WARRANT AGREEMENT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITY(IES).
IMMUNOMEDICS, INC.
WARRANT TO PURCHASE 75,000 SHARES OF COMMON STOCK
IMMUNOMEDICS, INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, Sutro & Co. Incorporated ("Sutro"), a
_________ corporation, or its registered transferees, successors or assigns
(each, a "holder"), is the registered holder of warrants (the "Warrants") to
subscribe for and purchase SEVENTY-FIVE THOUSAND (75,000) shares of the fully
paid and no assessable Common Stock (as adjusted pursuant to Section 4 hereof,
the "Warrant Shares") of the Company, at a purchase price per share equal to SIX
DOLLARS AND FIFTY CENTS ($6.50) (such price, as adjusted pursuant to Section 4
hereof, the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, (a) the term "Common Stock"
shall mean the Company's presently authorized Common Stock, par value $.01 per
share, and any stock into or for which such Common Stock may hereafter be
converted or exchanged, and (b) the term "Date of Grant" shall mean December 16,
1999. The term "Warrant" as used herein shall be deemed to include any warrant
issued upon transfer or partial exercise of this Warrant, unless the context
clearly requires otherwise. This Warrant is being issued pursuant to that
certain Letter Engagement Agreement (the "Agreement") of even date herewith
between the Company and Sutro.
1. Term.
The purchase right represented by this Warrant is exercisable, in whole
or in part, at any time and from time to time from the Date of Grant through and
including the close of business on December 16, 2004 (the "Expiration Date");
provided, however, that in the event that any portion of this Warrant is
unexercised as of the Expiration Date, the terms of Section 2(b) below shall
apply.
2. Exercise.
a. Method of Exercise; Payment; Issuance of New Warrant.
Subject to Section 1 hereof, the purchase right represented by
this Warrant may be exercised by the holder hereof, in whole or in part and from
time to time, by the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company, and, except as otherwise provided for herein, by the payment to the
Company of an amount equal to the then applicable Warrant Price multiplied by
the number of Warrant Shares then being purchased. The person or persons in
whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised if exercised prior to the close of
business on such date; otherwise, the date of record shall be the next business
day. In the event of any exercise of the rights represented by this Warrant,
certificates for the shares of Common Stock so purchased shall be delivered to
the holder hereof as soon as possible after such exercise and, unless this
Warrant has been fully exercised (including without limitation, exercise
pursuant to Section 2(b) below), a new Warrant representing the portion of the
Warrant Shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof as soon as possible.
b. Automatic Exercise. In the event that any portion of this
Warrant remains unexercised as of the Expiration Date and the fair market value
(determined in accordance with Section 4(i) below) of one share of Common Stock
as of the Expiration Date is greater than the applicable Warrant Price as of the
Expiration Date, then this Warrant shall be deemed to have been exercised
automatically immediately prior to the close of business on the Expiration Date
(or, in the event that the Expiration Date is not a business day, the
immediately preceding business day) (the "Automatic Exercise Date") in
accordance with Section 2(c) below, and the person entitled to receive the
shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such Warrant Shares as of the close of
business on such Automatic Exercise Date. This Warrant shall be deemed to be
surrendered to the Company on the Automatic Exercise Date by virtue of this
Section 2(b) and without any action by the holder of this Warrant or any other
person, upon the payment to the Company of the then applicable Warrant Price
multiplied by the number of Warrant Shares then being purchased shall be deemed
to be made pursuant to the terms of Section 2(c) below (without payment by the
holder of any exercise price or any cash or other consideration). As promptly as
practicable on or after the Automatic Exercise Date but in no event prior to the
date on which this Warrant is surrendered to the Company at the principal office
of the Company, the Company at its expense shall issue and deliver to the person
or persons entitled to receive the same a certificate or certificates for the
number of Warrant Shares issuable upon such exercise, in accordance with Section
2(c).
-2-
c. Cashless Right to Convert Warrant into Common Stock; Net
Issuance.
