any action which results in any adjustment of
the Exercise Price if the total number of shares of Common Stock issuable after
the action upon the exercise of all of the Warrants would exceed the total
number of shares of Common Stock then authorized by the Company's Articles of
Incorporation and available for the purpose of issue upon such exercise.
(e) Obligations Binding on Successors. This Warrant will be binding upon
any entity succeeding to the Company in one or a series of transactions by
merger, consolidation or acquisition of all or substantially all of the
Company's assets or other similar transactions.
SECTION 5. TAXES.
(a) The Company shall pay any and all documentary, stamp, transfer and
other similar taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.
(b) Notwithstanding any other provision of this Warrant or any other
Transaction Document, for income tax purposes, any assignee or transferee shall
agree that the Company and the Company's Transfer Agent shall be permitted to
withhold from any amounts payable to such assignee or transferee any taxes
required by law to be withheld from such amounts. Unless exempt from the
obligation to do so, each assignee or transferee shall execute and deliver to
the Company or the Transfer Agent, as applicable, a properly completed Form W-8
or W-9, indicating that such assignee or transferee is not subject to back-up
withholding for United States Federal income tax purposes. Each assignee or
transferee that does not deliver such a form pursuant to the preceding sentence
shall have the burden of proving to the Company's reasonable satisfaction that
it is exempt from such requirement.
SECTION 6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, prior to the exercise of the Warrants represented
hereby, the holder of this Warrant shall not be entitled, as such, to any rights
of a shareholder of the Company, including, without limitation, the right to
vote or to consent to any action of the shareholders of the Company, to receive
dividends or other distributions, to exercise any preemptive right or to receive
dividends or other distributions, to exercise any preemptive right or to receive
any notice of meetings of shareholders of the Company, and shall not be entitled
to receive any notice of any proceedings of the Company. In addition, nothing
contained in this Warrant shall be construed as imposing any liabilities on such
holder to purchase any securities (upon exercise of this Warrant or otherwise)
or as a shareholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company.
SECTION 7. COMPLIANCE WITH SECURITIES LAWS.
(a) The holder of this Warrant, by the acceptance hereof, represents and
warrants that (i) it is acquiring this Warrant and (ii) upon exercise of this
Warrant will acquire the Warrant Shares then issuable upon exercise thereof for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the Securities Act;
provided, however, that by
-9-
making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term and
reserves the right to dispose of this Warrant and the Warrant Shares at any time
in accordance with or pursuant to a registration statement or an exemption under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act and was not organized for the
specific purpose of acquiring the Warrants or Warrant Shares.
(b) This Warrant and all the Warrant Shares issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form
(in addition to any legend required by state securities laws or any securities
exchange upon which such Warrant Shares may, at the time of such exercise, be
listed) on the face thereof unless at the time of exercise such Warrant Shares
shall be registered under the Securities Act:
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY THE SECURITIES.
In addition, any Warrants or Warrant Shares held by or transferred to an
"affiliate" (as defined in Rule 501(b) of Regulation D under the Securities Act)
of the Company shall be stamped or imprinted with a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO
MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
VALID EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
The legends set forth above shall be removed and the Company shall direct the
Agent (in the case of Warrants) to issue a new Warrant or Warrant(s) of like
tenor and exercisable for the same number of Warrant Shares, or the Transfer
Agent (in the case of Warrant Shares) to issue a certificate or certificates
representing Warrant Shares, as appropriate, without such legends to the holder
of the Warrant(s) or Warrant Shares upon which they are stamped, (i) if such
Warrant(s) or Warrant Shares are registered for resale under the Securities Act
and are transferred or sold pursuant to such registration, (ii) if, pursuant to
a sale transaction, such holder provides the Company with an opinion
-10-
of counsel reasonably acceptable to the Company to the effect that a public
sale, assignment or transfer of the Warrant(s) or Warrant Shares may be made
without registration under the Securities Act, or (iii) if the holder of the
Securities has not been an "affiliate" (as defined in Rule 501(b) of Regulation
D under the Securities Act) during the preceding three (3) months, upon
expiration of the two- (2) year period under Rule 144(k) promulgated under the
Securities Act (or any successor rule). In the event Rule 144(k) (or any
successor rule) is amended to change the two- (2) year or three- (3) month
periods, the reference(s) in the preceding sentence shall be deemed to be a
reference to such changed period(s), provided that such change shall not become
effective if it is otherwise prohibited by, or would otherwise cause a violation
of, the then applicable federal securities laws. The Company shall not require
such opinion of counsel for the sale of Warrant(s) or Warrant Shares in
accordance with Rule 144 of the Securities Act, provided the seller provides
such representations that the Company shall reasonably request confirming
compliance with the requirements of Rule 144.
