EXHIBIT 4.5
THE WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAW. THE WARRANT AND THE
SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION UNDER SAID ACT AND ANY APPLICABLE SECURITIES LAWS OR AN EXEMPTION
THEREFROM UNDER SAID ACT OR LAWS. THE COMPANY MAY REQUEST, AS A CONDITION TO ANY
TRANSFER, AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF THE REGISTRATION RIGHTS PROVISIONS ATTACHED HERETO AS EXHIBIT A.
Warrant No. ________ ____________ Shares
FORM OF
WARRANT
To Purchase Common Stock of
GALES INDUSTSRIES INCORPORATED
GALES INDUSTRIES INCORPORATED, a Delaware corporation ("Gales"), intends
to seek equity or debt financing of at least $5,500,000 and, contemporaneously
with the closing of such financing, Gales contemplates entering into a "reverse
merger" transaction (the "Reverse Merger") with a publicly-held company (the
"Public Company"). Gales and/or the Public Company are referred to herein as the
"Company". After completion of the Reverse Merger, references herein to "Gales"
or the "Company" shall be deemed to refer collectively to Gales and the Public
Company. "Financing" means equity or debt financing resulting in gross proceeds
to the Company of at least $5,500,000.
This certifies that, commencing on the earlier of January 1, 2006 and the
date as of which the Reverse Merger is completed, and from time to time after
such earlier date until the Expiration Date, ____________________________ or its
registered assigns (the "Holder") is entitled to purchase from Gales, or the
Public Company with which Gales enters into a Reverse Merger, the number of
shares of Common Stock (as defined below) set forth above, in whole or in part,
including fractional parts, at a purchase price (the "Purchase Price") equal to
the lower of (1) $0.22 per share of Common Stock or (2), if the Company has
completed the Financing, the effective price per share of the Public Company's
Common Stock (or Common Stock equivalents) sold in the Financing. The effective
price per share referred to in the preceding sentence means the gross proceeds
of the Financing divided by the number of shares of Common Stock (or Common
Stock equivalents, but not warrants or securities issued to the placement agent
or other non-investors) issued to the investors in the Financing.
Notwithstanding anything else herein to the contrary, if, as of the date this
Warrant is exercised, the Reverse Merger has already been completed, only shares
of the Public Company's Common Stock will be issuable upon exercise of this
Warrant, and if, as of the date this Warrant is exercised, the Reverse Merger
has not been completed, only shares of the Company's Common Stock will be
issuable upon exercise of this Warrant, and, in such later case, the shares of
the Company's Common Stock issued upon exercise of this Warrant shall not have
any voting rights until the Financing is completed or terminated and the Company
shall have the right to dilute the Holder's percentage ownership of the
outstanding capital stock by issuing to other parties the shares of Common Stock
contemplated by the Company's proposed pro forma fully-diluted capitalization
table, a copy of which has been provided to the Holder, which takes into account
as of the date of the closing of the Reverse Merger, among other issuances, the
founder's shares, shares to officers, directors and employees, stock option
shares, shares to the Public Company's pre-existing shareholders, and shares to
the former shareholders of Air Industries Machining, Corp., a New York
corporation, which the Company contemplates acquiring simultaneously with the
closing of the Financing and the Reverse Merger. The number of Warrant Shares
(as defined below) and the Purchase Price therefor are subject to adjustment as
hereinafter set forth in Section 6. This is one of a series of warrants in
substantially the same form that were originally issued on the Issue Date.
The number of shares into which this Warrant is convertible, set forth
above, assumes that the per share price in the Financing is $0.22 and is derived
by dividing the principal amount of the 12% Convertible Bridge Note ("Note"),
purchased by the Holder from the Company, by $0.22. In the event the Financing
is completed at an effective price per share of the Public Company's Common
Stock (or Common Stock equivalents) of under $0.22, the number of shares into
which this Warrant is convertible will automatically adjust to the quotient of
the principal amount of the Note divided by such lower price per share at which
the Financing is completed.
SECTION 1. Certain Definitions. For all purposes of this Warrant, the
following terms shall have the meanings indicated:
"Additional Shares of Common Stock" means all shares of Common Stock
issued after the date hereof, other than Warrant Shares, whether now authorized
or not, other than Excluded Shares.
"Commission" means the Securities and Exchange Commission, or any
other Federal agency then administering the Securities Act.
"Common Stock" means and includes the Company's authorized common
stock, par value $0.001 per share, and includes any Common Stock of any class or
classes resulting from any successive changes or reclassifications thereof;
provided, however, that, in the event that the Company has completed the Reverse
Merger, "Common Stock" means the common stock of the Public Company.
