Exhibit 1.2
Draft 12/31/97
UNDERWRITER'S WARRANT AGREEMENT dated as of _______, 1997 between
Connecticut Valley Sports, Inc., a Delaware corporation (the "Company"), and
Briarwood Investment Counsel (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Underwriter has agreed, pursuant to the underwriting agreement
(the "Underwriting Agreement") dated _______, 1997 between the Underwriter and
the Company, to act as the underwriter in connection with the Company's proposed
public offering (the "Public Offering") of 1,500,000 units (the "Units")
consisting of 1,500,000 shares of common stock, par value $0.01 per share
("Common Stock"), and 1,500,000 redeemable Common Stock purchase warrants
("Redeemable Warrants"), plus up to an additional 225,000 shares of Common Stock
and 225,000 Redeemable Warrants pursuant to the Underwriter's over-allotment
option, which securities are included in a registration statement on Form SB-2
(File No. 333-37507) (hereinafter, the "Public Offering Registration
Statement"); and
WHEREAS, the Company proposes to issue to the Underwriter warrants, one for
the purchase of up to 150,000 shares of Common Stock and the other for the
purchase of up to 150,000 Redeemable Warrants; and
WHEREAS, the warrants issued pursuant to this Agreement are being issued
by the Company to the Underwriter or officers and partners of the Underwriter
and members of the selling group (the Selling Group") and/or their officers
or partners, in consideration for, and as part of the Underwriter's
compensation in connection with, the Underwriter acting as the underwriter
pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, the payment
by the Underwriter to the Company of an aggregate of $10, the receipt of
which is hereby acknowledged by the Company, the agreements herein set forth
and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. Subject to the terms and conditions of this Agreement, the
Underwriter, and/or its designees who are officers or partners of the
Underwriter or members of the Selling Group in connection with the Public
Offering, are hereby granted the right to purchase, at any time from ______ ,
1999 until 5:00 P.M., New
York City time, on _______, 2003 (the "Warrant Exercise Term"), up to (i)
150,000 shares of Common Stock (the "Shares") at an initial exercise price
(subject to adjustment as provided in Article 8 hereof) of $5.50 per Share
and (ii) 150,000 Redeemable Warrants at an initial exercise price of $.11 per
Redeemable Warrant. The right to purchase Shares as described in (i) above
is hereinafter referred to as "Warrant No. 1" and the right to purchase
Redeemable Warrants as described in (ii) above is hereinafter referred to as
"Warrant No. 2". Warrant No. 1 and Warrant No. 2 are hereinafter referred to
collectively as the "Warrants". Except as specifically otherwise provided
herein, the Shares and the Redeemable Warrants issued pursuant to Warrant No.
1 and Warrant No. 2, respectively, shall bear the same terms and conditions
as described under the caption "Description of Securities" in the Public
Offering Registration Statement. In addition, the Redeemable Warrants shall
be governed by the terms of the Warrant Agreement dated as of _______, 1998,
executed in connection with the Public Offering (the "Public Warrant
Agreement"), and except that the holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), with respect to the
Warrants, the Shares and the Redeemable Warrants subject thereto and the
shares of Common Stock underlying the Redeemable Warrants issuable upon
exercise of Warrant No. 2, which registration rights are more fully described
in paragraph 7 of this Warrant Agreement. In the event of any adjustments to
the exercise price of and the number of shares of Common Stock purchasable
under the Redeemable Warrants pursuant to the Public Warrant Agreement, the
same changes to the Redeemable Warrants subject to Warrant No. 2 shall be
simultaneously effected.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") for Warrant No. 1 and Warrant No. 2 to be delivered pursuant
to this Agreement shall be in the forms set forth as Exhibit A and Exhibit B
attached hereto, respectively, and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. Exercise of Warrants.