SECTION 8. OWNERSHIP AND TRANSFER.
(a) The Company shall cause the Warrant Agent to maintain at its principal
corporate trust office (or such office or agency of the Company as it the
Company may designate by notice to the holder hereof), a register for this
Warrant (the "Warrant Register"), in which the Warrant Agent shall record the
name and address of the Person in whose name this Warrant has been issued, as
well as the name and address of each transferee. The Company may treat the
Person in whose name any Warrant is registered on the Warrant Register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and all rights hereunder shall be assignable and
transferable by the holder hereof without the consent of the Company upon
surrender of this Warrant with a properly executed assignment (in the form of
Exhibit B attached hereto) at the principal corporate trust office of the
Warrant Agent (or such office or agency of the Company as it the Company may
designate in writing to the holder hereof).
(c) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Registration Rights Agreement. The
Warrant Shares shall constitute Registrable Securities (as such term is defined
in the Registration Rights Agreement). Each holder of this Warrant shall be
entitled to all of the benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and such holder, by its
acceptance of this Warrant, agrees and shall agree to be bound by and to comply
with the terms and conditions of the Registration Rights Agreement applicable to
such holder as a holder of such Registrable Securities.
SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE. The
Exercise Price, the number of Warrant Shares issuable upon the exercise of each
Warrant and the number of Warrants outstanding are subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 9.
-11-
(a) In case the Company shall hereafter pay a dividend in shares of Common
Stock, or make a distribution of shares of Common Stock, to all holders of the
outstanding Common Stock, the Exercise Price in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Exercise Price by a fraction of which (i) the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the Record Date (as defined in Section 9(f) of this Warrant)
fixed for such determination and (ii) the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend or
other distribution, such reduction in the Exercise Price to become effective
immediately after the opening of business on the day following the Record Date.
If any dividend or distribution of the type described in this Section 9(a) of
this Warrant is declared but not so paid or made, the Exercise Price shall again
be adjusted to the Exercise Price which would then be in effect if such dividend
or distribution had not been declared.
(b) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exercise Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(c) In case the Company shall issue rights or warrants to all holders of
its outstanding shares of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined in Section 9(f) of this Warrant) on the Record Date
fixed for the determination of shareholders entitled to receive such rights or
warrants, the Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect at the opening of
business on the date after such Record Date by a fraction (i) the numerator of
which shall be the sum of the number of shares of Common Stock outstanding at
the close of business on the Record Date plus the number of shares that the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such Current Market Price and (ii)
the denominator of which shall be the sum of the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock so offered for subscription or
purchase. Such adjustment shall become effective immediately after the opening
of business on the day following the Record Date fixed for determination of
shareholders entitled to receive such rights or warrants. To the extent that
shares of Common Stock are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or warrants, the Exercise
Price shall be readjusted to the Exercise Price that would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Exercise Price shall again be adjusted to be the Exercise Price that would then
be in effect if such date fixed for the
-12-
determination of shareholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock at less than the
Current Market Price, and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any consideration
received for such rights or warrants, the value of such consideration, if other
than cash, to be determined in good faith by the Company's Board of Directors.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
(other than any dividends or distributions to which Section 9(a) of this Warrant
applies) or evidences of its indebtedness or other assets (including securities,
but excluding (1) any rights or warrants referred to in Section 9(c) of this
Warrant and (2) dividends and distributions paid exclusively in cash (except as
set forth in Sections 9(e) and 9(f) of this Warrant (the foregoing hereinafter
in this Section 9(d) called the "Securities")), unless the Company elects to
reserve such Securities for distribution to the holders upon exercise of the
Warrants so that any such holder converting Warrants will receive upon such
exercise, in addition to the shares of Common Stock to which such holder is
entitled, the amount and kind of such Securities which such holder would have
received if such holder had exercised its Warrants into Common Stock immediately
prior to the Record Date for such distribution of the Securities, then, in each
such case, the Exercise Price shall be reduced so that the same shall be equal
to the price determined by multiplying the Exercise Price in effect immediately
prior to the close of business on the Record Date with respect to such
distribution by a fraction (i) the numerator of which shall be the Current
Market Price (as defined in Section 9(f) of this Warrant) on such date less the
fair market value (as determined in good faith by the Company's Board of
Directors, whose determination shall be conclusive) on such date of the portion
of the Securities so distributed applicable to one share of Common Stock and
(ii) the denominator of which shall be such Current Market Price, such reduction
to become effective immediately prior to the opening of business on the day
following the Record Date; provided, however, that in the event the then fair
market value (as determined in good faith by the Company's Board of Directors,
whose determination shall be conclusive) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder shall have the
right to receive upon conversion of a Warrant (or any portion thereof) the
amount of Securities such holder would have received had such holder converted
such Warrant (or portion thereof) immediately prior to such Record Date.
