UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
White Cloud Exploration, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
0114244
- --------------------------------------------------------------------------------
(CUSIP Number)
Mark G. Hollo, 90 Park Avenue-39th Fl, NY, NY 10016
Phone: (212) 697-5200
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 29, 1997
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: |_|
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 0114244
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Mark G. Hollo
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP (a) |x|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO, PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURUANT TO
ITEMS 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 1,844,962
BENEFICIALLY ---------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 0
PERSON ---------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,844,962
---------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,844,962
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.54%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
Page 2
<PAGE>
SCHEDULE 13D
CUSIP No. 0114244
Item 1. Security and Issuer
This statement relates to the common stock, par value $.001 per
share ("Common Stock"), of White Cloud Exploration, Inc., a Utah corporation
("White Cloud" or the "Company"). The Company's principal executive offices are
located at 116 Stanyan, San Francisco, CA 94118.
Item 2. Identity and Background
This statement is filed on behalf of Mark G. Hollo (the "Reporting
Person"). The business address of Mr. Mark G. Hollo is c/o Sands Brothers & Co.,
Ltd. ("Sands Brothers"), 90 Park Avenue, New York, New York 10016. The
occupation of Mr. Mark G. Hollo is Managing Director of Sands Brothers. Mr.
Hollo has not been convicted in any criminal proceeding during the past five
years.
During the past five years, Mr. Hollo has not been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
the result of which proceeding was a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws. Mr.
Mark G. Hollo is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to a Stock and Asset Contribution (the "Watchout
Agreement"), effective as of December 29, 1997, the shareholders of Watchout!, a
California corporation ("Watchout") received from White Cloud exploration, Inc.,
a Utah corporation ("White Cloud"), 11,296,302 newly issued restricted shares of
Common Stock in exchange for 100% of the outstanding shares of Watchout! (the
"Watchout Acquisition"). As a shareholder of Watchout, Mark G. Hollo received
1,819,964 restricted shares of Common Stock. Such shares are subject to
forfeiture under certain conditions.
On September 3, 1997, Sands Brothers arranged bridge financing on
behalf of the Company in an aggregate amount of $200,000 (the "Bridge
Financing"). In connection therewith, Mark G. Hollo, as a designee of Sands
Brothers, received for nominal consideration, warrants to purchase 25,000 shares
of Common Stock at $.01 per share (the "Hollo Warrants").
Item 4. Purpose of Transaction
The acquisition of Common Stock by Mr. Mark G. Hollo and the
acquisition of the Hollo Warrants were made for investment purposes. The
Reporting Person may dispose of or acquire additional securities of the Company
in privately negotiated transactions, open market transactions (if the shares
become registered for resale under the Securities Act of 1933, as amended)or
otherwise. Except as set forth above, the Reporting Person has no plans or
proposals which relate to or would result in the acquisition by any person of
additional securities of the Company (other than as set forth in Item 6 below),
or the disposition of securities of the Company. The Reporting Person does not
have any present plan, proposal, or intention which relates to or would result
in any action with respect to the matters listed in paragraphs (b) through (j)of
Item 4 of Schedule 13D.
Page 3
<PAGE>
SCHEDULE 13D
CUSIP No. 0114244
Item 5. Interest in Securities of the Issuer
(a)(b) Reference is made hereby to items 7-11 and 13 of page 2 of
this Schedule, which Items are incorporated by reference. Of the shares of
Common Stock beneficially owned by Mark G. Hollo, 1,819,964 shares are owned
directly by Mark G. Hollo and warrants to purchase 25,000 shares of Common Stock
are owned directly by Mark G. Hollo.
(c) During the past 60 days Mark G. Hollo acquired 1,819,964 shares
of Common Stock pursuant to the Watchout Agreement, effective as of December 29,
1997.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings, or Relationships with
Respect to Securities of the Issuer
In connection with the arrangement of the Bridge Financing, White
Cloud issued to Mark G. Hollo, as designee of Sands Brothers, the Hollo
Warrants. The Hollo Warrants are exercisable for a five year period commencing
on September 3, 1997, at an exercise price of $.01 per share. As holder of Hollo
Warrants, the Reporting Person has certain incidental registration rights with
respect to the Common Stock underlying the Hollo Warrants.