"Company" means Gales Industries Incorporated; provided, however,
that after completion of the Reverse Merger, references herein to the "Company"
will also be deemed to include the Public Company.
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"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Current Market Price" means the 10-day average closing bid prices
of a share of Common Stock as reported on NASDAQ for the period of 10
consecutive Trading Days ending on the date of determination; provided, however,
if the Common Stock is not listed or admitted to trading on NASDAQ, as reported
on the principal national security exchange or quotation system on which the
Common Stock is quoted or listed or admitted to trading; or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the closing bid price of such security on the over-the-counter market on
the day in question as reported by Bloomberg LP, or a similar generally accepted
reporting service, as the case may be, or if not listed or admitted for trading
on any national securities exchange or quoted in the over-the-counter market,
the Current Market Price shall be the Fair Value on such date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Excluded Shares" means:
(a) (i) shares of Common Stock issuable upon the exercise of options
and warrants (including this Warrant) and that are outstanding on the Issue Date
and (ii) such number of additional shares of Common Stock as may become issuable
upon the exercise of such options, warrants and convertible preferred stock by
reason of adjustments required pursuant to the anti-dilution provisions
applicable to such securities as in effect on the Issue Date;
(b) (i) shares of Common Stock issuable upon the exercise of options
and warrants granted or issued by the Company to its employees, officers,
directors, consultants and advisors, up to a maximum number of such shares
issuable at any point in time while this Warrant is exercisable that does not
exceed 20% of the then issued and outstanding shares of Common Stock; provided,
in each such case, that the exercise price for any such share shall not be less
than 85% of the Fair Value of the Common Stock on the date of grant or issuance
of the option or warrant (the "Minimum Price"), and (ii) such additional number
of shares of Common Stock as may become issuable pursuant to the terms of any
such options or warrants by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities in order to reflect any
subdivision or combination of Common Stock, by reclassification or otherwise, or
any dividend on Common Stock payable in Common Stock and anti-dilution
adjustments that do not adjust the exercise price below the Minimum Price;
(c) shares of Common Stock issuable upon exercise of warrants issued
to equipment lessors, banks or other institutional credit financing sources of
the Company in connection with the provision of financing or the rendering of
other services to the Company up to a maximum number of shares of Common Stock
issuable at any point in time while this Warrant is exercisable that does not
exceed 20% of the then issued and outstanding shares of Common Stock; provided,
in each such case, that the exercise or purchase price for any such share shall
not be less than the Minimum Price, and (ii) such additional number of shares of
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Common Stock as may become issuable pursuant to the terms of any such warrants
by reason of adjustments required pursuant to anti-dilution provisions
applicable to such securities in order to reflect any subdivision or combination
of Common Stock, by reclassification or otherwise, or any dividend on Common
Stock payable in Common Stock and anti-dilution adjustments that do not adjust
the exercise price below the Minimum Price.
"Expiration Date" means 5:00 p.m. New York City time on the fifth
anniversary of the Issue Date.
"Fair Value" means, on any date specified herein (i) in the case of
cash, the dollar amount thereof, (ii) in the case of a security admitted for
trading on any national securities exchange or quoted in the over-the-counter
market, the Current Market Price, and (iii) in all other cases as determined in
good faith jointly by the Company and the Holder; provided, however, that if
such parties are unable to reach agreement within 30 days, the Fair Value shall
be determined in good faith by an independent investment banking firm selected
jointly by the Company and the Holder or, if that selection cannot be made
within ten days, by an independent investment banking firm selected by the
American Arbitration Association in accordance with its rules.
"Issue Date" means __________, 2005.
"Options" means any rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Other Securities" means any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holder of this Warrant at any time shall be entitled to receive, or
shall have received, upon the exercise of this Warrant, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 7 or otherwise.
"Outstanding" or "outstanding" means, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then owned or held
by or for the account of the Company or any subsidiary of the Company, and shall
include all shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Purchase Price" means the purchase price set forth in the initial
paragraph hereof, as adjusted from time to time pursuant to the provisions of
Section 6 hereof.
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"Securities Act" or the "1933 Act" means the Securities Act of 1933,
as amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Trading Day" means a day on which the Nasdaq Stock Market is open
for the transaction of business.
"Warrant" means this warrant and any warrant issued in exchange,
division, substitution, transfer or replacement hereof.
"Warrant Shares" means the shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof pursuant to
Section 2 hereof.
SECTION 2. Exercise of Warrant.