3.1 Cash Exercise. The exercise price of the respective Warrants shall
be payable in cash or by certified or official bank check to the order of the
Company, or any combination of cash or check. Upon surrender of the
applicable Warrant Certificate with the annexed Form of Election to Purchase
duly executed, together with payment of the applicable exercise price for the
Shares and/or Redeemable Warrants purchased, at the Company's principal
offices, currently located at 4004 Highway 93 North, Stevensville, Montana
59870, the registered holder of a Warrant Certificate ("Holder" or
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"Holders") shall be entitled to receive a certificate or certificates for the
Shares and/or Redeemable Warrants so purchased. The purchase rights represented
by each Warrant Certificate are exercisable at the option of the Holder thereof,
in whole or in part (but not as to fractional Shares or fractional Redeemable
Warrants). In the case of the purchase of less than all the Shares or
Redeemable Warrants, as the case may be, purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Shares or Redeemable Warrants, as the case may
be, purchasable thereunder.
3.2 Cashless Exercise for Warrant No. 1. At any time during the
Warrant Exercise Term, the Holder may, at its option, exchange Warrant No. 1,
in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this Section 3.2, by surrendering the Warrant
Certificate representing Warrant No. 1 at the principal office of the
Company, accompanied by a notice stating (i) such Holder's intent to effect
such exchange, (ii) the number of Shares subject to Warrant No. 1 as to which
the exchange is to be effected and (iii) the date on which the Holder
requests that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the Notice of
Exchange or if the date the Notice of Exchange is received by the Company is
later than the date specified in the Notice of Exchange, such later date (the
"Exchange Date"). Certificates for the Shares issuable upon such Warrant
Exchange and, if applicable, a new warrant of like tenor evidencing the
balance of the Shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within three (3) business
days following the Exchange Date. In connection with any Warrant Exchange,
Warrant No. 1 shall represent the right to subscribe for and acquire the
number of Shares (rounded to the next highest integer) equal to (i) the
number of Shares specified by the Holder in its Notice of Exchange (the
"Total Number") less (ii) the number of Shares equal to the quotient obtained
by dividing (A) the product of the Total Number and the existing exercise
price of Warrant No. 1 by (B) the market price of a share of Common Stock on
the Exchange Date; and, in the case of any Warrant Exchange for less than all
of the Shares purchasable under Warrant No. 1, the Company shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the Shares
purchasable thereunder. By way of example, if the holder of Warrant No. 1
submits a Notice of Exchange relating to _____ of the _____ Shares subject to
Warrant No. 1 and the current market price of a share of Common Stock on the
Exchange Date is
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$_____, the holder will be entitled to receive _____ shares of Common Stock,
along with a new Warrant Certificate entitling the holder to purchase _____
Shares.
4. Issuance of Certificates.
4.1. Issuance. Upon exercise of the Warrants, the issuance of
certificates for the Shares and/or Redeemable Warrants, as applicable shall
be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance thereof,
and such certificates shall (subject to the provisions of Article 5 hereof)
be issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the
Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
4.2. Forms of Certificates. The Warrant Certificates and certificates
representing the Shares and/or Redeemable Warrants shall be executed on
behalf of the Company by the manual or facsimile signature of the present or
any future Chairman or Vice Chairman of the Board of Directors or President
or Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the present or any future
Secretary or Assistant Secretary of the Company. Warrant Certificates shall
be dated the date of execution by the Company upon initial issuance,
division, exchange, substitution or transfer. The Warrant Certificates and,
upon exercise of the Warrants, in part or in whole, certificates representing
the Shares and/or Redeemable Warrants shall bear a legend substantially
similar to the following:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not be
offered or sold except (i) pursuant to an effective registration statement
under the Act, (ii) to the extent applicable, pursuant to Rule 144 under
the Act (or any similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the Company of an
opinion of counsel, reasonably
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satisfactory to counsel to the Company, stating that an exemption from
registration under such Act is available."