(1) Right to Convert.
In addition to and without limiting the rights of the holder
hereof under the terms of this Warrant, the holder shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 2(c) at any time or from time to
time during the term of this Warrant. Upon exercise of the Conversion Right with
respect to all or a specified portion of shares subject to this Warrant (the
"Converted Warrant Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other consideration)
that number of shares of fully paid and nonassessable Common Stock equal to the
quotient obtained by dividing (i) the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in Section 2(c)(2) hereof),
which value shall be equal to (A) the aggregate fair market value of the
Converted Warrant Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the Conversion Date less (B) the aggregate Warrant
Price of the Converted Warrant Shares immediately prior to the exercise of the
Conversion Right by (ii) the fair market value of one (1) share of Common Stock
on the Conversion Date. Expressed as a formula, such conversion shall be
computed as follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock that may be issued to
the holder
Y = the fair market value ("FMV") of one (1) share of Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of Section 9 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(2) Method of Exercise.
The Conversion Right may be exercised by the holder by the surrender of
this Warrant at the principal office of the Company together with a written
statement specifying that the holder thereby intends to exercise the Conversion
Right and indicating the number of shares subject to this Warrant which are
being surrendered (referred to in Section 2(c)(1) hereof as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
-3-
Date and shall be delivered to the holder as soon as possible following the
Conversion Date.
(3) Determination of Fair Market Value.
d. For purposes of Section 2(c), "fair market value" of
a share of Common Stock shall have the meaning set forth in Section 4(i) below.
3. Stock Fully Paid; Reservation of Shares.
All Warrant Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from all taxes,
liens, charges, and statutory pre-emptive rights with respect to the issue
thereof. The Company shall pay all transfer taxes, if any, attributable to the
issuance of the Warrant Shares upon the exercise of this Warrant, provided that
such Warrant Shares are issued in the name of the holder of this Warrant. During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized, and reserved for the purpose of
the issue upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares.
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:
a. Intentionally omitted.
b. Merger, Sale, Reclassification.
In case of any (i) consolidation or merger (including a merger
in which the Company is the surviving entity), (ii) sale or other disposition of
all or substantially all of the Company's assets or distribution of property to
stockholders (other than distributions payable out of earnings or retained
earnings), or (iii) reclassification, change or conversion of securities of the
class issuable upon exercise of this Warrant (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), then the Company shall take all
necessary actions (including but not limited to executing and delivering to the
holder of this Warrant an additional Warrant or other instrument, in form and
substance acceptable to the holder of this Warrant such acceptance not to be
unreasonably withheld) to ensure that the holder of this Warrant shall
thereafter have the right to receive, at a total purchase price not to exceed
that payable upon the exercise of the unexercised portion of this Warrant, and
in lieu of the shares of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such consolidation, merger, sale or other disposition,
-4-
reclassification, change or conversion by a holder of the number of shares of
Common Stock then purchasable under this Warrant. Such new Warrant shall provide
for adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this Section 4(b)
shall similarly apply to successive reclassifications, changes and conversions.
c. Subdivision or Combination of Shares.
If the Company at any time while this Warrant remains
outstanding and unexpired shall subdivide or combine its outstanding shares of
Common Stock, the Warrant Price shall be proportionately decreased in the case
of a subdivision or increased in the case of a combination, effective at the
close of business on the date the subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions.
If the Company at any time while this Warrant is outstanding
and unexpired shall (i) pay a dividend with respect to Common Stock payable in
Common Stock, or (ii) make any other distribution with respect to Common Stock
(except any distribution specifically provided for in Section 4(b) or Section
4(c) hereof) of Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of Fully Diluted Shares
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
outstanding immediately after such dividend or distribution.
e. Rights Offerings.
