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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 31, 1998
BOETTCHER VENTURE CAPITAL PARTNERS, L.P.
----------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 0-12935 84-0958632
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
77 West Wacker Drive Chicago, IL 60601
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code (312) 574-6000
N/A
-------------------------------------------------------------
(Former name or former address, if changed since last report)
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Item 5. Other Events
On December 31, 1998, Boettcher Venture Capital Partners, L.P. (the
"Partnership") distributed all of its remaining assets to its partners.
As previously reported, the Partnership had attempted to convert to cash its
remaining portfolio investment, investment securities of Coleman Natural
Products, Inc. ("Coleman"). After numerous unsuccessful attempts, it was
determined that these securities would be distributed in kind to all partners in
proportion to their respective ownership percentage.
The final distribution of Partnership assets, consisting of cash and securities,
is described in detail in the attached correspondence mailed to limited partners
on December 31, 1998. [see exhibit 99.1]
Upon payment of the costs of liquidation, liabilities of the Partnership and the
final cash and securities distribution to partners, all assets of the
Partnership have been accounted for and all liabilities of the Partnership paid
or otherwise provided for by the Partnership and the Managing General Partner.
In January 1999, the Managing General Partner filed a certificate of
cancellation of the certificate of cancellation of the Certificate of Limited
Partnership of the Partnership with Delaware Secretary of State.
The Managing General Partners intends to file a Form 15 (Certification and
Notice of Termination of Registration Under Section 12(g) of the Securities and
Exchange Commission on January 29, 1999.
The Partnership is now dissolved and all of its assets have been distributed in
liquidation and dissolution of the Partnership and liabilities of the
Partnership paid or otherwise provided for.
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Item 7. Financial Statements and Exhibits
Exhibits
10.1 Statement of Operations for the period from October 1, 1998
through December 31, 1998
10.2 Statement of Operations for the period from January 1, 1998
through December 31, 1998
10.3 Statement of Cash Flows for the period from January 1, 1998
through December 31, 1998
99.1 Correspondence to Limited partners dated December 30, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOETTCHER VENTURE CAPITAL PARTNERS L.P.
---------------------------------------
(Registrant)
By: EVEREN Securities, Inc.
Managing General Partner
Dated: January 29, 1999 By: /s/ Daniel D. Williams
-----------------------------------
Chief Financial Officer; Principal
Financial and Accounting Officer of
the Partnership
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Exhibit 10.1
BOETTCHER VENTURE CAPITAL PARTNERS, L.P.
(A Limited Partnership)
Statement of Operations For the
Period from October 1, 1998 through December 31, 1998
(Unaudited)
Investment Income:
Interest and dividends from
short-term and portfolio
investments $ 38,225
---------
Expenses:
Professional fees 14,055
Other expenses 1,443
---------
Total expenses 15,498
---------
Net investment gain 22,727
Realized gain on sale of portfolio
investments -
---------
Net investment loss and realized gain
allocable to partners 22,727
Net change in unrealized appreciation
of portfolio investments -
---------
Net increase (decrease) in net assets $ 22,727
=========
Net investment gain (loss) per unit of
Limited partner interest $ 2.13
=========
Weighted average number of limited
partnership units outstanding 10,694
=========
See accompanying notes to financial statements.
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Exhibit 10.2
BOETTCHER VENTURE CAPITAL PARTNERS, L.P.
(A Limited Partnership)
Statement of Operations For the
Period from January 1, 1998 through December 31, 1998
(Unaudited)
Investment Income:
Interest and dividends from
short-term and portfolio
investments $ 119,520
---------
Expenses:
Professional fees 30,868
Other expenses 7,237
---------
Total expenses 38,105
---------
Net investment gain 81,415
Realized gain on sale of portfolio
investments 12,500
---------
Net investment loss and realized gain
allocable to partners 93,915
Net change in unrealized appreciation
of portfolio investments -
---------
Net increase (decrease) in net assets $ 93,915
=========
Net investment gain (loss) per unit of
Limited partner interest $ 8.78
=========
Weighted average number of limited
partnership units outstanding 10,694
=========
See accompanying notes to financial statements.