5. Restriction on Transfer of Warrants. The Holder of a Warrant
Certificate, by acceptance thereof, covenants and agrees that the Warrant is
being acquired as an investment and not with a view to the distribution
thereof, and that the Warrant may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of
one (1) year from the date hereof, except to officers or partners of the
Underwriter or to any member of the Selling Group participating in the
distribution to the public of the Common Stock and Redeemable Warrants,
and/or their respective officers or partners.
6. Price.
6.1 Initial and Adjusted Exercise Prices. The initial exercise price
of Warrant No. 1 shall be $5.50 per Share and the initial exercise price of
Warrant No. 2 shall be $.11 per Redeemable Warrant. The adjusted exercise
price shall be the price which shall result from time to time from any and
all adjustments of the initial exercise price in accordance with the
provisions of Article 8 hereof.
6.2 Exercise Price. The term "exercise price" herein shall mean the
initial exercise price of Warrant No. 1 or Warrant No. 2, as the case may be,
or the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. None of the
Warrants, the Shares, the Redeemable Warrants and the Common Stock issuable
upon exercise of the Redeemable Warrants (the "Underlying Shares") have been
registered for purposes of public distribution under the Securities Act of
1933, as amended (the "Act").
7.2 Registrable Securities. As used herein the term "Registrable
Securities" means the Warrants, the Shares issuable upon exercise of Warrant
No. 1, the Redeemable Warrants issuable upon exercise of Warrant No. 2, the
Underlying Shares and any securities issued upon any stock split or stock
dividend in respect of any of the foregoing; provided, however, any of such
securities shall cease to be Registrable Securities when, as of the date of
determination, (i) it has been effectively registered under the Act and
disposed of pursuant thereto, (ii) registration under the Act is no longer
required for the subsequent public distribution of
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such securities or (iii) it has ceased to be outstanding. In the event of
any merger, reorganization, consolidation, recapitalization or other change
in corporate structure affecting the Common Stock, such adjustment shall be
made in the definition of "Registrable Securities" as is appropriate in order
to prevent any dilution or enlargement of the rights granted pursuant to this
Article 7.
7.3 Piggyback Registration.
(a) If, at any time during the seven years following the date of
this Agreement, the Company proposes to prepare and file one or more
post-effective amendments to the Public Offering Registration Statement filed
in connection with the Public Offering or any new registration statement or
post-effective amendments thereto covering equity or debt securities of the
Company, or any such securities of the Company held by its shareholders
(other than pursuant to a Form S-4 relating to a merger or acquisition or
pursuant to a Form S-8 or successor form) (for purposes of this Article 7,
collectively, a "Registration Statement"), it will give written notice of its
intention to do so by registered mail ("Notice"), at least thirty (30) days
prior to the filing of each such Registration Statement, to all holders of
the Registrable Securities. Upon the written request of such a holder (a
"Requesting Holder"), made within twenty (20) business days after receipt of
the Notice, that the Company include any of the Requesting Holder's
Registrable Securities in the proposed Registration Statement, the Company
shall, as to each such Requesting Holder, use its best efforts to effect the
registration under the Act of the Registrable Securities which it has been so
requested to register ("Piggyback Registration"), at the Company's sole cost
and expense and at no cost or expense to the Requesting Holders (other than
underwriting discounts and commissions applicable to the sale of such
Registrable Securities and the fees and disbursements, if any, of counsel to
the Requesting Holders); provided, however, that the Company shall in any
event be entitled to withdraw such Registration Statement prior to its
effectiveness if such Registration Statement is withdrawn as to all
securities proposed to be registered thereunder; and provided, further, that
the rights granted under this Section 7.3 shall be subject to the right of
the managing underwriter, in any such offering that is underwritten, to limit
the number of Registrable Securities that may be included hereunder in such
offering on a pro rata basis with any other selling securityholder on whose
behalf securities of the Company are being registered.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an
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underwriting, the Company shall so advise the holders as a part of the
written notice given pursuant to paragraph (a) above. If the managing
underwriter determines that a limitation of the number of shares to be
underwritten is required, the underwriter may exclude some or all Registrable
Securities from such registration (the "Excluded Registrable Securities");
provided, however, that any other securityholder may only include the same
pro-rata portion of any such securities in such Registration Statement.