On February 5, 1997, Watchout and Sands Brothers entered into a
selling agreement (the "Selling Agreement")pursuant to which Sands Brothers has
agreed to act as placement agent in a private placement of up to $6,000,000 of
equity securities to be issued by an entity with shares registered under the
Securities Exchange Act of 1934, as amended (the "Private Placement"). The
Watchout Agreement and the Watchout Acquisition were entered into and
consummated to facilitate the Private Placement. Under the Selling Agreement,
upon completion of the Private Placement, in his capacity as a designee of Sands
Brothers, Mr. Mark G. Hollo is entitled to be elected to the Board of Directors
of the Company. Under the Selling Agreement, upon completion of the Private
Placement, Sands Brothers is entitled to receive additional warrants to purchase
shares of Common Stock. In addition, Sands Brothers is entitled to receive
compensation (which may include equity securities of the Company) in the event
of certain merger and acquisition activities of the Company. As a designee of
Sands Brothers, Mr. Mark G. Hollo may receive a portion of such compensation, as
well as additional warrants to purchase shares of Common Stock.
Page 4
<PAGE>
SCHEDULE 13D
CUSIP No. 0114244
Item 7. Material to Be Filed as Exhibits
The following exhibits are annexed hereto:
1. Warrant Agreement between Mark G. Hollo and White Cloud
Exploration, Inc. dated September 3, 1997.
Page 5
<PAGE>
SCHEDULE 13D
CUSIP No. 0114244
Signature
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
January 8, 1998
- ---------------
Date /s/ Mark G. Hollo
-------------------
Signature
Mark G. Hollo
-------------------
Name
Page 6
<PAGE>
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES UNLESS
THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE ISSUER STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT
THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT.
WHITE CLOUD EXPLORATION, INC.
September 3, 1997 25,000 shares
Warrant for the Purchase of Shares of Common Stock
FOR VALUE RECEIVED, White Cloud Exploration, Inc. (the "Company"), a Utah
corporation, hereby certifies that Mark G. Hollo (the "Holder"), is entitled,
subject to the provisions of this warrant (the "Warrant"), to purchase from the
Company at any time, or from time to time, during the period commencing at 9:00
a.m., New York local time on September 3, 1997 and expiring at 5:00 p.m., New
York local time, on September 3, 2002, 25,000 fully paid and non-assessable
shares of Common Stock, $.001 par value ("Common Stock"), of the Company at an
initial price of $.01 per share of Common Stock.
The term "Common Stock" means the shares of Common Stock $.001 par value,
of the Company as constituted on the date of issuance of the Warrant (the "Base
Date"). The number of shares of Common Stock to be received upon the exercise of
this Warrant may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, and as adjusted from time
to time, are hereinafter sometimes referred to as "Warrant Stock." The term the
"Company" means and includes the corporation named above as well as (i) any
immediate or more remote successor corporation resulting from the merger or
consolidation of such corporation (or any immediate or more remote successor
corporation of such corporation) with another corporation, and/or (ii) any
corporation to which such corporation (or any immediate or remote successor
corporation of such corporation) has transferred all or substantially all of its
property or assets as an entirety or substantially as an entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
<PAGE>
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
This Warrant is issued in connection with the purchase and sale of the
Warrant and a senior subordinated promissory note of the Company (the "Note") to
the Holder.