In the event that such dividend or distribution is not so paid or made,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such dividend or distribution had not been declared. If the
Company's Board of Directors determines the fair market value of any
distribution for purposes of this Section 9(d) by reference to the actual or
when issued trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market over the
same period (the "Reference Period") used in computing the Current Market Price
pursuant to Section 9(f) of this Warrant to the extent possible, unless the
Company's Board of Directors determines in good faith that determining the fair
market value during the Reference Period would not be in the best interest of
the holders.
-13-
In the event that the Company implements a new shareholder rights plan,
such rights plan shall provide that upon exercise of the Warrants the holders
will receive, in addition to the Common Stock issuable upon such exercise, the
rights issued under such rights plan (as if the holder had exercised the Warrant
prior to implementing the rights plan and notwithstanding the occurrence of an
event causing such rights to separate from the Common Stock at or prior to the
time of exercise). Any distribution of rights or warrants pursuant to a
shareholder rights plan complying with the requirements set forth in the
immediately preceding sentence of this paragraph shall not constitute a
distribution of rights or warrants for the purposes of this Section 9(d).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"), (i) are deemed to be transferred with such shares of Common
Stock, (ii) are not exercisable, and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 9(d) (and no adjustment to the Exercise Price under
this Section 9(d) will be required) until the occurrence of the earliest Trigger
Event. If such right or warrant is subject to subsequent events, upon the
occurrence of which such right or warrant shall become exercisable to purchase
different securities, evidences of indebtedness or other assets or entitle the
holder to purchase a different number or amount of the foregoing or to purchase
any of the foregoing at a different purchase price, then the occurrence of each
such event shall be deemed to be the date of issuance and record date with
respect to a new right or warrant (and a termination or expiration of the
existing right or warrant without exercise by the holder thereof). In addition,
in the event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto, that resulted in an adjustment to the Exercise
Price under this Section 9(d), (1) in the case of any such rights or warrants
that shall all have been redeemed or repurchased without exercise by any holders
thereof, the Exercise Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants all of which shall
have expired or been terminated without exercise, the Exercise Price shall be
readjusted as if such rights and warrants had never been issued.
For purposes of this Section 9(d) and Sections 9(a) and (c) of this
Warrant, any dividend or distribution to which this Section 9(d) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 9(a) or (c) of this
Warrant applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital stock,
rights or warrants other than such shares of
-14-
Common Stock or rights or warrants to which Section 9(c) of this Warrant applies
(and any Exercise Price reduction required by this Section 9(e) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Exercise Price reduction required by Sections 9(a) and
(c) of this Warrant with respect to such dividend or distribution shall then be
made), except (A) the Record Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution," "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 9(a) of this
Warrant and as "the date fixed for the determination of shareholders entitled to
receive such rights or warrants," "the Record Date fixed for the determination
of the shareholders entitled to receive such rights or warrants" and "such
Record Date" within the meaning of Section 9(c) of this Warrant and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 9(a) of this Warrant.
(e) Subject to the provisions of Section 9(i), in case the Company shall,
by dividend or otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a merger or consolidation to which
Section 10 of this Warrant applies or as part of a distribution referred to in
Section 9(d) of this Warrant), the Exercise Price shall be reduced so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the close of business on the Record Date with
respect to such distribution by a fraction (i) the numerator of which shall be
equal to the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the amount of such cash distributed to all holders of its Common
Stock, and (y) the number of shares of Common Stock outstanding on the Record
Date and (ii) the denominator of which shall be equal to the Current Market
Price on such date; provided, however, that in the event the portion of the cash
so distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that each holder
shall have the right to receive upon exercise of a Warrant (or any portion
thereof) the amount of cash such holder would have received had such holder
exercised such Warrant (or portion thereof) immediately prior to such Record
Date. In the event that such dividend or distribution is not so paid or made,
the Exercise Price shall again be adjusted to be the Exercise Price that would
then be in effect if such dividend or distribution had not been declared.