7.4 Demand Registration.
(a) At any time during the Warrant Exercise Term, any "Demand Holder"
(as such term is defined in Section 7.4(d) below) of the Registrable
Securities shall have the right (which right is in addition to the piggyback
registration rights provided for under Section 7.3 hereof), exercisable by
written notice to the Company (the "Demand Registration Request"), to have
the Company prepare and file with the Securities and Exchange Commission (the
"Commission"), on one occasion, at the sole expense of the Company (except as
provided in Section 7.5(b) hereof), a Registration Statement and such other
documents, including a prospectus, as may be necessary (in the opinion of
both counsel for the Company and counsel for such Demand Holder), in order to
comply with the provisions of the Act, so as to permit a public offering and
sale of the Registrable Securities by the holders thereof. The Company shall
use its best efforts to cause the Registration Statement to become effective
under the Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof. Once effective, the Company will use its
best efforts to maintain the effectiveness of the Registration Statement
until the earlier of (i) the date that all of the Registrable Securities
have been sold or (ii) the date which is nine months after the effective date
of such Registration Statement. A request for registration under this
Section 7.4(a) shall coincide with the availability of the Company's audited
financial statements, unless such Demand Holder(s) agree to pay the costs to
the Company of any special audit which may be required.
(b) The Company covenants and agrees to give written notice of any
Demand Registration Request to all holders of the Registrable Securities
within ten (10) business days from the date of the Company's receipt of any
such Demand Registration Request. After receiving notice from the Company as
provided in this Section 7.4(b), holders of Registrable Securities may
request the Company to include their Registrable Securities in the
Registration Statement to be filed pursuant to Section 7.4(a) hereof by
notifying the Company of their decision to have such securities
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included within ten (10) days of their receipt of the Company's notice.
(c) In addition to the registration rights provided for under Section
7.3 hereof and subsection (a) of this Section 7.4, at any time during the
Warrant Exercise Term, any Demand Holder (as defined below in Section 7.4(d))
of Registrable Securities shall have the right, exercisable by written
request to the Company, to have the Company prepare and file with the
Commission, on one occasion in respect of all holders of Registrable
Securities, a Registration Statement so as to permit a public offering and
sale of such Registrable Securities until the earlier of (i) the date that
all of the Registrable Securities have been sold or (ii) the date which is
nine months after the effective date of such Registration Statement;
provided, however, that all costs incident thereto shall be at the expense of
the holders of the Registrable Securities included in such Registration
Statement (including the costs of any special audit which may be required).
If a Demand Holder shall give notice to the Company at any time of its or
their desire to exercise the registration right granted pursuant to this
Section 7.4(c), then within ten (10) days after the Company's receipt of such
notice, the Company shall give notice to the other holders of Registrable
Securities advising them that the Company is proceeding with such
registration and offering to include therein the Registrable Securities of
such holders, provided they furnish the Company with such appropriate
information in connection therewith as the Company shall reasonably request
in writing.
(d) The term "Demand Holder" as used in this Section 7.4 shall mean any
holder or any combination of holders of Registrable Securities, if included
in such holders' Registrable Securities are that aggregate number of shares
of Common Stock (including Shares already issued and not disposed of in a
public offering and/or Shares issuable pursuant to the exercise of Warrant
No. 1 and Underlying Shares already issued and not disposed of in a public
offering and/or Underlying Shares issuable pursuant to the exercise of
Redeemable Warrants issued and not disposed of in a public offering or
issuable pursuant to exercise of Warrant No. 2 (the "Total Common Shares"))
as would constitute 50% or more of the aggregate number of such Total Common
Shares.