1. Exercise of Warrant. This Warrant may be exercised in whole or in part
at any time, or from time to time, during the period commencing at 9:00 a.m.,
New York local time on September 3, 1997 and expiring at 5:00 p.m., New York
local time, on September 3, 2002 (the "Warrant Exercise Term"), or, if such day
is a day on which banking institutions in the City of New York are authorized by
law to close, then on the next succeeding day that shall not be such a day, by
presentation and surrender hereof to the Company at its principal office, or at
the office of its stock transfer agent, if any, with the Warrant Exercise Form
attached hereto duly executed and accompanied by payment (either in cash or by
Company check, payable to the order of the Company) of the Exercise Price for
the number of shares of Common Stock specified in such Form and instruments of
transfer, if appropriate, duly executed by the Holder or his or her duly
authorized attorney. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder. Upon receipt by the Company of
this Warrant, together with the Exercise Price, at its office, or by the stock
transfer agency of the Company at its office, in proper form for exercise, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder. The Company
shall pay any and all documentary stamp or similar issue payable in respect of
the issue or delivery of shares of Common Stock on exercise of this Warrant.
2. Reservation of Shares. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and other securities and
property) from time to time receivable upon exercise of this Warrant. All such
shares (and other securities and property) shall be duly authorized and, when
issued upon such exercise, shall be validly issued, fully paid and
non-assessable and free of all preemptive rights.
3. Restrictions upon Transferability of Warrant.
3.1 Restrictions Upon Transferability. Subject to the terms and
provisions of the registration rights provisions contained in Section 7 hereof
(such rights are referred to as the "Registration Rights"), the shares of Common
Stock issuable upon exercise of this Warrant are not presently, and upon their
issuance may not be, registered under the Securities Act of 1933, as amended
(the "Act").
4. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall issue one additional share of
-2-
<PAGE>
Common Stock in lieu of each fraction of a share otherwise called for upon any
exercise of this Warrant.
5. No Redemption. This Warrant is not redeemable by the Company.
6. Anti-Dilution Provisions.
6.1 Adjustment for Dividends in Other Securities, Property, Etc.;
Reclassification, Etc. In case at any time or from time to time after the Base
Date, the holders of Common Stock (or any other securities at the time
receivable upon the exercise of this Warrant) shall have received, or on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive without payment thereof: (a) other or
additional securities, or property (other than cash) by way of dividend, (b) any
cash paid or payable except out of earned surplus of the Company at the Base
Date as increased (decreased) by subsequent credits (charges) thereto (other
than credits in respect of any capital or paid-in surplus or surplus created as
a result of a revaluation of property) or (c) other or additional (or fewer)
securities or property (including cash) by way of stock-split, spin-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement (other than in each such case additional shares of Common Stock or
any securities convertible into or exchangeable for Common Stock or any rights
or options to acquire any of the foregoing, adjustments in respect of which
shall be covered by Section 6.2), then, and in each such case, the Holder of
this Warrant, upon the exercise thereof as provided in Section 1, shall be
entitled to receive the amount of securities and property (including cash in the
cases referred to in clauses (b) and (c) above) which such Holder would hold on
the date of such exercise if on the Base Date it had been the holder of record
of the number of shares of Common Stock (as constituted on the Base Date)
subscribed for upon such exercise as provided in Section 1 and had thereafter,
during the period from the Base Date to and including the date of such exercise,
retained such shares and/or all other additional (or fewer) securities and
property (including cash in the cases referred to in clauses (b) and (c) above)
receivable by it as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 6.2.
6.2 Adjustment for Reorganization, Consolidation, Merger, Etc. In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities and property to which such Holder would
have been entitled upon such consummation if such Holder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as provided
in Section 6.1; in each such case, the terms of this Warrant shall be applicable
to the securities or property receivable upon the exercise of this Warrant after
such consummation.
-3-
<PAGE>
6.3 Notices of Record Date, Etc. In case:
(a) the Company shall take a record of the holders of its
Common Stock (or other securities at the time receivable upon the exercise of
the Warrant) for the purpose of entitling them to receive any dividend (other
than a cash dividend payable out of earned surplus) or other distribution, or
any right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company (other than a
stock split or reverse stock split), any reclassification of the capital stock
of the Company, any consolidation or merger of the Company with or into another
corporation (other than a merger for purposes of change of domicile) or any
conveyance of all or substantially all of the assets of the Company to another
corporation; or
(c) of any voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed to
each Holder of the Warrant at the time outstanding a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any,
is to be fixed, as to which the holders of record of Common Stock (or such other
securities at the time receivable upon the exercise of the Warrant) shall be
entitled to exchange their shares of Common Stock (or such other securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to the
date therein specified and this Warrant may be exercised prior to said date
during the term of the Warrant no later than five days prior to said date.