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Exhibit 10.3
BOETTCHER VENTURE CAPITAL PARTNERS, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS For the
Period from January 1, 1998 through December 31, 1998
(unaudited)
Cash flows from operating activities:
Net investment loss and realized gain
allocable to partners $ 93,915
Adjustment to reconcile net investment loss and
realized gain allocable to partners to net cash
used in operating activities:
Gain on sale of portfolio investments (12,500)
Paid in kind dividends
Change in operating assets and liabilities
Decrease in other receivables (13,156)
Decrease in payable to Managing
General Partner (47,840)
Decrease in accounts payable (4,675)
-----------
Net cash from operating activities 15,744
-----------
Cash flows from investing activities:
Proceeds from the disposition of portfolio investments 12,500
Proceeds from maturities of short-term investments 1,217,544
-----------
Net cash provided by investing activities 1,230,044
-----------
Cash flows used by financing activities-distributions
to partners (1,259,558)
-----------
Net decrease in cash (13,770)
Cash at beginning of period 13,770
-----------
Cash at end of period $ -
===========
See accompanying notes to financial statements.
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Exhibit 99.1
December 30, 1998
To the Limited Partners of
Boettcher Venture Capital Partmers, L.P.
We are pleased to report that we have completed the business of the
Partnership and will be making a final distribution to Partners in the very near
future. This will conclude an investment process which began in 1984, when you
and other Limited Partners provided initial capital totaling $10.7 million to
the Partnership. As you may recall, the purpose of Boettcher Venture Capital
Partners was to make high risk investments in entrepreneurial companies and to
help those companies maximize their business opportunities.
The Partnership made its first investment in November 1984 and
concluded its active investment program in March 1989. During that period we
made investments in sixteen different companies which were involved in a wide
range of businesses including computer systems and components, software,
retailing, consumer products, music, transportation and medical services. In
each case, we were joined in our investment by other professional venture
capitalists who also provided money and their professional expertise and
contacts. In many cases, we placed a member of our staff on the investee
company's board of directors in order to maximize both our knowledge and our
assistance in making strategic and tactical decisions regarding the business.
The investment results achieved by the Partnership were not as positive
as we had expected. During the period in which we invested there was sometimes
rapid and unpredictable change in both technology and some of the markets served
by certain of our portfolio companies. Moreover, expected market acceptance was
sometimes slower than planned and/or markets were less receptive to new and
innovative products or services. In other words, we found all of the risk
factors in the markets that we expected but were sometimes surprised by their
intensity. As a consequence, we had mixed investment results including a total
loss of our investment in four companies, and partial losses in four others. In
two cases we recovered our investment without loss or gain. On the positive side
we did enjoy substantial gains in five investments. Two were sold to other
companies in their industries. In the other three cases we sold our investment
securities in the public market, (two of the companies had initial public
offerings; and the third was already public when we made our investment). Our
sixteenth investment, in Coleman Natural Products, Inc. ("Coleman"), has not
been sold and securities in this company are part of our final distribution.
Boettcher Venture Capital Partners, pursuant to the terms of its
Partnership Agreement, terminated effective December 31, 1997. Since that time,
we have been winding up the affairs of the Partnership including the liquidation
of its investments. For the past year, we have attempted to sell our investment
position in Coleman. That has proved to be impossible despite our efforts and
the complete cooperation of both the company and our co-investors. At one time
it appeared
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that Coleman would complete an initial public offering, but due to both internal
and external factors, an offering was not completed. Currently Coleman is still
a private company with no public market for its securities. Furthermore, there
can be no guarantee that a public market will develop.
The Partnership's final distribution is being made on December 31,
1998, and will consist of both cash and investment securities of Coleman. The
cash distribution, which will be credited to your EVEREN account, will be equal
to approximately $90 per unit of limited partnership interest and will bring
total cash distributions during the life of the Partnership to $925 per unit.
