EXHIBIT 10.5
The securities represented by this Warrant and issuable upon exercise
hereof have not been registered under the United States Securities Act of 1933,
as amended (the "1933 Act"), or under the provisions of any applicable state
securities laws, but have been acquired by the registered holder hereof for
purposes of investment and in reliance on statutory exemptions under the 1933
Act, and under any applicable state securities laws. These securities and the
securities issued upon exercise hereof may not be sold, pledged, transferred or
assigned, nor may this Warrant be exercised, except in a transaction which is
exempt under the provisions of the 1933 Act and any applicable state securities
laws or pursuant to an effective registration statement.
VOID AFTER 5:00 P.M. PACIFIC STANDARD TIME ON NOVEMBER 13, 2005
WARRANT TO PURCHASE 400,000 SHARES OF COMMON STOCK
CYPRESS FINANCIAL SERVICES, INC.
No. W-BP-1 Dated: February 12, 1999
FOR VALUE RECEIVED, Cypress Financial Services, Inc. (the "Company"), a
Nevada corporation with its principal offices located at 5400 Orange Avenue,
Suite 200, Cypress, California 90630, hereby certifies that Batchelder &
Partners, Inc., or permitted assigns (the "Holder") is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at any time, or from
time to time during the period commencing on the date of this agreement and
expiring at 5:00 p.m. Pacific Standard Time, on November 13, 2005 (the
"Expiration Date"), up to FOUR HUNDRED THOUSAND (400,000) fully paid and non-
assessable shares of the $.001 par value common stock of the Company (the
"Common Stock") at prices as shown on Exhibit A (the "Exercise Price"). The
number of shares of Common Stock and the Exercise Price may be adjusted from
time to time as hereinafter set forth.
This Warrant is issued in connection with an agreement between the Company
and Batchelder & Partners, Inc., wherein the Company has retained Batchelder &
Partners, Inc., to act as its non-exclusive financial advisor.
The Holder agrees with the Company that this Warrant is issued, and all the
rights hereunder shall be held subject to, all of the conditions, limitations
and provisions set forth herein.
1. Exercise of Warrant.
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1.1 Exercise for Cash. Subject to the limitations set forth below in
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this Section 1 and in Section 8 hereof, this Warrant may be exercised in whole
or in part, during the period commencing upon the date of this agreement,
subject to the warrant vesting schedule on Exhibit A, and expiring at 5:00 p.m.
Pacific Standard Time on the Expiration Date or, if such day is a day on which
banking institutions in Los Angeles, California are authorized by law to close,
then on the next succeeding day that shall not be such a day, by presentation
and surrender of this Warrant to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Warrant Exercise Form
attached hereto duly executed and accompanied by payment (either in cash or by
check acceptable to the Company, payable to the order of the Company) of the
Exercise Price for the number of shares specified in such form and instruments
of transfer, if appropriate, duly
executed by the Holder or his or its duly authorized attorney. As soon as
practicable after each such exercise of the Warrants the Company at its expense
shall issue and deliver to the Holder a certificate or certificates for the
Common Stock, registered in the name of the Holder or its designee. The Company
will pay all documentary stamp and other like taxes, if any, attributable to the
initial issuance and delivery of the Warrants and the initial issuance and
delivery of the Common Stock upon the exercise of Warrants. If this Warrant
should be exercised in part only, the Company shall at its expense, upon
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant,
together with the Exercise Price, at its office, or by the stock transfer agent
of the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein to the
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contrary, if the fair value of one share of Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant at the principal office of the Company,
or at the office of its stock transfer agent, if any, together with a properly
endorsed Warrant Exercise Form and notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X = Y(A-B)
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A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Common
Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of the above calculation, fair market value of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that where there exists a public market for the Common
Stock at the time of such exercise, the fair market value per share shall be
either the (i) the average of the last reported sale prices of the Common Stock
on the New York Stock Exchange for the five trading days prior to the date of
determination of fair market value or, (ii) if the Common Stock is not listed on
the New York Stock Exchange, the average of the closing prices quoted on the
Nasdaq National Market or on any exchange on which the Common Stock is listed,
whichever is applicable, as published in The Wall Street Journal, for the five
trading days prior to the date of determination of fair market value.