In case the Company shall, at any time after the Date of
Grant, issue rights, options or warrants generally to the holders of equity
securities of the Company, entitling them to subscribe for or purchase shares of
Common Stock (or securities convertible or exchangeable into Common Stock) at a
price per share of Common Stock (or having a conversion or exchange price per
share of Common Stock if a security convertible or exchangeable into Common
Stock) less than the fair market value per share of Common Stock on the record
date for such issuance (or the date of issuance, if there is no record date),
the Warrant Price to be in effect on and after such record date (or issuance
date, as the case may be) shall be adjusted so that it shall equal the price
determined by multiplying the Warrant Price in effect immediately prior to such
record date (or issuance date, as the case may be) by a fraction (i) the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date (or issuance date, as the case may be) plus the number of
shares of Common Stock which the aggregate offering price of the total number of
shares of such Common Stock so to be offered (or the aggregate initial exchange
or conversion price of the exchangeable or convertible securities so to be
offered) would purchase at such fair market value on such record date (or
issuance date, as the case may be) and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding on such record date (or
issuance date, as the case may be) plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which the
convertible securities to be offered are initially exchangeable or convertible).
In case such subscription price may be paid in part or in whole in a form other
-5-
than cash, the fair market value of such consideration shall be determined by
the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, provided, that in the event the Board of Directors is unable to make
such a determination, then the fair market value of such consideration shall be
determined in the same manner as a Valuation under Section 4(i) below. Such
adjustment shall be made successively whenever such an issuance occurs; and in
the event that such rights, options, warrants, or convertible or exchangeable
securities are not so issued or expire or cease to be convertible or
exchangeable before they are exercised, converted, or exchanged (as the case may
be), then the Warrant Price shall again be adjusted to be the Warrant Price that
would then be in effect if such issuance had not occurred, but such subsequent
adjustment shall not affect the number of Warrant Shares issued upon any
exercise of this Warrant prior to the date such subsequent adjustment is made.
f. Other Special Distributions.
In case the Company shall fix a record date for the making of
a distribution (other than dividends, distributions or issuances referred to in
Section 4(c), Section 4(d) or Section 4(e) above, and other than cash dividends)
to all holders of shares of Common Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
surviving corporation) of evidences of indebtedness, assets or subscription
rights, options, warrants, or exchangeable or convertible securities containing
the right to subscribe for or purchase shares of any class of equity securities
of the Company, the Warrant Price to be in effect on and after such record date
shall be adjusted by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction (i) the numerator of which shall be the fair
market value per share of Common Stock on such record date (determined in
accordance with Section 4(i) below), less the fair market value (as determined
by the Board of Directors of the Company in good faith as set forth in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights, options, warrants, or exchangeable
or convertible securities applicable to one (1) share of the Common Stock
outstanding as of such record date, provided, that in the event the Board of
Directors is unable to make such a determination, then the fair market value of
such consideration shall be determined in the same manner as a Valuation under
Section 4(i) below, and (ii) the denominator of which shall be the fair market
value per share of Common Stock as determined in the manner set forth under
Section 4(i) below. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Warrant Price shall again be adjusted to be the Warrant Price which would
then be in effect if such record date had not been fixed, but such subsequent
adjustment shall not affect the number of Warrant Shares issued upon any
exercise of this Warrant prior to the date such subsequent adjustment was made.
-6-
g. Other Issuances of Securities.
Shares outstanding immediately after such sale and issuance.
Such adjustment shall be made successively whenever such an issuance is made.
h. Adjustment of Number of Shares.
Upon each adjustment in the Warrant Price, the number of
Warrant Shares purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Warrant Shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
i. Determination of Fair Market Value.