While the cash-on-cash return to you is slightly less than your capital
contribution, no recognition has been given either to the value of the Coleman
securities or pass-through tax losses in prior years.
On a per unit of Limited Partnership interest basis, the investment
securities to be distributed will consist of 46 shares of Coleman Series A
Preferred Stock, 14 shares of Common Stock, warrants expiring April 29, 2000 for
1.777 shares of Common Stock, warrants expiring August 19, 2000 for .819 shares
of Common Stock and warrants expiring September 22, 2000 for 1.752 shares of
Common Stock. All warrants are exercisable at a price of $0.775 per share.
Coleman will not issue stock certificates or warrants but will simply transfer
the appropriate securities on its books to each of our Limited Partners. Should
you require stock certificates or warrants, you should contact Coleman and
request that those be issued to you.
As outlined in the memorandum describing Coleman, which is included
with this letter, the Preferred Stock pays current dividends but is not
convertible. Thus far there have been no cash dividends paid on Coleman's common
stock. These securities will have a cost basis equal to that of the
Partnership's or $1.00 per share for the Preferred and $1.47 for the common. The
Partnership has a zero cost basis in the warrants. Any gain or loss from your
subsequent disposition of these securities will be long term since they have
been held by the Partnership for more than two years.
In conclusion, we would like to thank you for the confidence you placed
in us by supporting a unique investment product with your capital. We would also
like to thank you for your patience and your personal expressions of support at
annual meetings and through your correspondence.
Very truly yours,
Foye F. Black, Jr.
Attorney-in-fact
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COLEMAN NATURAL PRODUCTS, INC.
Coleman Natural Products, Inc., which is located in Denver, Colorado,
is the leading U.S. supplier and marketer of fresh, branded beef products
derived from cattle that have never received hormones or antibiotics. Most
commodity beef cattle in the U.S. are given antibiotics and are implanted with
hormones to accelerate growth and weight gain. Coleman believes that it is the
only company with substantial national distribution that has an approved U.S.
Department of Agriculture label describing its hormone and antibiotic free
cattle raising practices.
The company was founded by Mel Coleman, Sr., a fourth-generation
Colorado rancher. Mr. Coleman and his family initially financed the company.
Beginning in 1989, the company began to receive the financial support of a group
of venture capital investors, including Boettcher Venture Capital Partners, L.P.
Those investors have provided capital to Coleman as well as management
assistance and strategic advice by providing two representatives to the
company's Board of Directors.
Coleman currently faces many challenges and uncertainties in its
business. Recent economic downturns internationally have put pressure on
operating margins and domestic competition continues to be intense. Since it is
a private company, specific financial details about the company's operating
results or its prospects are not publicly available. However, based on recent
financings, the current fair market value of the common stock is below our cost
basis and also below the exercise price of the warrants being distributed to the
limited partners of Boettcher Venture Capital Partners, L.P. ("BVCP").
You will own Series A Preferred Stock, Common Stock and warrants to
purchase Common Stock in Coleman. The Common Stock has full voting rights. The
Company historically has not paid dividends on the Common Stock and does not
anticipate doing so in the future.
The Series A Preferred Stock is non-voting except under certain limited
circumstances as required by Delaware corporate law. It accrues two types of
dividends. The first dividend (the "Paid-in-Kind Dividend") is payable annually
in additional shares of Preferred Stock; an aggregate of 200,448 shares of
Preferred Stock are accrued each year under this Paid-in-Kind Dividend to all
holders of Preferred Stock. The number of shares of Preferred Stock you are
eligible to receive as a dividend is based upon the percentage you hold of
Coleman's Preferred Stock. The second type of dividend (the "Dividend") is
payable annually in either shares of Common Stock or cash at the rate of 9% per
share per annum; this percentage can increase under certain circumstances.
Coleman has the option of whether to pay the Dividend in cash or shares of
Common Stock (valued at current fair value, as determined by the Company and the
holders of at least 60% of the Preferred Stock). We believe that for the
immediate future, Coleman will continue to pay the Dividend in shares of Common
Stock. Both dividends are currently computed as of September 30 of each year and
paid shortly thereafter.