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2. Reservation of Shares. The Company will at all times reserve for
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issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and other securities) from time
to time receivable upon exercise of this Warrant. All such shares (and other
securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and non-assessable and free of all preemptive
rights. The Company agrees that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
3. Fractional Shares. The Company shall not be required to issue a
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fractional share upon the exercise of this Warrant, but rather the aggregate
number of shares issuable will be rounded up or down to the nearest full share.
4. Transfer of Warrant.
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4.1 Transfer to Comply with the 1933 Act. This Warrant may not be
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transferred or assigned in whole or in part without compliance with the 1933 Act
and applicable state securities laws by the transferor and the transferee
(including the delivery of investment representation letters and a legal opinion
reasonably satisfactory to the Company, if such are reasonably requested by the
Company). Any transfer of this Warrant shall be subject to the consent of the
Company, which consent shall not be unreasonably withheld. Subject to the
provisions of this Warrant, title to this Warrant may be transferred by
endorsement (by the Holder executing the Assignment Form attached hereto) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery. The Holder agrees to pay reasonable third party out-
of-pocket expenses associated with any such transfer. Notwithstanding the
foregoing in this Section 4.1, this Warrant may be transferred, in whole or in
part, without the consent of the Company, to or among the employees and
shareholders of Batchelder & Partners, Inc. by the Holder executing the
Assignment Form attached hereto which includes the acknowledgement by the
employee or shareholder of Batchelder & Partners, Inc. of the provisions and
restrictions of this Warrant.
4.2 Exchange of Warrant in Different Denominations and in Connection
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with a Transfer. Subject to the provisions of Section 4.1 hereof, this Warrant
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is exchangeable, at the option of the Holder, upon presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any, for
other warrants of different denominations, entitling the Holder or Holders
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. Subject to the provisions of Section 4.1 hereof, upon
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment attached hereto duly executed, the Company at
its expense shall execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
cancelled.
4.3 Mutilated or Missing Warrants. In the event that any Warrant
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shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant or in lieu of and substitution for the Warrant lost, stolen, or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or
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destruction. An applicant for such a substitute Warrant shall comply with such
other reasonable procedures as the Company may reasonably require.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
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entitled to any rights of a stockholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
6. Special Notices.
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(a) Whenever the Exercise Price or number of shares of Common Stock
purchasable hereunder shall be adjusted pursuant to Section 7 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such adjustment, and shall cause a copy of such certificate to be mailed (by
certified or registered mail, return receipt requested) to the Holder of this
Warrant.
(b) In case:
(i) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase
any shares of stock of any class or any other securities, or to receive any
other right, or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance
of all or substantially all of the assets of the Company to another
corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of
the Company,
then, and in each case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 15
days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third business day following
the date of such mailing.
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7. Adjustments. The Exercise Price and the number of shares purchasable
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hereunder are subject to adjustment from time to time as follows:
7.1 Merger, Sale of Assets, etc. If at any time while this Warrant,
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or any portion thereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a Holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 7. The foregoing provisions of this Section 7.1 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder for shares in connection with any such
transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the Holder would be entitled to
receive such securities or other property as such Holder would have been
entitled to receive had the Warrant been exercised immediately prior to such
transaction, with the Exercise Price appropriately adjusted, all subject to
further adjustment as provided in this Section 7.
7.2 Reclassification, etc. If the Company, at any time while this
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Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 7.
7.3 Split, Subdivision or Combination of Shares. If the Company at
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any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities as to
which purchase rights under this Warrant exist, or into a different number
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of securities of the same class, the number of shares of Common Stock
purchasable upon exercise immediately prior to such action shall be adjusted so
that the Holder shall be entitled to receive the kind and number of shares of
Common Stock or other securities of the Company which it would have owned or
would have been entitled to receive immediately after such action had the
Warrant been exercised immediately prior to such action and the Exercise Price
shall be appropriately adjusted, all subject to further adjustment as provided
in this Section 7.
7.4 Adjustments for Dividends in Stock or Other Securities or
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Property. If while this Warrant, or any portion hereof, remains outstanding and
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unexpired, the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such Holder would have been entitled to receive
immediately after such action had the Warrant been exercised immediately prior
to such action, and the Exercise Price shall be appropriately reduced, all
subject to further adjustment as provided in Section 7.