7.5 Covenants of the Company With Respect to Registration. The Company
covenants and agrees as follows:
(a) In connection with any registration under Section 7.4 hereof, the
Company shall file the Registration Statement as expeditiously as possible,
but in no event later than twenty (20) days following receipt of any demand
therefor (unless delayed by
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the failure of a holder of Registrable Securities to promptly furnish such
information necessary to complete such registration statement), shall use its
best efforts to have any such Registration Statement declared effective at
the earliest possible time, and shall furnish each holder of Registrable
Securities such number of prospectuses as shall reasonably be requested.
(b) Except as otherwise expressly set forth in this Agreement, the
Company shall pay all costs, fees and expenses in connection with all
Registration Statements filed pursuant to Sections 7.3 and 7.4(a) hereof
(excluding any underwriting discounts and commissions which may be incurred
in connection with the sale of any Registrable Securities and excluding any
fees and expenses of counsel for any Requesting Holder or Demand Holder),
including, without limitation, the Company's legal and accounting fees,
printing expenses, and blue sky fees and expenses. The holders of
Registrable Securities included in any Registration Statement filed pursuant
to Section 7.4(c) hereof will pay all costs, fees and expenses in connection
with such Registration Statement, including their own legal fees and
expenses, if any.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Registrable Securities included in a
Registration Statement for offering and sale under the securities or blue sky
laws of such states as are reasonably requested by the holders of such
securities; provided that the Company shall not be obligated to qualify or
register the Registrable Securities in any jurisdiction, in which it would
have to qualify as a foreign corporation or give a general consent to service
of process in order to so qualify or register.
(d) The Company shall indemnify any holder of the Registrable
Securities to be sold pursuant to any Registration Statement and each person,
if any, who controls such holder within the meaning of Section 15 of the Act
or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become
subject under the Act, the Exchange Act or otherwise, arising from such
Registration Statement to the same extent and with the same effect as the
provisions pursuant to which the Company has agreed to indemnify the
Underwriter contained in Section 6 of the Underwriting Agreement and to
provide for just and equitable contribution as set forth in Section 7 of the
Underwriting Agreement.
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(e) Each holder of Registrable Securities to be sold pursuant to a
Registration Statement will furnish to the Company such information as may be
reasonably be requested by the Company for inclusion in the Registration
Statement. Any holder of Registrable Securities to be sold pursuant to a
Registration Statement, and its successors and assigns, shall severally, and
not jointly, indemnify, the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage, expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished in writing by or on behalf of such holder, or its
successors or assigns, for specific inclusion in such Registration Statement
to the same extent and with the same effect as the provisions contained in
Section 6 of the Underwriting Agreement pursuant to which the Underwriter has
agreed to indemnify the Company and to provide for just and equitable
contribution as set forth in Section 7 of the Underwriting Agreement.
(f) Nothing contained in this Agreement shall be construed as requiring
any Holder to exercise his Warrants prior to the initial filing of any
Registration Statement or the effectiveness thereof.
(g) If the Company shall fail to comply with the provisions of this
Article 7, the Company shall, in addition to any other equitable or other
relief available to the holders of Registrable Securities, be liable for any
or all actual damages (but not punitive or consequential damages) sustained
by the holders of Registrable Securities, requesting registration of their
Registrable Securities.
(h) The Company shall not permit the inclusion of any securities other
than the Registrable Securities to be included in any Registration Statement
filed pursuant to Section 7.4 hereof, without the prior written consent of
the Demand Holders, which consent shall not be unreasonably withheld.
(i) The Company shall deliver promptly to each holder of Registrable
Securities whose securities are included in a Registration Statement copies
of all correspondence between the Commission and the Company, its counsel or
auditors and all memoranda relating to discussions with the Commission or its
staff with respect to the Registration Statement and permit each holder of
Registrable Securities and underwriters to do such investigation, upon
reasonable advance notice, with respect to
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information contained in or omitted from the Registration Statement as it
deems reasonably necessary to comply with applicable securities laws or rules
of the National Association of Securities Dealers, Inc. ("NASD"). Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times and as often as any such holder of Registrable Securities or
underwriter shall reasonably request.