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The Series A Preferred Stock is mandatorily redeemable. The current
redemption date is May 1, 1999. In the past, the holders of a majority of the
outstanding shares of Preferred Stock have extended this redemption date, and it
is possible that they will do so in the future. Because BVCP Limited Partners
will own less than 15% of the Preferred Stock outstanding, your vote or consent
may not be needed in order to extend the redemption date. Additionally, in the
past the holders of a majority of the Preferred Stock have amended other rights
and preferences of the Preferred Stock, and some of these changes have been
adverse to the holders. It is possible that this will happen in the future, and
again, your vote or consent may not be needed in order to make such changes.
In the event of a liquidation of Coleman, the Preferred Stock will
receive any assets available after payment of all of Coleman's debt. Only after
the holders of Preferred Stock have received $1.00 per share, plus any accrued
but unpaid dividends, will Coleman be able to make any distribution to the
holders of its Common Stock.
The warrants expire on April 29, 2000, August 19, 2000, and September
22, 2000 as more fully explained in the letter to limited partners from EVEREN
Securities, Inc. They are exercisable at $0.775 per share. As was pointed out
earlier in this memorandum, the current fair market value of Coleman's common
stock is lower than the current exercise price. Attached is a form of warrant
which contains the terms of the warrants which you will own.
In conclusion, the Coleman securities which you will acquire do not now
have a trading market, nor is one likely to develop in the foreseeable future.
Coleman currently is not required to file information with the Securities and
Exchange Commission, and, therefore, information, which might form the basis for
a trading market, is not publicly available. Moreover, any stock certificate or
warrant which you would receive would contain the following legend:
"These securities have not been registered under state or federal
securities laws and may not be offered, sold, pledged (except a pledge
pursuant to the terms of which any offer or sale upon foreclosure would
be made in a manner that would not violate the registration provisions
of federal or state securities laws), or otherwise distributed for
value, nor may these securities be transferred on the books of the
Company, without opinion of counsel, concurred in by counsel for the
Company, that no violation of such registration provisions would result
therefrom."
Additional information can be obtained directly from the company at its
corporate headquarters as follows:
Coleman Natural Products, Inc.
5140 Race Court
Denver, CO 80216
(303) 297-9393
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THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS,
AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING SAID SECURITIES, OR (ii) THE ISSUER RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF SAID SECURITIES SATISFACTORY TO THE ISSUER
STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION OR THE ISSUER
OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
No. ______ WARRANT TO PURCHASE _____
SHARES OF COMMON STOCK
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF COLEMAN NATURAL PRODUCTS, INC.
Void After 5:00 p.m. (Denver time) __________ __, ____
For value received, Coleman Natural Products, Inc., a Delaware
corporation (the "Company"), grants to __________________________ (the "Initial
Holder") the right, subject to the terms of this Warrant, to purchase at any
time and from time to time during the period commencing on the "Initial Exercise
Date" (as defined below) and ending on the "Expiration Date" (as defined below)
up to ______ fully paid and nonassessable shares of Common Stock of the Company.
The exercise price shall be $____ (the "Basic Exercise Price"). The Basic
Exercise Price and the number of shares that may be purchased are subject to
adjustment under the terms of this Warrant.
Section I. Definitions.
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As used in this Warrant, unless the context otherwise requires:
"Aggregate Value" means the dollar value equal to the quotient of the
Basic Exercise Price multiplied by the Warrant Shares (as of the date hereof).
"Basic Exercise Price" means the price at which each Warrant Share may
be purchased upon exercise of this Warrant, as stated in the introductory
paragraph.
"Common Stock" means the Common Stock of the Company.
"Company" has the meaning specified in the introductory paragraph.
"Exercise Date" means any date when this Warrant is exercised, in whole
or in part, in the manner indicated in Sections 2.1 and 2.2 below.
"Exercise Price" means the Basic Exercise Price; provided, however,
that if an adjustment is required under Section 7.1 of this Warrant, then the
"Exercise Price" means, after such adjustment, the price at which each Warrant
Share may be purchased upon exercise of this Warrant immediately after the last
such adjustment.