(a) This Warrant may be exercised at any time, in whole or in part,
for all or any part of the number of shares of Common Stock purchasable
hereunder, prior to the Expiration Date. To exercise this Warrant, in whole or
in part, the Holder shall complete the notice of exercise attached hereto (the
"Notice of Exercise"), and deliver this Warrant and, except as otherwise
provided in this Section 2, cash in an amount equal to the aggregate Purchase
Price of the shares of Common Stock being purchased, together with the Notice of
Exercise, to the Company at its office referred to in Section 9. Upon receipt
thereof, the Company shall, as promptly as practicable and in any event within
ten (10) business days thereafter, execute or cause to be executed and deliver
or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock specified in
the Notice of Exercise, together with cash in lieu of any fraction of a share,
as hereinafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as the
Holder shall request in the Notice of Exercise and shall be registered in the
name of the Holder or such other name as shall be designated in the Notice of
Exercise, subject to compliance with applicable securities laws. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and the Holder or any other person or
entity so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date the Notice of
Exercise, together with the cash, if any, and this Warrant, are received by the
Company as described above. If this Warrant shall have been exercised in part,
the Company shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant. All shares of Common Stock issuable upon the exercise of this
Warrant pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable and without any preemptive rights. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
execution and delivery of stock certificates pursuant to this Section, unless
such tax or charge is imposed by law upon the Holder, in which case such taxes
or charges shall be paid by the Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of the Holder, and in
such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other charge
is due.
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(b) In lieu of payment of the Purchase Price in cash, the Holder may
make such payment, by way of cashless exercise, as follows:
(c) by delivery of shares of Common Stock with an aggregate Current
Market Price on the date of exercise equal to the Purchase Price, subject,
however, to the provisions of Section 16(b) of the Exchange Act; or
(d) through the written election of the Holder to have withheld by
the Company from the shares of Common Stock otherwise deliverable upon exercise,
Common Stock having an aggregate Current Market Price on the date of exercise
equal to the Purchase Price.
SECTION 3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which the Holder of this Warrant would otherwise be entitled
to purchase upon exercise, the Company shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Fair Value per
share of Common Stock on the date of exercise.
SECTION 4. Ownership of this Warrant.
(a) The Company shall deem and treat the Holder as the holder and
owner of this Warrant (notwithstanding any notations of ownership or writing
hereon made by anyone other than the Company) for all purposes and shall not be
required to give effect to any notice to the contrary, until presentation of
this Warrant for registration of transfer as provided in this Section 4.
(b) Subject to Section 5, this Warrant is exchangeable, upon the
surrender hereof by the Holder to the Company at its office referred to in
Section 9, for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares of Common Stock purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of shares of Common Stock as shall be designated by the Holder at the
time of such surrender. Subject to compliance with applicable securities laws,
this Warrant and all rights hereunder are transferable in whole or in part upon
the books of the Company by the Holder hereof in person or by a duly authorized
attorney, and a new Warrant shall be executed and delivered by the Company of
the like tenor and date as this Warrant but registered in the name of the
transferee, upon surrender of this Warrant duly endorsed, at said office or
agency of the Company. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of an agreement of
unsecured indemnity and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor and
date, in lieu of this Warrant. This Warrant shall be promptly cancelled by the
Company upon the surrender hereof in connection with any exchange, transfer or
replacement. The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 4.
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SECTION 5. Restrictions. This Warrant and the Warrant Shares may not be
sold, transferred, or otherwise disposed of without registration under the
Securities Act or pursuant to an exemption therefrom.
SECTION 6. Anti-Dilution Provisions; Adjustments.
6.1 Adjustment of Number of Shares -- Issuance of Additional Shares
of Common Stock. Upon each adjustment of the Purchase Price as a result of the
calculations made in Section 6.2, this Warrant shall thereafter evidence the
right to receive, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth of a share) obtained by
dividing (i) the product of the aggregate number of shares covered by this
Warrant immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
6.2 Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 6.4 or Section 6.5 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 6.9), without consideration or for a consideration per share less
than the Current Market Price, immediately prior to such issue or sale, then,
and in each such case, subject to Section 6.7, the Purchase Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent), determined by multiplying such Purchase Price by a
fraction
(a) the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale and
(ii) the number of shares of Common Stock which the gross consideration received
by the Company for the total number of such Additional Shares of Common Stock so
issued or sold would purchase at the Current Market Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale, provided that, for the
purposes of this Section 6.2, (x) immediately after any Additional Shares of
Common Stock are deemed to have been issued pursuant to Section 6.4 or Section
6.5, such Additional Shares of Common Stock shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
6.3 Dividends and Distributions. In case the Company at any time or
from time to time after the date hereof shall declare, order, pay or make a
dividend or other distribution on the Common Stock of (i) cash, (ii) any
evidences of its indebtedness, any shares of its stock or any other securities
or property of any nature whatsoever (including, without limitation, any
distribution of other or additional stock or Convertible Securities, Options or
other securities or property, by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) or (iii) any warrants or
other rights to subscribe for or purchase any evidences of its indebtedness, any
shares of its stock or any other securities or property of any nature
whatsoever, then
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(a) the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such adjustment by a fraction (1) the numerator of which
shall be the Current Market Price at the date of taking such record and (2) the
denominator of which shall be such Current Market Price minus the amount
allocable to one share of Common Stock of (x) any such cash so distributable and
(y) the Fair Value of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and
(b) the Purchase Price shall be adjusted to equal (1) the Purchase
Price immediately prior to the adjustment multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (2) the number of shares for which this Warrant is
exercisable immediately after such adjustment.