For purposes of those provisions of this Warrant requiring a
determination in accordance with this Section 4(i), "fair market value" as of a
particular date (the "Determination Date") shall mean (i) for any security if
such security is traded on a national securities exchange (an "Exchange"), the
weighted average (based on daily trading volume) of the mid-point between the
daily high and low trading prices of the security on each of the last five (5)
trading days prior to the Determination Date reported on such Exchange, (ii) for
any security that is not traded on an Exchange but which is quoted on the Nasdaq
Stock Market ("NASDAQ"), the weighted average (based on daily trading volume) of
the mid-point between the daily high and low trading prices reported on NASDAQ
on each of the last five (5) trading days (or if the relevant price or quotation
did not exist on any of such days, the relevant price or quotation on the next
preceding business day on which there was such a price or quotation, for a total
of five trading days) prior to the Determination Date, or (iii) for any security
or any other asset, if no price can be determined on the basis of the above
methods of valuation, then the judgment of valuation shall be determined in good
faith by the Board of Directors of the Company, which determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary. If the Board of Directors of the Company is
unable to determine any Valuation (as defined below), the Company shall select
an investment banking firm of national reputation which has not had a material
relationship with the Company or any officer of the Company within the preceding
two (2) years, which shall determine such Valuation. Such investment banking
firm's determination of such Valuation shall be final, binding and conclusive on
the Company and the holders of all of the Warrants issued hereunder and then
outstanding, to the extent of the issuance or distribution to which such
Valuation applies. If the Board of Directors of the Company was unable to
determine such Valuation, all costs and fees of such investment banking firm
shall be borne by the Company. For purposes of this Section 4(i), the term
"Valuation" shall mean the determination, to be made initially by the Board of
Directors of the Company, of the fair market value of any asset pursuant to
clause (iii) above in this paragraph.
-7-
5. Notice of Adjustments.
Whenever the Warrant Price or the number of Warrant Shares purchasable
hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make
a certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price and the
number of Warrant Shares purchasable hereunder after giving effect to such
adjustment, which shall be mailed (without regard to Section 11 hereof, by first
class mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares.
No fractional shares of Common Stock will be issued in connection with
any exercise hereunder, but in lieu of such fractional shares the Company shall
make a cash payment therefor based on the fair market value (as determined in
accordance with Section 4(i) above) of a share of Common Stock on the date of
exercise.
7. Compliance with Securities Act; Disposition of Warrant or Warrant
Shares.
a. Compliance with Securities Act.
The holder of this Warrant, by acceptance hereof, agrees that
this Warrant and the shares of Common Stock to be issued upon exercise hereof,
are being acquired for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Common Stock to be issued
upon exercise hereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise
of this Warrant, the holder hereof shall confirm in writing, by executing the
form attached as Schedule 1 to Exhibit A hereto, that the shares of Common Stock
so purchased are being acquired for investment and not with a view toward
distribution or resale. All shares of Common Stock issued upon exercise of this
Warrant (unless registered under the Act) shall be stamped or imprinted with a
legend in substantially the following form: "THE SECURITIES EVIDENCED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED, or (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES)"
In addition, in connection with the issuance of this Warrant,
the holder specifically represents to the Company by acceptance of this Warrant
as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for resale in connection with any "distribution" thereof for
purposes of the Act.
-8-
(2) The holder understands that this Warrant and the Warrant Shares have
not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption maybe
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Warrant and the Warrant
Shares, or for a period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and the Warrant Shares
must be held indefinitely unless subsequently registered under the Act and any
applicable state securities laws, or unless exemptions from registration are
otherwise available.
(4) The holder is aware of the provisions of Rule 144 and 144A, promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant and the Warrant Shares there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144 and
144A, and that, in such event, the holder may be precluded from selling this
Warrant and the Warrant Shares under Rule 144 and 144A even if the one (1)-year
minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
-9-
b. Disposition of Warrant or Warrant Shares. This Warrant and
the Warrant Shares may be detached and transferred, in whole or in part,
separately from the Agreement.