"Expiration Date" means 5:00 p.m. (Denver time) on _________ __, _____.
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"Holder" means the Initial Holder or, upon assignment of this Warrant
by the Initial Holder (or a subsequent Holder), such assignee.
"Initial Exercise Date" means the date of this Warrant.
"Initial Holder" has the meaning specified in the introductory
paragraph.
"Person" means an individual, corporation, partnership, trust, joint
venture or other form of business entity.
"Registration Rights Agreement" means the Amended and Restated
Registration and Preemptive Rights Agreement dated December 22, 1998, and as
amended from time to time, by and among the Company, the Initial Holder and
certain other parties.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and all rules and regulations promulgated thereunder, or any act, rules
or regulations which replace the Securities Act or any such rules and
regulations.
"Subsequent Warrant" has the meaning specified in Section 2.3 below.
"Warrant Share(s)" means any share(s) of Common Stock, or other
securities, issued or issuable upon exercise of this Warrant.
Section 2. Duration and Exercise of Warrant.
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2.1 Exercise Period. Subject to the provisions hereof, this Warrant may
be exercised at any time and from time to time during the period commencing on
the Initial Exercise Date and ending on the Expiration Date. After the
Expiration Date, this Warrant shall become void and all rights to purchase
Warrant Shares hereunder shall thereupon cease.
2.2 Method of Exercise and Payment.
(a) Method of Exercise. Subject to Section 2.1 hereof and
compliance with all applicable Federal and state securities laws, the purchase
right represented by this Warrant may be exercised, in whole or in part, by the
Holder by (i) surrender of this Warrant and delivery of the Exercise Form
attached hereto, duly executed, at the principal office of the Company and (ii)
payment to the Company of an amount equal to the product of the then applicable
Exercise Price multiplied by the number of Warrant Shares then being purchased.
(b) Method of Payment. Payment shall be made either (1) by
check drawn on a United States bank and for United States funds made payable to
the Company, (2) by wire transfer of United States funds for the account of the
Company, (3) by the cancellation of indebtedness of the Company to the Holder,
but only at the option of the Holder, or (4) by any combination of the foregoing
at the option of the Holder.
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(c) Net Issue Exercise. In lieu of exercising this Warrant
pursuant to subsection (a), above, the Holder may elect to receive shares equal
to the value of the Warrant (or the portion thereof being canceled) by surrender
of the Warrant at the principal office of the Company together with notice of
such election, in which event the Company shall issue to Holder the number of
shares of the Company's Common Stock computed using the following formula:
X = Y(A-B)
------
A
Where X - The number of shares of Common Stock to be issued to Holder
Y - the number of shares of Common Stock purchasable under the Warrant
A - the fair market value of one share of the Company's Common Stock
B - Exercise Price (as adjusted to the date of such calculations).
For purposes of this subsection (c), fair market value of the Company's Common
Stock shall mean the price per share of such Common Stock which the Company's
Board of Directors, in the exercise of its business judgment, and taking into
account all relevant factors, determines to be the fair market value of such
Common Stock on the date of exercise of the Warrant.
(d) Delivery of Certificate. In the event of any exercise of the
purchase right represented by this Warrant,
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certificates for the Warrant Shares so purchased shall be delivered to the
Holder within thirty (30) days of delivery of the Exercise Form and, unless this
Warrant has been fully exercised or has expired, a new warrant representing the
portion of the Warrant Shares with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder within such thirty (30)
day period.
2.3 Taxes. The Company will pay any stamp, transfer or similar tax that
may be payable in respect of the issuance of the Warrant Shares.
Section 3. Validity and Reservation of Warrant Shares. The Company
represents and warrants that all Warrant Shares issued upon exercise of this
Warrant will be validly issued, fully paid, nonassessable and not subject to
preemptive or similar rights. The Company agrees that, as long as this Warrant
may be exercised, the Company will have authorized and reserved for issuance
upon exercise of this Warrant a sufficient number of shares of Common Stock to
provide for exercise in full of this Warrant.