7. Registration Rights.
7.1. Incidental Registration Rights. At any time commencing on the
date of the issuance of this Warrant, if the Company shall determine to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale of any of its
securities by it or any of its security holders (other than a registration
statement on Form S-4, S-8 or other limited purpose form), the Company will give
written notice of its determination to the holders of the Warrant. Upon the
written request from any of the Holders (the "Responding Holders") within twenty
(20) days after receipt of any such notice from the Company, the Company will,
except as herein provided, cause the shares of Common Stock underlying this, and
all like kind Warrants (the "Warrant Securities") owned by the Responding
Holders to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition by the prospective seller or
sellers of the Warrant Securities to be so registered; provided,
-4-
<PAGE>
however, that nothing herein shall prevent the Company from, at any time,
abandoning or delaying any registration. If any registration pursuant to this
Section 7.1 shall be underwritten in whole or in part, the Company shall require
that the Warrant Securities requested for inclusion pursuant to this Section 7.1
be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters.
Notwithstanding the foregoing, if the managing underwriter
determines and advises in writing that the inclusion of all Warrant Securities
proposed to be included in the underwritten public offering, together with any
other issued and outstanding securities proposed to be included therein by
holders of securities other than the Responding Holders, would interfere with
the successful marketing of such securities, then the number of such Warrant
Securities that the managing underwriter believes may be sold in such
underwritten public offering shall be allocated for inclusion in the
registration statement in the following order of priority, subject to any
existing contractual rights of the Company: (i) the securities being offered by
the Company, (ii) the number of securities held by other holders, including
Responding Holders, on a pro rata basis, based upon the number of securities
sought to be registered by each such other holder or Responding Holder. The
Warrant Securities that are excluded from the underwritten public offering shall
be withheld from the market by the Responding Holders for a period, not to
exceed 180 days, that the managing underwriter reasonably determines as
necessary in order to effect the underwritten public offering.
The Company shall pay the expenses described in Section 7.3 for
Registration Statements filed pursuant to this Section 7.1.
7.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 7.1 to effect the registration of Warrant
Securities under the Securities Act, the Holder shall deliver to the Company
such information that is reasonably needed by the Company to effect the
registration of Warrant Securities and the Company will:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and, with respect to Section 7.1, remain effective for such
period as may be reasonably necessary to effect the sale of such securities, not
to exceed nine months;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities as set
forth in Section 7.2(a) above;
(c) furnish to the holders of Warrant Securities participating in
such registration and to the underwriters of the securities being registered,
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as the holders and such
underwriters may reasonably request in order to facilitate the public offering
of such securities;
-5-
<PAGE>
(d) use its best efforts to register or qualify the Warrant
Securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the participating holders may reasonably
request in writing within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the Holders of Warrant Securities participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of the
holders of a majority of the Warrant Securities covered thereby, any amendments
or supplements to such registration statement or prospectus which, in the
opinion of counsel for such holders (and concurred in by counsel for the
Company), is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of Shares by such Holders;
(h) prepare and promptly file with the SEC and promptly notify the
holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at any time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise the holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
7.3 Expenses.
(a) With respect to an inclusion of Warrant Securities in a
registration statement pursuant to Section 7.1 hereof, all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
(as specified in paragraph (b) below) in connection therewith shall be borne by
the Company; provided, however, that the Holders participating in such
registration shall bear their pro rata share of the underwriting discount and
commissions and transfer taxes, and each holder shall be responsible for the
payment of such holder's legal fees.
-6-
<PAGE>
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in Section 7.3(a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdiction in which the securities to be offered are to be
registered and qualified. Fees and disbursements of counsel and accountants for
the selling holders not expressly included above shall be borne by such holders.