With respect to any offer, sale or other disposition of this
Warrant, or any Warrant Shares acquired pursuant to the exercise of this Warrant
prior to registration of such Warrant or Warrant Shares, the holder hereof and
each subsequent holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such Warrant
Shares and indicating whether or not under the Act certificates for this Warrant
or such Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
ensure compliance with applicable law. Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has been
made pursuant to this Section 7(b) that the opinion of counsel for the holder is
not reasonably satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made. The foregoing
notwithstanding, this Warrant or such Warrant Shares may, as to such federal
laws, be offered, sold or otherwise disposed of in accordance with Rule 144 and
144A under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 and 144A have been satisfied. Each
certificate representing this Warrant or the Warrant Shares thus transferred
(except a transfer pursuant to Rule 144) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent or, if acting as its
own transfer agent, the Company may stop transfer on its corporate books, in
connection with such restrictions.
8. Rights as Stockholders; Information.
No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the holder of this Warrant, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to stockholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise, until this Warrant shall have been exercised and the Warrant
Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein. The foregoing notwithstanding, the Company will transmit to the
holder of this Warrant such information, documents and reports as are generally
distributed to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the stockholders.
-10-
9. Registration Rights
9.1 Demand Registration Rights
a. The Company covenants and agrees that at any time after
receipt of a written request (a "Demand Registration Request") from holder(s) of
Warrants and/or Warrant Shares (collectively, the "Securityholders") holding at
least twenty-five percent (25%) of the Registrable Securities not already sold
pursuant to this Section 9 or Rule 144 under the Act, stating that such
Securityholders desire and intend to have the Company register all or a portion
of the Warrant Shares then outstanding or issuable pursuant to unexercised
Warrants (the "Registrable Securities") for sale, then the Company shall: (i)
promptly deliver written notice (the "Registration Notice") to all other
Securityholders of the Company's receipt of such registration request; (ii) file
with the SEC, within forty-five (45) days of delivery of the Registration
Notice, a registration statement on Form S-3, or any successor form of
registration to such form, or, if the Company is ineligible therefore, Form S-1,
or any successor form of registration to such form, for an offering to be made
covering all of the Registrable Securities; (iii) use its best efforts to cause
such registration statement to be declared effective within ninety (90) days of
delivery of the Registration Notice; and (iv) use its best efforts to cause such
registration statement to become effective under the Act and remain effective
for six (6) months or such shorter period as may be required if all such
Registrable Securities covered by such registration statement are sold prior to
the expiration of such six (6)-month period; provided, however, that the Company
shall be obligated to effect only one such registration pursuant to this Section
9.1. For purposes of this Section 9.1(a), a registration shall not be deemed to
have been effected unless a registration statement including at least
eighty-five percent (85%) of the Registrable Shares requested to be included
therein has been declared effective and, subject to Section 9.3(b) hereof,
remained effective for a period of six (6) months (or such shorter period as is
permitted in clause (iv) of the first sentence of this Section 9.1(a)).
b. The foregoing Section 9.1(a) notwithstanding, in the event
of an underwritten offering pursuant to this Section 9.1, if the managing
underwriter of such offering shall advise the Securityholders in writing that,
in its opinion, the distribution of a specified portion of the securities
requested to be included in the registration would materially adversely affect
the distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in the registration shall be reduced in the
following order: (i) first, securities proposed to be included by the Company
and securities that are not Registrable Securities shall be excluded as
determined by the Company and (ii) second, Registrable Securities will be
excluded pro rata among all of the Registrable Securities requested to be
included therein. For purposes of this Section 9.1, the Securityholders who have
requested registration of Common Stock to be acquired upon the exercise of
Warrants not theretofore exercised shall furnish the Company with an undertaking
that they or the underwriters or other persons to whom such Warrants will be
transferred have undertaken to exercise such Warrants and to sell, transfer or
otherwise dispose of the Shares received upon exercise of such Warrants in such
registration.