7.5 Adjustments for Extraordinary Cash Dividends or Distributions. If
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while this Warrant, or any portion hereof, remains outstanding and unexpired,
but is not yet exercisable pursuant to Section 1.1, the Company determines to
make any extraordinary cash dividends or distributions to its stockholders,
including in liquidation, then the Company's notice to the Holder pursuant to
Section 6 shall include a provision (as determined in good faith by the
Company's Board of Directors) that (i) the Holder may exercise this Warrant
prior to such transaction; and/or (ii) in the Board of Directors discretion, but
only if feasible, appropriate adjustment (as determined in good faith by the
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights of the Holder after the transaction to the
end that the Holder would be entitled to receive immediately after the
transaction such securities or other property as such Holder would have been
entitled to receive had the Warrant been exercised immediately prior to such
action, with the Exercise Price appropriately adjusted, all subject to further
adjustment as provided in this Section 7.
7.6 Adjustments for Rights Issues. If while this Warrant, or any
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portion hereof, remains outstanding and unexpired, the Company shall issue
rights, options or warrants (collectively, "Rights") to all holders of its
outstanding Common Stock entitling them to subscribe for or purchase shares of
common stock at a price per share which is lower at the record date mentioned
below than the then current fair market value per share of Common Stock (as
determined pursuant to Section 1.2), the number of shares of Common Stock
thereafter purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock theretofore purchasable upon
exercise of each Warrant by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of such
Rights plus the additional number of shares of Common Stock offered for
subscription or purchase in connection with such Rights and the denominator of
which shall be the number of shares of Common Stock outstanding on the date of
issuance of such Rights plus the number of shares which the aggregate proceeds
received or receivable by the Company upon exercise of such
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Rights would purchase at the fair market value per share of Common Stock at such
record date. Such adjustment shall be made whenever Rights are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive Rights.
7.7 Certificate as to Adjustments. Upon the occurrence of each
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adjustment or readjustment pursuant to this Section 7, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.
7.8 No Impairment. The Company will not, by any voluntary action,
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avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 7 and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
7.9 Voluntary Adjustment by the Company. The Company may at its
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option, at any time during the term of the Warrants, reduce the then current
Exercise Price to any amount deemed appropriate by the Board of Directors of the
Company or accelerate the vesting of the warrants as deemed appropriate by the
Board of Directors of the Company.
8. Restrictions on Exercise Imposed by Federal and State Securities Laws.
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Holder hereby acknowledges that neither this Warrant nor any of the securities
that may be acquired upon exercise of this Warrant have been registered under
the 1933 Act or under the securities laws of any state. As a condition to
exercise, in the absence of an effective registration statement under the 1933
Act, the Company may require the Holder to sign a representation letter
confirming compliance with this Agreement and applicable federal and state
securities laws and other applicable laws, by reaffirmation of the following
representations and warranties of the Holder:
(a) this Warrant and the shares of Common Stock subject to this
Warrant are or will be acquired by Holder solely for its own account, for
investment purposes only and with no present intention of distributing,
selling or otherwise disposing of them in connection with a distribution;
(b) Holder is able to bear the economic risk of an investment in the
Common Stock issued upon exercise of this Warrant and can afford to sustain
a total loss of such investment;
(c) Holder has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
proposed investment and therefore has the capacity to protect its own
interests in connection with its acquisition of Common Stock pursuant to
the terms of this Warrant;
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(d) Holder is an "accredited investor," as that term is defined in
Regulation D under the 1933 Act, or if not an "accredited investor" then
Holder, by reason of its business or financial experience or the business
or financial experience of its advisors, has the capacity to protect its
own interest in connection with the purchase of the Common Stock; and
(e) Holder or its representatives have had had an adequate opportunity
to ask questions and receive answers from the officers of the Company
concerning, among other matters, the Company, its management, its plans for
the operation of its business and potential additional acquisitions.