A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value) into
shares of Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 6.3 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 6.5.
6.4 Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date (or, if
the Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading), provided that such Additional Shares of
Common Stock shall not be deemed to have been issued unless (i) the
consideration per share (determined pursuant to Section 6.6) of such shares
would be less than their Fair Value on the date of and immediately prior to such
issue, sale, grant or assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an ex-dividend basis, on
the date prior to the commencement of ex-dividend trading), as the case may be,
and (ii) such Additional Shares of Common Stock are not purchasable pursuant to
Rights referred to in Section 6.9, and provided, further, that
(a) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue or sale
of Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
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(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Company, or for any decrease or increase in the
number of Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the Purchase
Price computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement of
ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or the
expiration of any rights of conversion or exchange under any such Convertible
Securities which (or purchase by the Company and cancellation or retirement of
any such Convertible Securities the rights of conversion or exchange under
which) shall not have been exercised, the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading, as the
case may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration (or such cancellation or retirement, as the
case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration actually
received by the Company upon such exercise, or for the issue or sale
of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon
the exercise of such Options were issued at the time of the issue
or sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to Section
6.6) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
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(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Purchase Price by an amount in excess of the
amount of the adjustment thereof originally made in respect of the issue, sale,
grant or assumption of such Options or Convertible Securities; and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption thereof, no
adjustment of the Purchase Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the manner
provided in subdivision (c) above.
6.5 Treatment of Stock Dividends, Stock Splits, etc. If at any time
the Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, by a reverse stock split or otherwise,
then (i) the number of shares of Common Stock for which this Warrant
is exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Purchase Price shall be
adjusted to equal (A) the Purchase Price multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares for which this Warrant is
exercisable immediately after such adjustment.
6.6 Computation of Consideration. For the purposes of this Section
6,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the
amount of cash received by the Company, without deducting any
expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the Fair Value thereof at the time
of such issue or sale, and
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(iii) in the case where Additional Shares of Common Stock are
issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be the
portion of such consideration so received, computed as provided in
clauses (i) and (ii) above, allocable to such Additional Shares of
Common Stock, such allocation to be determined in the same manner
that the Fair Value of property not consisting of cash or
securities is to be determined as provided in the definition of
"Fair Value" herein;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 6.4, relating to Options and Convertible Securities, shall
be deemed to have been issued for a consideration per share determined by
dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption
of the Options or Convertible Securities in question, plus the
minimum aggregate amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
consideration to protect against dilution) payable to the Company
upon the exercise in full of such Options or the conversion or
exchange of such Convertible Securities or, in the case of Options
for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such consideration
as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number to protect against dilution) issuable upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 6.5, relating to stock dividends, stock splits, etc., shall
be deemed to have been issued for no consideration.
6.7 De Minimis Adjustments. If the amount of any adjustment of the
Purchase Price per share required pursuant to this Section 6 would be less than
$.01, such amount shall be carried forward and the adjustment with respect
thereto made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate a change in the Purchase Price of at least $.01 per share. All
calculations under this Warrant shall be made to the nearest .001 of a cent or
to the nearest one-hundredth of a share, as the case may be.
6.8 Abandoned Dividend or Distribution. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
11
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price and number of
shares of Common Stock purchasable upon Warrant exercise by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
6.9 Shareholder Rights Plan. Notwithstanding the foregoing, in the
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 6.2 or Section 6.3 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
SECTION 7. Consolidation, Merger, Etc.
7.1 Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof shall (a)
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) permit any
other Person to consolidate with or merge into the Company and the Company shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, the Common Stock or Other Securities shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or assets
to any other Person in one or more related transactions, or (d) effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 6.2 or Section 6.3), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Purchase Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the amount of securities, cash or other property to which such
Holder would actually have been entitled as a shareholder upon such consummation
if such Holder had exercised this Warrant immediately prior thereto, subject to
adjustments (subsequent to such consummation) as nearly equivalent as possible
to the adjustments provided for in Section 6.