(j) If, in connection with a registration which includes Registrable
Securities pursuant to this Article 7, the Company shall enter into an
underwriting agreement with one or more underwriters selected for such
underwriting, such agreement shall contain such representations, warranties
and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the underwriters. The holders
of Registrable Securities shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at
their option, require that any or all the representations and warranties of
the Company to or for the benefit of such underwriters shall, to the extent
that they may be applicable, also be made to and for the benefit of such
holders of Registrable Securities. Such holders of Registrable Securities
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate to
such holders of Registrable Securities and their intended methods of
distribution.
8. Adjustments of Exercise Price and Number of Shares.
8.1 Stock Dividend, Split, etc.. In case the Company shall (i) declare
a dividend or make a distribution on its outstanding shares of Common Stock
in shares of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller number of
shares, the exercise price under Warrant No. 1 in effect at the time of the
record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be adjusted so that
it shall equal the price determined by multiplying the exercise price by a
fraction, the denominator of which shall be the number of shares or Common
Stock outstanding after giving effect to such action, and the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such action.
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8.2 Rights or Warrants. In the case the Company shall fix a record
date for the issuance of rights or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the "Subscription
Price") (or having a conversion price per share) less than the current market
price of the Common Stock (as defined in Section 8.5 below) on such record
date, the exercise price of Warrant No. 1 shall be adjusted so that it shall
thereafter equal the price determined by multiplying (i) the exercise price
in effect immediately prior to the date of such issuance and (ii) a fraction,
the numerator of which shall be the sum of the number of shares of Common
Stock outstanding on such record date and the number of additional shares of
Common Stock which the aggregate offering price of the total number of shares
of Common Stock so offered for subscription or purchase (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such current market price per share of the Common Stock, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
on such record date and the number of additional shares of Common Stock
offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent
that shares of Common Stock are not delivered (or securities convertible into
Common Stock are not delivered) after the expiration of such rights or
warrants the exercise price shall be readjusted to the exercise price which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
8.3 Evidences of Indebtedness or Assets. In case the Company shall
hereafter distribute to the holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or distributions of
securities of the type referred to in Section 8.1 above) or subscription
rights or warrants (excluding those referred to in Section 8.2 above), then
in each such case the exercise price of Warrant No. 1 in effect thereafter
shall be determined by multiplying (i) the exercise price in effect
immediately prior thereto and (ii) a fraction, the numerator of which shall
be the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Section 8.5
below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of
such
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rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made whenever
any such distribution is made and shall become effectively immediately after
the record date for the determination of shareholders entitled to receive
such distribution.
8.4 Adjustment of Number of Shares. Whenever the Exercise Price
payable upon exercise of Warrant No. 1 is adjusted pursuant to Sections 8.1,
8.2 or 8.3 above, the number of Shares purchasable upon exercise of Warrant
No. 1 shall simultaneously be adjusted by multiplying the number of Shares
initially issuable upon exercise of Warrant No. 1 by the exercise price in
effect on the date hereof and dividing the product so obtained by the
exercise price, as adjusted.
8.5 Determination of Current Market Price. For the purpose of any
computation under Sections 8.2 and 8.3 above, the current market price per
share of Common Stock at any date shall be deemed to be the average of the
daily closing prices for twenty (20) consecutive business days before such
date. The closing price for each day shall be the last sale price regular
way or, in case no such reported sale takes place on such day, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is admitted
to trading or listed, or as reported by National Association of Securities
Dealers, Inc. Automatic Quotation System ("NASDAQ") or other similar
organization if NASDAQ is no longer reporting such information, or if not so
available, the fair market price as determined by the Board of Directors.
8.6 No Adjustment for De Minimus Adjustment. No adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least ten cents ($0.10) in such price; provided,
however, that any adjustments which by reason of this Section 8.6 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All calculations under
this Article 8 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Article 8 to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the exercise price, in addition to those
required by this Article 8, as it shall determine, in its sole discretion, to
be advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or
13
combination of Common Stock, hereafter made by the Company shall not result
in any Federal income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Redeemable Warrants
issuable upon exercise of Warrant No. 2).