(f) For purposes of this Section 9, the following terms shall have the
meanings indicated:
(1) "Closing Price" with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the Nasdaq National Market or New York
Stock Exchange, as applicable, or, if such security is not listed or admitted to
trading on such National Market or Exchange, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange
-15-
member firm selected from time to time by the Board of Directors for that
purpose, whose determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten (10) consecutive Trading
Days immediately prior to the date in question; provided, however, that (1) if
the "ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Exercise Price pursuant to Section 9(a), (b), (c), (d) or (e) of this Warrant
occurs during such ten (10) consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Exercise Price
is so required to be adjusted as a result of such other event, (2) if the "ex"
date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Exercise Price pursuant to
Section 9(a), (b), (c), (d) or (e) of this Warrant occurs on or after the "ex"
date for the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by multiplying such Closing
Price by the reciprocal of the fraction by which the Exercise Price is so
required to be adjusted as a result of such other event, and (3) if the "ex"
date for the issuance or distribution requiring such computation is prior to the
day in question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the Closing Price for each Trading Day on or
after such "ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined in good faith by the Company's Board of
Directors in a manner consistent with any determination of such value for
purposes of Section 9(d) of this Warrant, whose determination shall be
conclusive) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades regular way on the
relevant exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution and (2) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective. Notwithstanding the foregoing, whenever
successive adjustments to the Exercise Price are called for pursuant to this
Section 9, such adjustments shall be made to the Current Market Price as may be
necessary or appropriate to effectuate the intent of this Section 9 and to avoid
unjust or inequitable results as determined in good faith by the Company's Board
of Directors.
(3) "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed
-16-
for determination of shareholders entitled to receive such cash, securities or
other property (whether such date is fixed by the Company's Board of Directors
or by statute, contract or otherwise).
(g) The Company may make such reductions in the Exercise Price, in
addition to those required by Section 9(a), (b), (c), (d) or (e) of this
Warrant, as the Company's Board of Directors considers to be advisable to avoid
or diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes.
(h) To the extent permitted by applicable law, the Company from time to
time may reduce the Exercise Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during such
period and the Company's Board of Directors shall have made a determination that
such reduction would be in the best interests of the Company, which
determination shall be conclusive and described in a Board Resolution. Whenever
the Exercise Price is reduced pursuant to the preceding sentence, the Company
shall mail or cause to be mailed to the holder of each Warrant at his last
address in the Warrant Register a notice of the reduction at least five (5) days
prior to the date the reduced Exercise Price is to take effect, and such notice
shall state the reduced Exercise Price and the period during which it will be in
effect.
(i) No adjustment in the Exercise Price shall be required under this
Section 9 unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 9(i) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 9 shall be made by the Company and shall be
made to the nearest cent or to the nearest one hundredth of a share, as the case
may be. No adjustment need be made for a change in the par value of the Common
Stock.
(j) Notice to Holders of Warrants Prior to Certain Actions. In case:
(1) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Exercise Price
pursuant to this Section 9; or
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any share of any
class or any other rights or warrants; or
(3) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock, or a
change from par value to no par value), or of any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required, or of the sale and transfer of all or substantially all of
the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
-17-
the Company shall mail or cause to be mailed to the holder at such address
appearing in the Warrant Register as promptly as possible but in any event at
least fifteen (15) days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights are to be determined, or (y) the date on
which such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. In addition, whenever the Exercise Price
is adjusted as provided in this Section 9, the Company shall prepare a notice of
such adjustment of the Exercise Price setting forth the adjusted Exercise Price
and the date on which each adjustment becomes effective and shall mail such
notice of such adjustment of the Exercise Price to the holder of each Warrant at
his last address in the Warrant Register within twenty (20) days of the
effective date of such adjustment. Failure to deliver such notice shall not
effect the legality or validity of any such adjustment.
(k) In any case in which this Section 9 provides that an adjustment shall
become effective immediately after a Record Date for an event, the Company may
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such Record Date and before the occurrence of such event
the additional shares of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such holder any amount in cash in lieu of any fractions of shares of Common
Stock pursuant to Section 2(c) of this Warrant.