9. Legend. Unless the shares of Common Stock have been registered under
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the 1933 Act, upon exercise of any of the Warrants and the issuance of any of
the shares of Common Stock, all certificates representing shares shall bear on
the face thereof substantially the following legend, as well as any other
legends necessary to comply with applicable state and federal laws for the
issuance of such shares:
"The shares represented by this Certificate have not been registered
under the United States Securities Act of 1933 ("the 1933 Act") and are
"restricted securities" as that term is defined in Rule 144 under the 1933
Act. The shares may not be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the 1933 Act
or pursuant to an exemption from registration under the 1933 Act the
availability of which is to be established to the satisfaction of the
Company."
10. Registration Rights.
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10.1 Definitions.
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(a) As used in this Section 10, the following terms shall have
the meanings set forth below:
(i) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the 1933 Act.
(ii) "Initiating Holders" shall mean any Holder or Holders
who in the aggregate hold not less than a majority of the
outstanding Registrable Securities.
(iii) "Registrable Securities" shall mean shares of Common
Stock issued or issuable pursuant to the exercise of this
Warrant; provided, however, Registrable Securities shall not
include any shares of Common Stock which have previously been
sold to the public either pursuant to a registration statement or
Rule 144.
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(iv) "Registration Expenses" shall mean all expenses incurred
and affecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for
the Company, blue sky fees and expenses, and expenses of any regular
or special audits incident to or required by such registration, but
shall not include the compensation of regular employees of the
Company, which shall be paid in any event by the Company, or Selling
Expenses.
(v) "Rule 144" shall mean Rule 144 as promulgated by the
Commission under the 1933 Act as such Rule may be amended from time
to time, or any similar successor rule that may be promulgated by the
Commission.
(vi) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale
of the Registrable Securities and the fees and expenses of separate
counsel, if any, for the Holders.
10.2 Company Registration.
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(a) If the Company shall determine to register any of its securities
for its own account (other than the registration of securities to be issued or
issuable under a stock option plan, employee stock ownership plan or similar
employment related plans) or if the Company shall determine or be required to
register any of its securities for the account of a security holder or holders
exercising their respective demand registration rights, then the Company will:
(i) promptly give to each holder of Registrable Securities
written notice thereof; and
(ii) use its reasonable best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 10.2(b) below, and in any
underwriting involved therein, all the Registrable Securities specified in
a written request or requests, made by any holder of Registrable Securities
and received by the Company within ten days after written notice from the
Company described in clause (i) above is mailed or delivered by the
Company. Such written request may specify all or a part of a holder's
Registrable Securities.
(b) Underwriting. In connection with any underwritten offering by
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the Company of any of its securities, no such registration of the Registrable
Securities shall be required if the managing underwriter for the Company advises
the Company and the holder of Registrable Securities in writing that including
all or part of the Registrable Securities and the securities of the Company held
by other security holders entitled to participate in such offering will
materially adversely affect the proposed offering and jeopardize the
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Company's ability to sell its own securities in such offering. If such managing
underwriter advises the Company that, in its opinion, part of the Registrable
Securities and the securities of the Company held by other security holders
entitled to participate in such offering may be included in such offering
without materially adversely affecting the proposed offering, then the Company
shall be obligated to include such lesser number of Registrable Securities and
the securities of the Company held by other security holders of the Company in
such offering, which securities shall be taken from those owned and held by a
group consisting of the holders of the Registrable Securities and the other
holders of the Company's securities having registration rights that are pari
passu with those of the holders of the Registrable Securities, and such
limitation shall be imposed upon the holders of the Registrable Securities and
such other holders pro rata on the basis of the total number of shares of
Registrable Securities and the shares of the Company's securities held by such
other holders or obtainable by them upon the exercise of rights with respect to
other securities owned by them.
(c) In connection with any underwritten offering by the Company in which
any holder of Registrable Securities participates pursuant to this Section 10.2,
such holder shall, if requested by the managing underwriter or underwriters
thereof, agree not to sell any of the Warrants or Registrable Securities owned
by such holder in any transaction other than those included in such underwritten
offering for a period beginning 60 days prior to the date the Company and the
underwriter reasonably expect the registration statement to become effective,
and for such period after the effective date of the registration statement as is
agreed upon by the underwriters and the Company (not to exceed 180 days). Such
holder shall not be required to enter into an agreement not to sell unless all
of the Company's executive officers and directors also agree to such
limitations. Notwithstanding the foregoing, any holder of Registrable Securities
who elects to withdraw the Registrable Securities requested to be included in
such offering pursuant to Section 10.2(a)(ii) shall not be bound by the
agreement not to sell its Warrants or Registrable Securities in other
transactions. Provided, however, that if such holder elects to withdraw its
Registrable Securities and the managing underwriter reasonably determines that a
sale by such holder would adversely affect the contemplated offering, then such
holder shall agree not to sell any of its Warrants or Registrable Securities for
a period beginning 60 days prior to the date the Company and the underwriter
reasonably expect the registration statement to become effective, and for a
period of 60 days after the effective date of the registration statement.