12
7.2 Assumption of Obligations. Notwithstanding anything contained in
this Warrant, the Company shall not effect any of the transactions described in
clauses (a) through (d) of Section 7.1 unless, prior to the consummation
thereof, each Person (other than the Company) which may be required to deliver
any stock, securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant,
including Exhibit A hereto), (b) the obligation to deliver to the Holder such
shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this Section 7, the Holder may be entitled to receive.
SECTION 8. Covenants of the Company. The Company covenants and agrees that
it shall reserve and set apart and have at all times, free from preemptive
rights, the number of authorized but unissued shares of Common Stock deliverable
upon the exercise in full of this Warrant, and it shall have at all times any
other rights or privileges provided for therein sufficient to enable it at any
time to fulfill all of its obligations hereunder. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
the exercise in full of this Warrant, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose, including, without limitation, taking
appropriate board action, recommending such an increase to the holders of Common
Stock, holding shareholders meetings, soliciting votes and proxies in favor of
such increase to obtain the requisite shareholder approval and upon such
approval, the Company shall reserve and keep available such additional shares
solely for the purpose of permitting the exercise of this Warrant. The Company
covenants and agrees that all shares of Common Stock which shall be so issuable
will, upon issuance, be duly and validly authorized and issued, fully paid and
nonassessable, free and clear of any liens, claims and restrictions (other than
as provided herein).
SECTION 9. Notification by the Company.
9.1 Notice of Adjustments. Whenever the number of shares of Common
Stock or the class or type of stock or other property for which this Warrant is
exercisable, or whenever the price at which a share of such Common Stock may be
purchased upon exercise of this Warrant, shall be adjusted pursuant to Section
6, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company determined the Fair Value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 6.2), specifying the number of shares of
Common Stock for which this Warrant is exercisable and describing the number and
kind of any other shares of stock or other property for which this Warrant is
exercisable, if any, and any change in the purchase price or prices thereof,
after giving effect to such adjustment or change. The Company shall promptly
cause a signed copy of such certificate to be delivered to the Holder in
accordance with Section 10. The Company shall keep at its office or agency
designated pursuant to Section 10 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by the Holder or any prospective purchaser of a Warrant designated by the
Holder.
13
9.2 Notice of Certain Corporate Action. The Holder shall be entitled
to the same rights to receive notice of corporate action as any holder of Common
Stock.
SECTION 10. Notices. Any notice or other document required or permitted to
be given or delivered to the Holder shall be hand delivered or delivered by
nationally recognized overnight courier at, or sent by certified or registered
mail postage prepaid and return receipt requested to the Holder at the last
address shown on the books of the Company. Any notice or other document required
or permitted to be given or delivered to the Company shall be delivered at, or
sent by certified or registered mail to, the principal office of the Company, at
333 East 66th Street, 9th Floor, New York, NY 10021, Attn: Executive Chairman,
or such other address as shall have been furnished to the Holder by the Company.
All such communications shall be deemed to have been given or made when so
delivered by hand, or one business day after being sent by overnight delivery or
five business days after being so mailed.
SECTION 11. No Rights as Shareholders; Limitation of Liability. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company except as expressly set forth herein. No provision hereof, in the
absence of affirmative action by the Holder to exercise this Warrant or purchase
shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability upon the Holder for
the Purchase Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 12. Law Governing. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without giving effect to the conflict of law provisions thereof.
SECTION 13. Miscellaneous. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The headings in this Warrant are for purposes
of reference only and shall not affect the meaning or construction of any of the
provisions hereof.
SECTION 14. Registration Rights. This Warrant is subject to the
Registration Rights provisions contained in Exhibit A hereto. By accepting this
Warrant or receiving any benefits hereunder, the Holder, and each successor
Holder, hereby agrees to the provisions set forth in Exhibit A hereto.
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officer as of the _____ day of ________, 2005.
GALES INDUSTRIES INCORPORATED
By:
-------------------------
Name:
Title:
15
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_________________ of the Company's Warrant Shares provided for therein and
requests that certificates for such Warrant Shares be issued in the name of*:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print name, address, and social security number or employer
identification number)
and, if said number of Warrant Shares shall not be all the shares of Common
Stock purchasable thereunder, that a new Warrant certificate for the balance
remaining of the shares of Common Stock purchasable under the within Warrant be
registered in the name of the undersigned Warrantholder or his assignee as below
indicated and delivered to the address stated below.
In order to induce the Company to give instructions to its transfer agent
to issue the shares of Common Stock being purchased upon exercise of the
Warrant, the undersigned hereby represents and warrants that undersigned is an
"accredited investor" as that term is defined in Regulation D under the
Securities Act of 1933, as amended.