-11-
9.2 Incidental Registration
a. Subject to Section 9.2(b) below, the Company covenants and
agrees that in the event the Company proposes after the Date of Grant to file a
registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms and other than registrations pursuant to
Section 9.1 hereof), whether or not for its own account, then the Company shall
give written notice of such proposed filing to all Securityholders promptly (and
in any event at least twenty (20) days before the anticipated filing date). Such
notice shall offer to such Securityholders, together with others who have
similar rights, the opportunity to include in such registration statement such
number of Registrable Securities as they may request (other than Registrable
Securities already registered pursuant to a Shelf Registration Statement). The
Company shall direct and use its reasonable best efforts to cause the managing
underwriter of a proposed underwritten offering (unless the offering is an
underwritten offering of a class of the Company's equity securities other than
Common Stock and the managing underwriter has advised the Company in writing
that, in its opinion, the inclusion in such offering of Common Stock would
materially adversely affect the distribution of such offering) to permit the
holders of Registrable Securities requested to be included in the registration
to include such Registrable Securities in the proposed offering and the Company
shall use its reasonable best efforts to include such Registrable Securities in
such proposed offering on the same terms and conditions as any similar
securities of the Company included therein. If the offering of which the Company
gives notice is a public offering involving an underwriter, the right of a
Securityholder to registration pursuant to this Section 9.2 shall be conditioned
upon (i) such Securityholder's participation in such underwriting and the
inclusion of the Registrable Securities to be sold by such Securityholder in the
underwriting and (ii) such Securityholder executing an underwriting agreement
entered into by the Company which includes customary terms and conditions
relating to sales by shareholders. The foregoing notwithstanding, in the case of
a firm commitment offering on underwriting terms appropriate for such a
transaction, other than a registration requested by Securityholders pursuant to
Section 9.1, if any such managing underwriter of recognized standing shall
advise the Company and the Securityholders in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be reduced in the following
order: (i) first, Registrable Securities and such other securities requested to
be included by holders of such other securities shall be excluded pro rata and
(ii) second the securities the Company proposes to include therein shall be
excluded.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders) requests, pursuant
to rights granted to such holder or holders, that the Company file a
registration statement for the public offering of securities and the Company and
the other holders of the Company's securities (including the Securityholders)
who have rights to be included in such registration, request to be included in
-12-
>
such registration and the managing underwriter of such offering shall advise the
Company and the holders requesting inclusion in the offering that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution
then, the securities to be included in the registration shall be reduced in the
following order: (i) first, any securities requested to be included therein by
the holders of such other securities in such a manner as determined by the
Company, (ii) second Registrable Securities shall be excluded pro rata, (iii)
securities proposed to be included by the Company shall be excluded and, (iv)
fourth, securities requested to be included therein by the holder or holders
making the initial request for the registration. For purposes of this Section
9.2(b), the Company agrees to request for inclusion in the registration only
that number of securities that the Company intends, in good faith, to sell, if
all such securities so requested by the Company were permitted to be included by
the managing underwriter in such registration and sold pursuant thereto.