8.7 Notice. Whenever an exercise price is adjusted, as herein
provided, the Company shall promptly, but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice setting forth
the adjusted exercise price and adjusted number of Shares and/or Warrants
issuable upon exercise of the Warrants and, if requested, information
describing the transactions giving rise to such adjustments, to be mailed to
the Holder, at the address set forth herein, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. The Company may retain a
firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to
make any computation required by this Section 8, and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
8.8 Other Securities. In the event that at any time, as a result of
any adjustment made pursuant to this Article 8, the Holder thereafter shall
become entitled to receive any securities of the Company other than Common
Stock and Redeemable Warrants, thereafter the number of such other securities
receivable upon exercise of the Warrants shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock and Redeemable Warrants
contained in Sections 8.1 to 8.6, inclusive above.
9. Exchange and Replacement of Warrant Certificates.
9.1 Exchange. Each Warrant Certificate is exchangeable without
expense, upon the surrender hereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of like tenor
and date representing in the aggregate the right to purchase the same number
of Shares or Redeemable Warrants, as the case may be, in such denominations
as shall be designated by the Holder thereof at the time of such surrender.
9.2 Replacement. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
Warrant Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it, and reimbursement to the Company
of all reasonable expenses incidental thereto, and upon surrender and
cancellation of any Warrants, if mutilated, the Company will make
14
and deliver a new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common
Stock or Redeemable Warrants and shall not be required to issue scrip or pay
cash in lieu of fractional interests, it being the intent of the parties that
all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or Redeemable Warrants, as
the case may be.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of Warrant No. 1
and the exercise of the Redeemable Warrants subject to Warrant No. 2, such
number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of Warrant No.
1 and payment of the exercise price therefor, all shares of Common Stock
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder,
and that, upon exercise of Warrant No. 2 and payment of the exercise price
therefor, the Redeemable Warrants will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock and all Redeemable Warrants
issuable upon the exercise of the Warrants, as well as the Underlying Shares,
to be listed on or quoted by NASDAQ or listed on such national securities
exchanges as the Company's Common Stock is then listed.
12. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holder or Holders the right to vote
or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter,
or as having any rights whatsoever as a shareholder of the Company. If,
however, at any time prior to the expiration of the Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock and/or Redeemable Warrants for the purpose of entitling
them to receive a dividend or distribution payable otherwise than in
cash, or a cash dividend or distribution payable otherwise than out
of current
15
or retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock and/or
Redeemable Warrants any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant to
subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
then, in any one or more of said events, the Company shall give written
notice of such event at least fifteen (15) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination
of the shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or
entitled to vote on such proposed dissolution, liquidation, winding up or
sale. Such notice shall specify such record date or the date of closing of
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in
connection with the declaration or payment of any such dividend or
distribution, or the issuance of any convertible or exchangeable securities
or subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to Connecticut Valley Sports, Inc., 4004 Highway
93 North, Stevensville, Montana 59870 or to such other address as the
Company may designate by notice to the Holders.
14. Supplements and Amendments. The Company and the Underwriter may
from time to time supplement or amend this
16
Agreement without the approval of any Holders of Warrant Certificates in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or
to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Underwriter may deem necessary or
desirable and which the Company and the Underwriter deem not to adversely
affect the interests of the Holders of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement by
or for the benefit of the Company and the Holders inure to the benefit of
their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of
business on _______, 2006. Notwithstanding the foregoing, this Agreement
will terminate on any earlier date when all Warrants have been exercised and
all the Shares issuable upon exercise of Warrant No. 1 and all the Redeemable
Warrants issuable upon exercise of Warrant No. 2 (or the Underlying Shares)
have been resold to the public; provided, however, that the provisions of
Section 7.5 shall survive such termination until the close of business on
_______, 2009.
17. Governing Law. This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State
of New York and for all purposes shall be construed in accordance with the
laws of said State.
18. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered holder or holders of the Warrant
Certificates, Warrants or the underlying securities any legal or equitable
right, remedy or claim under this Agreement; and this Agreement shall be for
the sole and exclusive benefit of the Company and the Underwriter and any
other holder or holders of the Warrant Certificates, Warrants or the
underlying securities.
19. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
17
CONNECTICUT VALLEY SPORTS, INC.
By:--------------------------------------
Name:
Title:
Attest:
By: --------------------------
Name:
Title
BRIARWOOD INVESTMENT COUNSEL
By:------------------------------------
Name:
Title:
Attest:
By: ---------------------------
Name:
Title
18
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, ________, 2003.
No. WW-1 150,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________ or registered assigns is
the registered holder of 150,000 Warrants to purchase, at any time from _______,
1999 until 5:00 P.M. New York City time on _______, 2003 ("Expiration Date"), up
to 150,000 shares ("Shares") of fully-paid and nonassessable common stock, par
value $.01 per share ("Common Stock"), of Connecticut Valley Sports, Inc. , a
Delaware corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $5.50 per Share upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Warrant Agreement dated as of _______, 1998 between the Company and
Briarwood Investment Counsel (the "Warrant Agreement"). Payment of the Exercise
Price may be made in cash, or by certified or official bank check in New York
Clearing House funds payable to the order of the Company, or any combination of
cash or check.
19
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the Exercise Price and/or number of the Company's securities issuable thereupon
may, subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant Certificate evidencing
the adjustment in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
20
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
21
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of the date below.
Dated: _______, 1998 CONNECTICUT VALLEY SPORTS, INC.
By:--------------------------------
Name:
Title:
Attest:
By: -----------------------------------------
Name:
Title
22
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Shares and herewith
tenders in payment for such Shares cash or a certified or official bank check
payable in New York Clearing House Funds to the order of in the amount of
$ , all in accordance with the terms hereof. The undersigned requests that a
certificate for such Shares be registered in the name of , whose address is and
that such Certificate be delivered to whose address is.
Dated:__________ Signature:_______________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant
Certificate.)
------------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
23
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint, Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated:__________ Signature:________________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant
Certificate)
_______________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
24
EXHIBIT B
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE 5:00 P.M., NEW YORK TIME, _______, 2003
No. WW-2 150,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _________ or registered assigns is
the registered holder of 150,000 Warrants to purchase, at any time from _______,
1999 until 5:00 P.M. New York City time on , 2003 ("Expiration Date"), up to
150,000 Redeemable Common Stock Purchase Warrants ("Redeemable Warrants"), of
Connecticut Valley Sports, Inc., a Delaware corporation (the "Company"), at the
exercise price (the "Exercise Price"), of $.11 per Redeemable Warrant upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Warrant Agreement dated as of ________, 1998 between the Company and
Briarwood Investment Counsel (the "Warrant Agreement"). Payment of the Exercise
Price may be made in cash, or by certified or official bank check in New York
Clearing House funds payable to the order of the Company, or any combination of
cash or check.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
25
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated: ___________ CONNECTICUT VALLEY SPORTS, INC.
By: ----------------------------------
Name:
Title:
26
Attest:
Name:
Title
27
FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Redeemable Warrants and
herewith tenders in payment for such Redeemable Warrants cash or a certified or
official bank check payable in New York Clearing House Funds to the order of
_______________ in the amount of $_______, all in accordance with the terms
hereof. The undersigned requests that a certificate for such Redeemable
Warrants be registered in the name of___________, whose address is ________
__________________________ and that such Certificate be delivered to whose
address is _____________________________________.
Dated: ____________ Signature: ___________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
__________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
28
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Warrant Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
_____________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint, Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ________, 1997 Signature: __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate)
___________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
29