Dated: ________________, 20___
Name of Warrant holder or Assignee:
___________________________________
(please print)
Address:
___________________________________
___________________________________
___________________________________
Signature: _______________________________________
Signature Guaranteed: NOTE: THE ABOVE SIGNATURE MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WITHIN WARRANT IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER, UNLESS THE WITHIN WARRANT HAS BEEN
ASSIGNED.
* If other than the Holder specified on the within Warrant delivered with this
Notice of Exercise, the transfer is subject to compliance with applicable
securities laws and the payment by the Holder of any applicable transfer or
similar taxes.
16
IF WARRANT SHARES ARE TO BE ISSUED IN ANY NAME OTHER THAN
THAT OF THE REGISTERED HOLDER OF THE WITHIN WARRANT, THE
REGISTERED HOLDER'S SIGNATURE SHALL BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR BY A MEMBER FIRM OF
THE NEW YORK STOCK EXCHANGE.
17
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(name and address of assignee must be printed or typewritten)
the within Warrant, hereby irrevocably constituting and appointing attorney to
transfer said Warrant on the books of the Company with full power of
substitution in the premises.
Dated: __________________________
Name of Warrantholder or Assignee:
_________________________________
(please print)
Address:
_________________________________
_________________________________
_________________________________
Signature: ______________________________
SIGNATURE OF REGISTERED HOLDER
- ----------
Signature Guaranteed: NOTE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS IT APPEARS UPON THE FACE OF THE WITHIN
WARRANT IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER. SUCH SIGNATURE SHALL
BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR BY
A MEMBER FIRM OF THE NEW YORK STOCK EXCHANGE.
18
Exhibit A to Warrant
REGISTRATION RIGHTS
The following provisions are a part of the Warrant (the "Warrant")
to purchase shares of Common Stock that was initially issued to
_____________________ in __________ 2005, and any warrant, in substantially the
same form as the Warrant, that is issued to any Person who or which becomes a
Holder as permitted by the Warrant. References to the "Warrant" include each
such subsequently issued Warrant. As used below, the "Issuer" means Gales
Industries Incorporated or the public company with which it enters into a
"reverse merger" transaction, "Registered Holder" means the Holder and
"Registered Holders" refers to the holders of the Warrants and the Notes (as
defined below). This Warrant is one of a series of Warrants (together, the
"Warrants") issued in connection with the Company's sale of its 12.0%
Convertible Bridge Notes (the "Notes"), limited in aggregate principal amount to
$150,000. All capitalized terms below shall have the same meanings as in the
Warrant, unless otherwise defined. Paragraph references below are to the
paragraphs of this Exhibit A.
Registration Rights.
(a) Registered Holders shall have certain registration rights
as follows:
A. If, after the date of the this Warrant, Issuer shall
file with the Securities and Exchange Commission ("SEC") a registration
statement ("Registration Statement") under the Securities Act, registering any
shares of Common Stock owned by any person or entity, Issuer shall include in
such Registration Statement all of the shares into which the Notes and the
Warrants are convertible, subject to the remaining terms of this Section 8(a).
After such initial Registration Statement, if the Issuer shall file a second
Registration Statement with the SEC, the Issuer the shall give written notice to
each Registered Holder thereof prior to such filing.
B. Within fifteen (15) days after such notice from
Issuer, each Registered Holder shall give written notice to Issuer whether or
not the Registered Holder desires to have included in the Registration Statement
all of the shares into which the Notes and the Warrants are convertible (the
"Registrable Securities"). If a Registered Holder fails to give such notice
within such period, such Registered Holder shall not have the right to have such
Registered Holder's Registrable Securities registered pursuant to such
registration statement. If a Registered Holder gives such notice, then Issuer
shall include such Registered Holder's Registrable Securities in the
registration statement, at Issuer's sole cost and expense, subject to the
remaining terms of this Section 8(a).
C. If the registration statement relates to an
underwritten offering, and the underwriter shall determine in writing that the
total number of shares of Common Stock to be included in the offering, including
the Registrable Securities, shall exceed the amount which the underwriter deems
to be appropriate for the offering, the number of shares of the Registrable
Securities shall be reduced in the same proportion as the remainder of the
shares in the offering and each Registered Holder's Registrable Securities
included in such registration statement will be reduced proportionately. For
this purpose, if other securities in the registration statement are derivative
securities, their underlying shares shall be included in the computation. The
Registered Holders shall enter into such agreements as may be reasonably
required by the underwriters and the Registered Holders shall pay to the
underwriters commissions relating to the sale of their respective Registrable
Securities.