9.3 Company's Obligations
a. In connection with the registration of Registrable
Securities on behalf of the holders thereof (such Securityholders being referred
to herein as "Sellers") in accordance with Section 9.1 or Section 9.2 above, and
in addition to its other obligations under this Section 9, the Company agrees
to:
(i) with respect to any registration pursuant
to Section 9.1(a) or Section 9.1(b), prepare and file with the SEC a
registration statement on the form specified in such section, with respect to
the Registrable Securities to be registered pursuant to such section, and to use
its best efforts to cause such registration statement to become and remain
effective as provided in such section;
(ii) enter into a cross-indemnity agreement, in
customary form, with each underwriter, if any, and each
Seller;
(iii) subject to the provisions of Section 9.1
and Section 9.2 regarding reductions in Registrable Securities to be included in
a registration, include in the registration statement filed with the SEC, the
Registrable Securities for which requests for registration have been made (or,
in the case of a registration under Section 9.1(a), all such Registrable
Securities), promptly after filing of such a registration statement or
prospectus or any amendments or supplements thereto, furnish to each Seller
copies of all such documents filed including, if requested, documents
incorporated by reference in the registration statement, and notify each Seller
of any stop order issued or threatened by the SEC and use its best efforts to
prevent the entry of such stop order or to remove it if entered;
(iv) subject to Section 9.3(b), prepare and file with
the SEC such amendments of and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective with respect to a registration statement under
-13-
Section 9.1 or Section 9.2, for a period of six (6) months or such shorter
period as may be required if all such Registrable Securities covered by such
registration statement are sold prior to the expiration of such period and to
otherwise comply with the provisions of the Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Sellers set forth in
such registration statement;
(v) furnish to each Seller and each underwriter, if
any, without charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
proposed to be sold by such Seller;
(vi) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or Blue Sky laws
of such jurisdictions as any Seller or any such underwriter reasonably requests
in writing and keep such registrations or qualifications in effect for so long
as such registration statement remains in effect and do any and all acts and
things which may be reasonably necessary or advisable to enable such Seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Seller; provided, however, that the Company shall not be required
to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Subsection 9.3(a)(vi), or (B)
consent to general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when a
prospectus relating to such Seller's Registrable Securities is required to be
delivered under the Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact necessary to make the
statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(viii) cause all such Registrable Securities to be
listed on any Exchange or NASDAQ on which similar securities issued by the
Company are then listed;
(ix) provide a transfer agent, registrar and CUSIP
number for all such Registrable Securities not later than the effective date of
such registration statement;
(x) enter into such customary agreements (including
an underwriting agreement in customary form) and take all such other actions
that the Sellers or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
-14-
(xi) make available for inspection by the Sellers and
their counsel, any underwriter participating in any disposition pursuant to such
registration statement, and any counsel retained by any such underwriter, all
pertinent financial and other information and corporate documents of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Seller, underwriter or counsel in
connection with such registration statement;
(xii) with respect to any underwritten offering, use
its reasonable best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as the Sellers or any
underwriter may reasonably request;
(xiii) with respect to an underwritten offering,
obtain an opinion of counsel to the Company, addressed to the Sellers and any
underwriter, in customary form and including such matters as are customarily
covered by such opinions in underwritten registered offerings of equity
securities as the Sellers or any underwriter may reasonably request, such
opinion to be reasonably satisfactory in form and substance to each Seller; and
(xiv) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
Securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this Section 9 notwithstanding,
upon receipt by the Securityholders of a written notice signed by the chief
executive officer or chief financial officer of the Company to the effect set
forth below, the Company shall not be obligated during a reasonable period of
time (not to exceed ninety (90) days) thereafter (i) to effect any registrations
pursuant to this Section 9 or (ii) with respect to an effective Shelf
Registration Statement, may suspend the effectiveness of such registration
statement, at any time at which, in the Company's reasonable judgment, (i) there
is a development involving the Company or any of its affiliates which is
material but which has not yet been publicly disclosed or (ii) sales pursuant to
the registration statement would materially and adversely affect an underwritten
public offering for the account of the Company or any other material financing
project or a proposed or pending material merger or other material acquisition
or material business combination or material disposition of the Company's
assets, to which the Company or any of its affiliates is, or is expected to be,
a party. In the event a registration is postponed in accordance with this
Section 9.3(b), (x) the Company must (unless otherwise instructed by those
holders who requested such registration) file the requested registration within
nine (9) months from the date the Company first received the request of the
holders, (y) the Company may not defer the filing of a requested registration or
suspend the effectiveness of a Shelf Registration Statement pursuant to this
Section 9.3(b) more than once in any eighteen (18)-month period, and (z) there
shall be added to any period during which the Company is obligated to keep a
registration effective the number of days for which the registration was
postponed pursuant to this Section 9.3(b).