(d) The Company may delay any underwritten offering pursuant to this
Section 10.2 when a condition or pending transaction exists the disclosure of
which would reasonably be expected to have a material effect on the proposed
offering.
10.3 Request for Registration.
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(a) If the Company shall receive from the Initiating Holders at any
time or times not earlier than one year after the date of this Agreement a
written request that the Company effect any registration with respect to
all or a part of the Common Stock held by persons holding Registrable
Securities the Company will:
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(i) promptly give written notice of the proposed
registration to all persons holding Registrable Securities, and
(ii) as soon as practicable, use its reasonable best
efforts to effect such registration (including, without limitation,
filing post-effective amendments, appropriate qualifications under
applicable blue sky or other state securities laws, and appropriate
compliance with the 1933 Act) and as would permit or facilitate the
sale and distribution of all or such portion of such Common Stock as
are specified in such request, together with all or such portion of
the Registrable Securities of any holder or holders joining in such
request as are specified in a written request received by the Company
within twenty days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 10.3:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of
process in effecting such registration, qualification, or
compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the 1933 Act;
(B) Except as provided in the last sentence of subsection
10.3(b) below, after the Company has initiated one such
registration pursuant to this Section 10.3 (counting for these
purposes only registrations which have been declared or ordered
effective and pursuant to which Registrable Securities have been
sold); or
(C) During the period starting with the date sixty days
prior to the Company's good faith estimate of the date of filing
of, and ending on a date one hundred eighty days after the
effective date of, a registration by the Company for the sale by
the Company of the Company's securities; provided that the
Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.
(b) Subject to the foregoing clauses (A) through (C), the
Company shall: (i) file a registration statement covering the Common Stock so
requested to be as soon as practicable after receipt of the requests of the
Initiating Holders; (ii) use its reasonable best efforts to keep such
registration effective for a period of ninety days or until the Holders of the
Registrable Securities have completed the distribution described in the
registration statement relating thereto, whichever first occurs; (iii) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement; (iv) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a holder of Registrable Securities from time to time may
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reasonably request; (v) cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed; and (vi) provide a transfer
agent and registrar for all Registrable Securities registered pursuant to such
registration statement and CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration. The
registration statement filed pursuant to the request of the Initiating Holders
may not include other securities of the Company (except for securities which are
included pursuant to piggyback registration provisions ("Piggyback Securities")
in contracts entered into by the Company) unless the written consent of the
Initiating Holders has been obtained. If written consent is not obtained, the
Company may nevertheless include other securities in such registration;
provided, however, if the amount of Registrable Securities actually sold is less
than the amount of Registrable Securities requested to be registered by the
Initiating Holders, then the Initiating Holders shall have a subsequent demand
registration right or rights, pursuant to this Section 10.3, with respect to any
Registrable Securities requested but not successfully sold.
(c) If the offering of the Registrable Securities is to be
underwritten the Company shall enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Initiating Holders, which underwriters are reasonably
acceptable to the Company. If a holder of Registrable Securities does not agree
to the terms of any such underwriting, such person shall be excluded therefrom
by written notice from the Company or the underwriter. The Registrable
Securities so excluded shall also be withdrawn from registration.
10.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to
Section 10 shall be borne by the Company. All Selling Expenses relating to
securities so registered shall be borne by the holders of such securities pro
rata on the basis of the number of shares of securities so registered on their
behalf, as shall any other expenses in connection with the registration required
to be borne by the Holders of such securities.