D. Other than their right to have their Registrable
Securities included in the Issuer's initial Registration Statement after the
date hereof, the Registered Holders shall have one other opportunity to have the
Registrable Securities registered under this Section 8(a).
E. The Registered Holder shall furnish in writing to
Issuer such information as Issuer shall reasonably require in connection with a
registration statement.
(b) In the event Issuer effects any registration under the
1933 Act of any Registrable Securities pursuant to Section 8(a), the Issuer
shall indemnify, to the extent permitted by law, and hold harmless any
Registered Holder whose Registrable Securities are included in such Registration
Statement (each, a "Seller"), any underwriter, any officer, director, employee
or agent of any Seller or underwriter, and each other person, if any, who
controls any Seller or underwriter within the meaning of Section 15 of the 1933
Act, against any losses, claims, damages or liabilities, judgment, fines,
penalties, costs and expenses, joint or several, or actions in respect thereof
(collectively, the "Claims"), to which each such indemnified party becomes
subject, under the 1933 Act or otherwise, insofar as such Claims arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement or prospectus or any amendment or
supplement thereto or any document filed under a state securities or blue sky
law (collectively, the "Registration Documents") or insofar as such Claims arise
out of or are based upon the omission or alleged omission to state in any
Registration Document a material fact required to be stated therein or necessary
to make the statements made therein not misleading, and will reimburse any such
indemnified party for any legal or other expenses reasonably incurred by such
indemnified party in investigating or defending any such Claim; provided that
the Issuer shall not be liable in any such case to the extent such Claim is
based upon an untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact made in any Registration
Document in reliance upon and in conformity with written information furnished
to Issuer by or on behalf of any indemnified party specifically for use in the
preparation of such Registration Document.
(c) In connection with any registration statement in which any
Seller is participating, each Seller, severally and not jointly, shall
indemnify, to the extent permitted by law, and hold harmless Issuer, each of its
directors, each of its officers who have signed the registration statement, each
other person, if any, who controls Issuer within the meaning of Section 15 of
the 1933 Act, each other Seller and each underwriter, any officer, director,
employee or agent of any such other Seller or underwriter and each other person,
if any, who controls such other Seller or underwriter within the meaning of
Section 15 of the 1933 Act against any Claims to which each such indemnified
party may become subject under the 1933 Act or otherwise, insofar as such Claims
(or actions in respect thereof) are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Document, or
insofar as any Claims are based upon the omission or alleged omission to state
in any Registration Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading, and will reimburse
any such indemnified party for any legal or other expenses reasonably incurred
by such indemnified party in investigating or defending any such claim;
provided, however, that such indemnification or reimbursement shall be payable
only if, and to the extent that, any such Claim arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any Registration Document in reliance upon and in conformity with
written information furnished to Issuer by the Seller specifically for use in
the preparation thereof.
(d) Any person entitled to indemnification under Sections 8(b)
or 8(c) above shall notify promptly the indemnifying party in writing of the
commencement of any Claim if a claim for indemnification in respect thereof is
to be made against an indemnifying party under this Section 8(d), but the
omission of such notice shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under
Section 8(b) or 8(c) above, except to the extent that such failure shall
materially adversely affect any indemnifying party or its rights hereunder. In
case any action is brought against the indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it chooses, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party;
and, after notice from the indemnifying party to the indemnified party that it
so chooses, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that (i) if the indemnifying party fails to take reasonable steps necessary to
defend diligently the Claim within twenty (20) days after receiving notice from
the indemnified party that the indemnified party believes it has failed to do
so; (ii) if the indemnified party who is a defendant in any action or proceeding
which is also brought against the indemnifying party reasonably shall have
concluded that there are legal defenses available to the indemnified party which
are not available to the indemnifying party; or (iii) if representation of both
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, the indemnified party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of counsel for all indemnified parties in each jurisdiction, except to the
extent any indemnified party or parties reasonably shall have concluded that
there are legal defenses available to such party or parties which are not
available to the other indemnified parties or to the extent representation of
all indemnified parties by the same counsel is otherwise inappropriate under
applicable standards of professional conduct) and the indemnifying party shall
be liable for any reasonable expenses therefor; provided, that no indemnifying
party shall be subject to any liability for any settlement of a Claim made
without its consent (which may not be unreasonably withheld, delayed or
conditioned). If the indemnifying party assumes the defense of any Claim
hereunder, such indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement attributes liability to
the indemnified party (which consent may not be unreasonably withheld, delayed
or conditioned).