Section 4. Fractional Share. No fractional Warrant Shares shall be
issued upon the exercise of this Warrant, and the number of Warrant Shares to be
issued shall be rounded to the nearest whole number.
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Section 5. Limited Rights of Warrant Holder. The Holder shall not,
solely by virtue of being the Holder of this Warrant, have any of the rights of
a stockholder of the Company, either at law or equity, until this Warrant shall
have been exercised.
Section 6. Loss of Warrant. Upon receipt by the Company of satisfactory
evidence of the loss, theft, destruction or mutilation of this Warrant and
either (in the case of loss, theft or destruction) reasonable indemnification
and a bond satisfactory to the Company if requested by the Company or (in the
case of mutilation) the surrender of this Warrant for cancellation, the Company
will execute and deliver to the Holder, without charge, a new warrant of like
denomination.
Section 7. Certain Adjustments to Warrant.
7.1 Adjustment of Number, Class and Exercise Price. The number, class
and Exercise Price of securities for which this Warrant may be exercised are
subject to adjustment from time to time upon the happening of certain events as
hereinafter provided:
7.1.1 Recapitalization. If the outstanding shares of the
Company's Common Stock are divided into a greater number of shares or the
Company issues a stock dividend on its outstanding Common Stock, the number of
shares of Common Stock purchasable upon the exercise of this Warrant shall be
proportionately increased and the Exercise Price shall be
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proportionately reduced and, conversely, if the outstanding shares of Common
Stock are combined into a smaller number of shares of Common Stock, the number
of shares of Common Stock purchasable upon the exercise of this Warrant shall be
proportionately reduced and the Exercise Price shall be proportionately
increased. The increases and reductions provided for in this Section 7.1.1 shall
be made with the intent and, as nearly as practicable, the effect that neither
the percentage of the total equity of the Company obtainable on exercise of this
Warrant nor the total price payable for such percentage shall be affected by any
event described in this Section 7.1.1.
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Section 7.1.2 Merger or Reorganization, Etc.. In the event of any
change in the Common Stock through merger, consolidation, reclassification,
reorganization, partial or complete liquidation or other change in the capital
structure of the Company (not including the issuance of additional shares of
capital stock other than by stock dividend or stock split), then, as a condition
of such change in the capital structure of the Company, appropriate and adequate
provision shall be made so that the Holder of this Warrant will have the right
thereafter to receive upon the exercise of this Warrant the kind and amount of
shares of stock or other securities or property to which it would have been
entitled if, immediately prior to such merger, consolidation, reclassification,
reorganization, recapitalization or other change in the capital structure, it
had held the number of shares of Common Stock obtainable upon the exercise of
this Warrant. In any such case, appropriate adjustment shall be made in the
applications of the provisions set forth herein with respect to the rights and
interest thereafter of the Holder, to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the exercise of this Warrant. Furthermore, the Company shall provide the Holder
with at least 10 days' prior written notice of the date
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when any such change in the capital structure of the Company shall take place.
7.1.3 Certain Stock Issuances.
(a) If the Company at any time after the Initial Exercise Date shall
issue any "Additional Stock" (as defined in clause (e) below) without
consideration or for a consideration per share less than the Exercise Price in
effect immediately prior to the issuance of such Additional Stock, the Exercise
Price in effect immediately prior to such issuance shall forthwith (except as
otherwise provided in this subsection 7.1.3) be adjusted or readjusted to a
price (calculated to the nearest cent) determined according to the formula:
NEP = EEP x OB + X
-----------
OB + AS
where
NEP = the new Exercise Price
EEP = the existing Exercise Price immediately before the new issuance
OB = the total outstanding shares of Common Stock
immediately before the new issuance plus Common
Stock issuable upon conversion of Convertible
Securities
X = number of shares issuable at the existing Exercise
Price for the total consideration to be received for
the new issuance
AS = number of shares of Additional Stock to be issued
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The Exercise Price as so adjusted or readjusted shall not exceed the Basic
Exercise Price on the date hereof (as such Basic Exercise Price may be adjusted
pursuant to subparagraphs 7.1.1 and 7.1.2 of this Section 7.1). The number of
shares of Common Stock purchasable upon the exercise of this Warrant shall be
adjusted or readjusted each time the Exercise Price is adjusted or readjusted
and shall equal the product of the Aggregate Value divided by the Exercise Price
as so adjusted or readjusted.