7.4 Indemnification.
(a) The Company will indemnify and hold harmless each holder of
Warrant Securities which are included in a registration statement pursuant to
the provisions of Section 7.1 hereof, its directors and officers, and any
underwriter (as defined in the Securities Act) for such holder and each person,
if any, who controls such Holder or such underwriter within the meaning of the
Securities Act, from and against, and will reimburse such Holder and each such
underwriter and controlling person with respect to, any and all loss, damage,
liability, cost and expense to which such Holder or any such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, damages liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage, liability,
cost or expenses arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by such Holder, such underwriter or such controlling
person in writing specifically for use in the preparation thereof.
(b) Each holder of Warrant Securities included in a registration
pursuant to the provisions of Section 7.1 hereof will indemnify and hold
harmless the Company, its directors and officers, any controlling person and any
underwriter thereof from and against, and will reimburse the Company, its
directors and officers, any controlling person and any underwriter thereof with
respect to, any and all loss, damage, liability, cost or expense to which the
Company or any controlling person and/or any underwriter thereof may become
subject under the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the statement
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished by or
on behalf of such holder specifically for use in the preparation thereof.
-7-
<PAGE>
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 7.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, that if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or in addition to
those available to the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from also representing
the indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to an indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnified party.
8. Adjustments of Exercise Price and Number of Shares.
8.1 Computation of Adjusted Price. Except as hereinafter provided,
in case the Company shall at any time after the date hereof issue or sell any
shares of Common Stock, including shares held in the Company's treasury and
shares of Common Stock issued upon the exercise of any options, rights or
warrants to subscribe for shares of Common Stock and shares of Common Stock
issued upon the direct or indirect conversion or exchange of securities for
shares of Common Stock, for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance or sale of such shares or
without consideration, then forthwith upon such issuance or sale, the Exercise
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by dividing
(A) an amount equal to the sum of (X) the product of (a) the total number of
shares of Common Stock outstanding immediately prior to such issuance or sale,
multiplied by (b) the Exercise Price in effect immediately prior to such
issuance or sale, plus, (Y) the aggregate of the amount of all consideration, if
any, received by the Company upon such issuance or sale, by (B) the total number
of shares of Common Stock outstanding immediately after such issuance or sale;
provided, however, that in no event shall the Exercise Price be adjusted
pursuant to this computation to an amount in excess of the Exercise Price
-8-
<PAGE>
in effect immediately prior to such computation.
For the purposes of any computation to be made in accordance with
this Section 8.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if such securities shall
be sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price) before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing similar services, or any
expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as a dividend or
other distribution on any stock of the Company) of shares of Common Stock for a
consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of shareholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than shares
of Common Stock into securities including shares of Common Stock shall be deemed
to involve the issuance of such shares of Common Stock for a consideration other
than cash immediately prior to the close of busi ness on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such shares of Common Stock shall be
determined as provided in subsection (ii) of this Section 8.1.
(v) The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
8.2 Options, Rights, Warrants and Convertible and Exchangeable Securities.
If the Company shall at any time after the date hereof issue options, rights or
warrants to subscribe for shares of Common Stock, or issue any securities
convertible into or exchangeable for shares of Common Stock, (i) for a
consideration per share less than the Exercise Price in effect immediately prior
to the issuance of such options, rights or warrants, or such convertible or
exchangeable securities or (ii) without consideration, the Exercise Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with the
-9-
<PAGE>
provisions of Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common Stock, as the
case may be, issuable under all the outstanding options, rights or warrants
shall be deemed to be issued and outstanding at the time all the outstanding
options, rights or warrants were issued, and for a consideration equal to the
minimum purchase price per share provided for in the options, rights or warrants
at the time of issuance, plus the consideration (determined in the same manner
as consideration received on the issue or sale of shares in accordance with the
terms of the Warrants), if any, received by the Company for the options, rights
or warrants, and if no minimum price is provided in the options, rights or
warrants, then the consideration shall be equal to zero; provided, however, that
upon the expiration or other termination of the options, rights or warrants, if
any thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (a) (and for the
purposes of subsection (v) of Section 8.1 hereof) shall be reduced by such
number of shares as to which options, warrants and/or rights shall have expired
or terminated unexercised, and such number of shares shall no longer be deemed
to be issued and outstanding, and the Exercise Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not have expired or terminated unexercised.