-15-
c. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant hereto, furnish the
Company with such information regarding the distribution of the Registrable
Securities proposed to be sold by such Seller as the Company may from time to
time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section
9.3(a)(vii) above, such Seller shall forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Seller's receipt of copies of the supplemented
or amended prospectus contemplated by Section 9.3(a)(vii) above and, if so
directed by the Company, such Seller will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies in such Seller's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any such
notice, the period mentioned in Section 9.3(a)(iv) above shall be extended by
the number of days during the period from and including the date of giving of
such notice to and including the date when each Seller shall have received the
copies of the supplemented or amended prospectus contemplated by Section
9.3(a)(vii) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by name or
otherwise as the Seller of any securities of the Company unless such reference
to such Seller is agreed to by the Seller or is specifically required by the Act
or any similar federal statute then in force.
9.4 Fees and Expenses. All expenses incident to the Company's
performance of or compliance with this Warrant shall be borne by the Company,
including without limitation all registration and filing fees, fees and expenses
relating to filings with any Exchange and/or NASDAQ, fees and expenses of
compliance with securities or Blue Sky laws in jurisdictions reasonably
requested by any Seller or underwriter pursuant to Section 9.3(a)(vi) (including
reasonable fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Securities), all word processing, duplicating
and printing expenses, messenger and delivery expenses, fees and disbursements
of counsel for the Company and one (1) counsel for the Sellers (selected by
those Sellers owning a majority of the Registrable Securities), fees and
expenses of independent public accountants (including the expenses of any
special audit or "cold comfort" letters required by or incident to such
performance), fees and expenses of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals attributable directly to the securities being
registered, which discounts, commissions or fees with respect to any Seller's
respective shares shall be paid by such Seller), all the Company's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the expense of any liability insurance (if the Company
determines to obtain such insurance), the fees and expenses incurred in
connection with the listing of the securities to be registered on any Exchange
and/or NASDAQ on which such securities issued by the Company are then listed,
the reasonable fees and expenses of any special experts (including attorneys)
retained by the Company (if it so desires) in connection with such registration,
and fees and expenses of other persons retained by the Company (all such
expenses being herein called "Registration Expenses").
-16-
9.5 Participation. In connection with the preparation and filing of
each registration statement under the Act pursuant to this Section 9, the
Company shall give the Sellers under such registration statement, their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such Sellers' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Act.
9.6 Indemnification
a. In the event of any registration of any securities of the
Company under the Act, the Company shall, and hereby does, indemnify and hold
harmless in the case of any registration statement filed pursuant to Section 9.1
or Section 9.2 above, the Seller of any Registrable Securities covered by such
registration statement, its directors, officers, employees and agents, each
other person who participates as an underwriter in the offering or sale of such
Registrable Securities and each other person, if any, who controls such Seller
or any such underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities (or actions or proceedings whether commenced or
threatened in respect thereof), joint or several, to which such Seller or any
such director or officer or employee or agent or underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company shall reimburse such Seller and each such director, officer,
employee, agent, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding, whether
commenced or threatened in respect thereof), or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment, or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Seller for the express purpose of use in the preparation thereof
and, provided, further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened, in respect thereof), or expense
arises out of such person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, within the time
required by the Act to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Seller or any such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such Registrable Securities
by such Seller.
-17-
b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement filed pursuant
to Section 9.1 or Section 9.2 above, such prospective Seller shall, and hereby
does, indemnify and hold harmless the Company, its directors, officers,
employees and agents, each other person who participates as an underwriter in
the offering or sale of such Registrable Securities and each other person, if
any, who controls the Company or any such underwriter within the meaning of the
Act against any losses, claims, damages, or liabilities (or actions or
proceedings whether commenced or threatened in respect thereof), joint or
several, to which the Company or any such director or officer or employee or
underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and such prospective Seller shall reimburse
the Company and any such director, officer, employee, agent, underwriter or
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action, or proceeding if, and only if, such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment, or supplement. In no event shall the
liability of any Seller hereunder be greater in amount than the dollar amount of
the proceeds received by such Seller upon the sale of the Registrable Securities
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such Registrable Securities
by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities industry
professionals participating in the distribution to the same extent as provide