(e) If for any reason the indemnity provided in Section 8(b)
or 8(c) above is unavailable, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of any Claim in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other from
the transactions contemplated by this Security. If, however, the allocation
provided in the immediately preceding sentence is not permitted by applicable
law, or if the indemnified party failed to give the notice required by Section
8(d) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates 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. The amount paid or
payable in respect of any Claim shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such Claim. Notwithstanding the foregoing, no
underwriter or controlling person thereof, if any, shall be required to
contribute, in respect of such underwriter's participation as an underwriter in
the offering, any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The obligation of any underwriters to
contribute pursuant to this subsection (e) shall be several in proportion to
their respective underwriting commitments and not joint.
(f) The provisions of Sections 8(b) through 8(e) hereof shall
be in addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
(g) If and whenever Issuer is required by the provisions of
this Section 8 to register any Registrable Securities under the 1933 Act, Issuer
shall, as expeditiously as possible under the circumstances:
A. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective as soon as possible and
remain effective.
B. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement current and to
comply with the provisions of the 1933 Act, and any regulations promulgated
thereunder, with respect to the sale or disposition of all Registrable
Securities covered by the registration statement required to effect the
distribution of the securities, but in no event shall Issuer be required to do
so for a period of more than three (3) years following the effective date of the
registration statement.
C. Furnish to the Sellers participating in the offering,
copies (in reasonable quantities) of summary, preliminary, final, amended or
supplemented prospectuses, in conformity with the requirements of the 1933 Act
and any regulations promulgated thereunder, and other documents as reasonably
may be required in order to facilitate the disposition of the securities, but
only while Issuer is required under the provisions hereof to keep the
registration statement current.
D. Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions of the United States as the
Sellers participating in the offering shall reasonably request, and do any and
all other acts and things which may be reasonably necessary to enable each
participating Seller to consummate the disposition of the Registrable Securities
in such jurisdictions.
E. Notify each Seller selling Registrable Securities, at
any time when a prospectus relating to any such Registrable Securities covered
by such registration statement is required to be delivered under the 1933 Act,
of Issuer's becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and promptly prepare and furnish to each such Seller selling
Registrable Securities a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
F. As soon as practicable after the effective date of
the registration statement, and in any event within eighteen (18) months
thereafter, make generally available to Sellers participating in the offering an
earnings statement (which need not be audited) covering a period of at least
twelve (12) consecutive months beginning after the effective date of the
registration statement which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act, including, at Issuer's option, Rule 158
thereunder. To the extent that Issuer files such information with the SEC in
satisfaction of the foregoing, Issuer need not deliver the above referenced
earnings statement to Seller.
G. Upon request, deliver promptly to counsel of each
Seller participating in the offering copies of all correspondence between the
SEC and Issuer, its counsel or auditors and all memoranda relating to
discussions with the SEC or its staff with respect to the registration statement
and permit each such Seller to do such investigation at such Seller's sole cost
and expense, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary. Each Seller agrees that it will use its best efforts not to interfere
unreasonably with Issuer's business when conducting any such investigation and
each Seller shall keep any such information received pursuant to this Subsection
G confidential.
H. Provide a transfer agent and registrar located in the
United States for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement.
I. List the Registrable Securities covered by such
registration statement on such exchanges or the NASDAQ as the Common Stock may
then be listed.
J. Pay all Registration Expenses (as hereinafter
defined) incurred in connection with a registration of Registrable Securities,
whether or not such registration statement shall become effective; provided that
each Seller shall pay all underwriting discounts, commissions and transfer
taxes, if any, relating to the sale or disposition of such Seller's Registrable
Securities pursuant to a registration statement. As used herein, "Registration
Expenses" means any and all reasonable and customary expenses incident to
performance of or compliance with the registration rights set forth herein,
including, without limitation, (i) all SEC, stock exchange and National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
fees and expenses of complying with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities but no other expenses
of the underwriters or their counsel), (iii) all printing, messenger and
delivery expenses, and (iv) the fees and expenses of counsel for Issuer and
Issuer's independent public accountants.
(h) Following the effectiveness of the Registration Statement,
the Issuer may, at any time, suspend the effectiveness of the Registration
Statement for up to thirty (30) days on each of two occasions during any twelve
(12) month period, as appropriate (the "Maximum Suspension Period"), by giving
notice ("Suspension Notice") to the Register Holders to the effect that the
Issuer has determined that it may be required to disclose a material corporate
development in the prospectus which forms a part of the Registration Statement.
In the event that the Issuer issues a Suspension Notice, the Issuer shall, prior
to the expiration of the Maximum Suspension Period, file such amendments to the
Registration Statement as may be necessary to allow for the Registrable
Securities to be sold in compliance with applicable law, advise the holders of
the Registrable Securities in writing that the use of the applicable prospectus
may be resumed, deliver to such holders copies of any additional or supplemental
or amended prospectus, if applicable, and deliver to such holders copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.