(l) For purposes of this Section 9, the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
(m) Upon each adjustment of the Exercise Price pursuant to this Section 9,
each Warrant shall thereupon evidence the right to purchase that number of
shares of Common Stock (calculated to the nearest hundredth of a share) obtained
by multiplying the number of shares of Common Stock purchasable immediately
prior to such adjustment upon exercise of the Warrant by the Exercise Price in
effect immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment. The
adjustment pursuant to this Section 9(m) to the number of shares of Common Stock
purchasable upon exercise of a Warrant shall be made each time an adjustment of
the Exercise Price is made pursuant to this Section 9 (or would be made but for
Section 9(k) of this Warrant).
SECTION 10. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any of
the following events occur, namely (i) any reclassification or change of the
outstanding shares of Common Stock
-18-
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), (ii)
any consolidation, merger or combination of the Company with another person as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock (other than as a result of a change in name, a
change in par value or a change in the jurisdiction of incorporation), (iii) any
statutory exchange, as a result of which holders of Common Stock generally shall
be entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock (such transaction, a
"Statutory Exchange"), or (iv) any sale or conveyance of the properties and
assets of the Company as, or substantially as, an entirety to any other person
as a result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, then the Company or the successor or purchasing
person, as the case may be, shall issue a replacement Warrant providing that
such Warrant shall be exercisable for the kind and amount of shares of stock and
other securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, Statutory
Exchange, sale or conveyance by a holder of a number of shares of Common Stock
issuable upon exercise of such Warrants (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available for issuance
upon exercise of all such Warrants) immediately prior to such reclassification,
change, consolidation, merger, combination, Statutory Exchange, sale or
conveyance assuming such holder of Common Stock did not exercise his rights of
election, if any, that holders of Common Stock who were entitled to vote or
consent to such transaction had as to the kind or amount of securities, cash or
other property receivable upon such consolidation, merger, combination,
Statutory Exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
combination, Statutory Exchange, sale or conveyance is not the same for each
share of Common Stock in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purposes of this Section 10,
the kind and amount of securities, cash or other property receivable upon such
consolidation, merger, combination, Statutory Exchange, sale or conveyance for
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). Such replacement Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 9 of this Warrant. If, in
the case of any such reclassification, change, consolidation, merger,
combination, Statutory Exchange, sale or conveyance, the stock or other
securities and assets receivable thereupon by a holder of shares of Common Stock
shall include shares of stock or other securities and assets of a corporation
other than the successor or purchasing person, as the case may be, in such
reclassification, change, consolidate, merger, combination, Statutory Exchange,
sale or conveyance, then such replacement Warrant shall also be executed by such
other person and shall contain such additional provisions to protect the
interests of the holder of the Warrants as the Company's Board of Directors
shall reasonably consider necessary by reason of the foregoing. The Exercise
Price for the stock and other securities, property and assets (including cash)
so receivable upon such event shall be an amount equal to the Exercise Price
immediately prior to such event.
The Company shall mail or cause to be mailed such replacement Warrant to each
holder of Warrants, at such holder's address appearing in the Warrant Register
within twenty (20) days after
-19-
execution thereof. Failure to deliver such notice shall not affect the legality
or validity of such replacement Warrant.
The above provisions of this Section 10 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 10 applies to any event or occurrence, Section 9 of this Warrant
shall not apply.
SECTION 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this Warrant is
lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt of
an indemnification undertaking or other form of security reasonably acceptable
to the Company (or in the case of a mutilated Warrant, the Warrant), cause the
Warrant Agent to issue a new Warrant of like denomination and tenor as this
Warrant so lost, stolen, mutilated or destroyed. In every case, the applicant
for a replacement Warrant shall furnish to the Company such security or
indemnity as may be reasonably required by the Company to save it harmless, and,
in every case of destruction, loss or theft, the applicant shall also furnish to
the Company evidence to its satisfaction of the destruction, loss or theft of
the applicant's Warrant and of the ownership thereof. Upon the issuance of any
replacement Warrant, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.