(b) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any discounts, commissions or other expenses allowed, paid or incurred
by the Company for any underwriting or otherwise in connection with the issuance
and sale thereof.
(c) In the case of the issuance of the Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash shall be
deemed to be the fair value thereof as determined by the Board of Directors
irrespective of any accounting treatment.
(d) In the case of the issuance of "Convertible Securities," which is
defined as the issuance of options or warrants to purchase, or rights to
subscribe for, Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options or warrants to purchase, or rights to
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subscribe for, such convertible or exchangeable securities (which are not
excluded from the definition of Additional Stock in (e) below), the following
provisions shall apply:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options or warrants to purchase, or rights to
subscribe for, Common Stock shall be deemed to have been issued at the time such
options, warrants or rights were issued and for a per share consideration equal
to the pro rata consideration (determined in the manner provided in subsections
7.1.3 (b) and (c)), if any, received by the Company upon the issuance of such
options, warrants or rights plus the minimum per share purchase price provided
in such options, warrants or rights for the Common Stock covered thereby;
(ii) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options or warrants to purchase,
or rights to subscribe for, such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been issued at
the time such securities were issued or such options, warrants or rights were
issued and for a consideration equal to the consideration, if any, received by
the Company for any such securities and related options, warrants or rights,
plus the additional consideration, if any, to be received by the
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Company upon the conversion or exchange of such securities or the exercise of
any related options, warrants or rights (the consideration in each case to be
determined in the manner provided in subsections 7.1.3 (b) and (c)).
(iii) In the event of any change in the number of shares of
Common Stock deliverable (or any change in the consideration payable to the
Company) upon exercise of such options, warrants or rights or upon conversion of
or in exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions thereof, the
Exercise Price then in effect shall forthwith be readjusted to such Exercise
Price as would have been obtained had the adjustment which was made upon the
issuance of such options, warrants, rights or securities not converted prior to
such change or the options, warrants or rights related to such securities not
converted prior to such change been made upon the basis of such change, but no
further adjustment shall be made for the actual issuance of Common Stock (or the
actual payment of consideration to the Company) upon the exercise of any such
options, warrants or rights or the conversion or exchange of such securities;
(iv) Upon the expiration of any such options, warrants or
rights, the termination of any such rights to convert or exchange or the
expiration of any exchangeable securities, the
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Exercise Price shall forthwith be readjusted to such Exercise Price as would
have been obtained had the adjustment which was made upon the issuance of such
options, warrants, rights or securities or options, warrants or rights related
to such securities been made upon the basis of the issuance of only the number
of shares of Common Stock actually issued upon the exercise of such options,
warrants or rights, upon the conversion or exchange of such securities or upon
the exercise of the options, warrants or rights related to such securities.
(e) "Additional Stock" shall mean any shares of Common Stock issued (or
deemed to have been issued pursuant to subsection 7.1.3 (d)) by the Company on
or after the Initial Exercise Date other than:
(i) Common Stock issued pursuant to a transaction described in
subsection 7.1.1 or 7.1.2 hereof,
(ii) shares of Common Stock (appropriately adjusted for any
stock dividend, stock split or recapitalization) issued to employees,
consultants or directors of the Company directly or pursuant to option, bonus or
incentive plans or agreements approved by the Board of Directors, and
(iii) shares of Common Stock (appropriately adjusted for any
stock dividend, stock split or recapitalization) issued upon exercise of
Warrants dated October 13, 1993 and December 22, 1998.