10.5 Indemnification.
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(a) The Company will indemnify each Holder, each of its officers,
directors and partners, employees, legal counsel, and accountants and each
person controlling such Holder within the meaning of Section 15 of the 1933 Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 10, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the 1933 Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of material fact contained
in any prospectus, offering circular, or other document (including any related
registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or any violation by the Company of the
1933 Act or any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification, or compliance, and will reimburse each such
Holder, each of its officers, directors, partners, employees, legal counsel, and
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accountants and each person controlling such Holder, each such underwriter, and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein. It is
agreed that the indemnity agreement contained in this Section 10.5 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification, or
compliance is being effected pursuant to this Section 10, indemnify the Company,
each of its directors, officers, partners, legal counsel, and accountants and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the 1933 Act, and each other such Holder,
and each of their officers, directors, and partners, and each person controlling
such Holder, 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 such registration
statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and will reimburse the Company and such
Holders, directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld); and provided that in no event shall any indemnity
under this Section 10.5 exceed the gross proceeds from the offering received by
such Holder.
(c) Each party entitled to indemnification under this Section 10.5
(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 sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 10, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except
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with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement that 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. Each Indemnified
Party shall furnish such information regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(d) If the indemnification provided for in this Section 10.5 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact related to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
10.6 Information by Holder. Each holder of Registrable Securities
---------------------
shall furnish to the Company such information regarding such holder and the
distribution proposed by such holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 10.
10.7 Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the Commission that may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its reasonable best efforts to make and keep public
information regarding the Company available as those terms are understood and
defined in Rule 144.
10.8 Transfer or Assignment of Registration Rights. The rights to
---------------------------------------------
cause the Company to register securities granted to a holder of Registrable
Securities by the Company under this Section 10 may be transferred or assigned
by a Holder in connection with a transfer or assignment of the Warrants or a
transfer or assignment of Common Stock in connection with the exercise of the
Warrants provided that the Company has been given written notice at the time of
or within a reasonable time after said transfer or assignment, stating the name
and address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned,
and, provided further, that the transferee or assignee of such rights assumes in
writing the obligations of such Holder under this Section 10.
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11. Notices. All notices required hereunder shall be in writing and shall
-------
be deemed given when delivered personally and, in the case of mailing, on the
third business day following the date of such mailing, when mailed by certified
or registered mail, return receipt requested, at the address of such party as
set forth on the first page, or at such other address of which the Company or
Holder has been advised by notice hereunder.
12. Applicable Law. This Warrant is issued under and shall for all
--------------
purposes be governed by and construed in accordance with the laws of the State
of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, all as of the day
and year first above written.
CYPRESS FINANCIAL SERVICES, INC.,
a Nevada corporation
By: /s/ MANUEL OCCIANO
-----------------------------------
Manuel Occiano
Chief Executive Officer
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EXHIBIT A
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WARRANT VESTING SCHEDULE
Target Enterprise (1)(2)(3)(4)
Shares Exercise price Value (millions)
- --------------------------------------------------------------------------------
100,000 $1.75 N/A
50,000 $2.25 $17.29
50,000 $2.75 $20.55
50,000 $3.25 $23.82
50,000 $3.75 $27.08
50,000 $4.25 $30.34
50,000 $4.75 $33.61
(1) 100,000 shares are to be vested at $1.75 per share upon execution of this
Warrant.
(2) For clarity purposes, upon the achievement of any Target Enterprise Value,
it is expressly agreed and understood that the shares associated with such
Target Enterprise Value shall be fully vested and further that all lesser
Target Enterprise Value thresholds shall have been met and the shares
associated with such Target Enterprise Values shall be fully vested. For
example, if prior to the Expiration Date, the Target Enterprise Value
equals or exceeds $20,550,000, then this Warrant shall be exercisable as to
200,000 shares through the Expiration Date irrespective of whether the
Target Enterprise Value thereafter declines.
(3) It is expressly agreed that the Company shall have the ability to
accelerate the vesting of any and all Warrants based upon the Company's
assessment of the services provided.
(4) Target Enterprise Value is defined as the aggregate fair market value of
all equity of the Company (including stock options, warrants or similar
rights to acquire stock on a fully diluted basis but excluding any unvested
Warrants referred to herein) plus the face value of any debt issued or
assumed by the Company. The fair market value shall be calculated as
provided in Section 1.2 of this Warrant.