SECTION 12. NOTICE. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile; or (iii) one
(1) Business Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. If
notice is to be sent to the Company, the holder shall use its reasonable best
efforts to provide additional copies to the individuals listed below; provided,
however, that the failure of such holder to send such additional copies shall in
no way limit the effectiveness of any notice sent to the Company as provided for
below. The addresses and facsimile numbers for such communications shall be:
-20-
If to the Company:
Rockford Corporation
600 South Rockford Drive
Tempe, Arizona 85281
Telephone: (480) 967-3565
Facsimile: (480) 966-3639
Attention: Mr. W. Gary Suttle
with a copy to:
Steptoe & Johnson LLP
201 E. Washington St., Suite 1600
Phoenix, Arizona 85004
Telephone: (602) 257-5200
Facsimile: (602)257-5299
Attention: Kevin Olson, Esq.
If to the Transfer Agent:
Equiserve Trust Company, N.A.
1 North State Street, 11th Floor
Chicago, Illinois 60602
Telephone: (312) 499-7032
Facsimile: (312) 499-7065
Attention: Tammie Marshall
If to the Warrant Agent:
BNY Western Trust Company
700 S. Flower Street - Suite 500
Los Angeles, CA 90017
Attention: Corporate Trust Administration
Facsimile: 213-630-6298
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant. Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided
-21-
by a nationally recognized overnight delivery service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
SECTION 13. AMENDMENTS. This Warrant and any term hereof may be amended,
changed, waived, discharged, or terminated only by an instrument in writing
signed by the Company and holders of a majority of Warrant Shares represented by
all Warrants. Such amendment, change, waiver, discharge or termination shall be
binding on the Company and all of the Warrant holder's assignees and
transferees; provided, however, that no such action may increase the Exercise
Price, including by a waiver of or an amendment to Section 9 of this Agreement,
or decrease the number of shares or class of stock issuable upon exercise of any
Warrants without the written consent of the holder of such Warrant. No waivers
of any term, condition or provision of this Warrant in any one or more instances
shall be deemed to be or construed as a further or continuing waiver of any such
term, condition or provision.
SECTION 14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. The corporate
laws of the State of Arizona shall govern all issues concerning the relative
rights of the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Warrant shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Warrant in that jurisdiction or the validity or enforceability
of any provision of this Warrant in any other jurisdiction. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 15. Descriptive Headings. The headings of this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
-22-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as
of day and year first above written.
"COMPANY"
ROCKFORD CORPORATION
By: __________________________________
Its: _________________________________
S-1
EXHIBIT A TO WARRANT
FORM OF EXERCISE NOTICE
The undersigned holder hereby exercises the right to purchase ______________
shares of Common Stock ("Warrant Shares") of Rockford Corporation, an Arizona
corporation (the "Company"), evidenced by the attached Warrant (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1. Form of Exercise Price. The holder intends that payment of the Exercise
Price shall be made as:
______ "Cash Exercise" with respect to ________ Warrant Shares; and/or
______ "Cashless Exercise" with respect to ______ Warrant Shares (to the
extent permitted by the terms of the Warrant).
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the sum of $___________________ to the
Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The holder of this warrant has sold or will
sell the shares of common stock issuable pursuant to this Notice pursuant to a
registration statement or an exemption from registration under the Securities
Act of 1933, as amended.
4. Private Placement Representations. The holder of this Warrant confirms
the continuing validity of, and reaffirms as of the date hereof, its
representations and warranties set forth in Section 7 of the Warrant.
Date: _______________, ____
_____________________________________ _____________________________________
Name of Registered Holder Tax ID of Registered Holder
(if applicable)
By: _________________________________
Its: ________________________________
A-1
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
_________________ to issue the above indicated number of shares of Common Stock
in accordance with the Irrevocable Transfer Agent Instructions dated ________
__, 2004 from the Company and acknowledged and agreed to by
____________________.
ROCKFORD CORPORATION
By: _____________________________________
Its: ____________________________________
A-2
EXHIBIT B TO WARRANT
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Rockford Corporation, an Arizona
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _________, 200_
___________________________________________
By:
Its:
Taxpayer I.D. No. or Soc. Sec. No:
___________________________________________
Address: __________________________________
__________________________________
__________________________________
Name in which new Warrant(s) should be registered:
Right to Purchase No. of Shares of Common Stock: _________________
Name: ____________________________________________________________
Taxpayer I.D. No. or Soc. Sec. No: _______________________________
Address: ________________________________________________
________________________________________________
________________________________________________
The balance of the attached Warrant not so transferred shall be returned
to the transferor in the form of a new Warrant reflecting such reduced amount.