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7.1.4 Minimum Adjustment Not Required. Anything in this Section 7.1 to
the contrary notwithstanding, the Company shall not be required, except as
hereinafter provided, to make any adjustment of the Exercise Price in any case
in which the amount by which such Exercise Price would be increased or reduced,
in accordance with the foregoing provisions, would be less than $0.01 per share,
but in such a case, any adjustment that would otherwise be required to be made
will be carried forward and made at the time and together with the next
subsequent adjustment.
7.2 Notice of Adjustment. Whenever an event occurs requiring any
adjustment to be made pursuant to Section 7.1, the Company shall promptly file
with its Secretary or an Assistant Secretary at its principal office and with
its stock transfer agent, if any, a certificate of its chief executive officer
specifying such adjustment, setting forth in reasonable detail the acts
requiring such adjustment, and stating such other facts as shall be necessary to
show the manner and figures used to compute such adjustment. Such chief
executive officer's certificate shall be made available at all reasonable times
for inspection by the Holder. Promptly (but in no event more than 30 days) after
each such adjustment, the Company shall give a copy of such certificate by
certified mail to the Holder.
Section 8. Subdivision of Warrant. At the request of the Holder in
connection with a transfer of a portion of this
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Warrant upon surrender of this Warrant for such purpose to the Company at its
principal office, the Company at its expense (except for any transfer tax
payable) will issue and exchange therefor new Warrants of like tenor and date
representing in the aggregate the amount of the Warrant Shares.
Section 9. Rights of Registration. This Warrant and the Warrant Shares
shall be entitled to certain rights to include the Warrant Shares in
registration statements filed under the Securities Act upon the terms and
conditions specified in the Registration Rights Agreement.
Section 10. Miscellaneous.
10.1 Successors and Assigns. The provisions of this Warrant shall be
binding upon and inure to the benefit of the Company, the Holder and their
respective permitted successors and assigns hereunder.
10.2 Notice. Each notice, certificate or demand referred to in this
Warrant shall be in writing and shall be deemed "given" upon personal delivery
to the party to be notified or upon deposit with the United States Postal
Service, in registered or certified mail, postage prepaid and addressed to the
party to be notified at the address set forth below or such other address as
such party may designate by written notice to the other party given in the
foregoing manner:
If to the Company:
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Coleman Natural Products, Inc.
5140 Race Court, #4
Denver, Colorado 80216
Attention: President
If to the Holder:
The Holder's last known address as it appears on the
books of the Company.
10.3 Applicable Law. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the State of Delaware.
10.4 Headings. The headings herein are for convenience only and are not
part of this Warrant and shall not affect the interpretation thereof.
DATED: ___________ __, ____.
COLEMAN NATURAL PRODUCTS, INC.
By:
------------------------------
Lee N. Arst, President
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EXERCISE FORM
TO: COLEMAN NATURAL PRODUCTS, INC.
1. The undersigned Holder of the attached original, executed
Stock Purchase Warrant hereby elects to exercise its purchase right under such
Warrant with respect to _________ Warrant Shares, as defined in the Warrant, of
Coleman Natural Products, Inc.
2. The undersigned Holder elects to pay the aggregate Exercise
Price for such Warrant Shares (the "Exercise Shares") in the following manner:
[ ] by the enclosed check drawn on a United States bank and for
United States funds made payable to the Company in the amount
of $__________;
[ ] by wire transfer of United States funds to the account of
the Company in the amount of $__________, which transfer has
been made before or simultaneously with the delivery of this
Exercise Form pursuant to the instructions of the Company;
[ ] by the net issuance exercise formula provided in this
Warrant based upon a fair market value, as provided to the
Holder by the Company's authorized officer, of $__________;
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[ ] by the combination of the foregoing indicated above or on
the attached sheet.
3. Please issue a stock certificate or certificates representing the
appropriate number of Shares in the name of the undersigned or in such other
names as is specified below:
Name:
--------------------------------------
Address:
-----------------------------------
-------------------------------------------
Tax Identification No.
---------------------
HOLDER:
------------------------------------
By:
----------------------------------------
Its:
---------------------------------------
Date:
-------------------
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