(b) The aggregate maximum number of shares of Common Stock issuable
upon conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined in
the same manner as consideration received on the issue or sale of shares of
Common Stock in accordance with the terms of the Warrants) received by the
Company for such securities, plus the minimum consideration, if any, receivable
by the Company upon the conversion or exchange thereof; provided, however, that
upon the termination of the right to convert or exchange such convertible or
exchangeable securities (whether by reason of redemption or otherwise), the
number of shares deemed to be issued and outstanding pursuant to this subsection
(b) (and for the purpose of subsection (v) of Section 8.1 hereof) shall be
reduced by such number of shares as to which the conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be issued and outstanding and the Exercise Price then in
effect shall forthwith be readjusted and thereafter be the price which it would
have been had adjustment been made on the basis of the issuance only of the
shares actually issued or issuable upon the conversion or exchange of those
convertible or exchangeable securities as to which the conversion or exchange
rights shall not have expired or terminated unexercised.
(c) If any change shall occur in the price per share provided for in
any of the options, rights or warrants referred to in subsection (a) of this
Section 8.2, or in the price per share at which the securities referred to in
subsection (b) of this Section 8.2 are convertible or exchangeable, the options,
rights or warrants or conversion or exchange rights, as the case may be, shall
be deemed to have expired or terminated on the date when such price change
became effective in respect of shares not theretofore issued pursuant to the
exercise or conversion or exchange thereof, and the Company shall be deemed to
have issued upon such date new options, rights or warrants or
-10-
<PAGE>
convertible or exchangeable securities at the new price in respect of the number
of shares issuable upon the exercise of such options, rights or warrants or the
conversion or exchange of such convert ible or exchangeable securities.
8.3 Excepted Issues and Sales. No adjustments pursuant to this
Section 8 shall be made in respect of (i) shares of Common Stock issued upon the
exercise of any option, warrant, convertible debt or other derivative security
of the Company issued and outstanding as of the date of this Warrant, (ii)
shares of Common Stock issuable pursuant to employee stock option plans, or
similar compensation plans, or pursuant to employment, consulting, advisory or
other similar agreements, (iii) shares of Common Stock underlying options and
warrants issued to investment banking firms, financial advisors, placement
agents or underwriters, (iv) shares of Common Stock offered to the public
pursuant to a registration statement under the Securities Act of 1933, as
amended and (v) shares of Common Stock issued pursuant to the acquisition of
another corporation or other entity by the Company by merger, purchase of
substantially all of such other corporation's or entity's assets, or by other
reorganization whereby the Company ends up owning, directly or indirectly,
greater than 50% of the voting power of such corporation or entity.
9. Legend. Upon exercise of any of the Warrants and the issuance of any of
the shares thereunder, all certificates representing shares shall bear on the
face thereof substantially the following legends, insofar as is consistent with
applicable law:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH SECURITIES UNLESS THE ISSUER
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE ISSUER STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT."
10. Applicable Law. The Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the State of New
York excluding the choice of law rules thereof.
11. Notices. Notices and other communications to be given to the Holder of
the Warrant evidenced by this certificate shall be deemed to have been
sufficiently given, if delivered or mailed, addressed to the Holder at 90 Park
Avenue, 39th Floor, New York, NY 10016 or at such other address as the Holder or
any successor holder shall have designated by written notice to the Corporation
as
-11-
<PAGE>
herein provided and if mailed, sent registered or certified mail, postage
prepaid. Notices or other communications to the Company shall be deemed to have
been sufficiently given if delivered by hand or mailed, by registered or
certified mail, postage prepaid, to White Cloud Exploration, Inc., 1050
Seventeenth Street, Denver Colorado 80265, or at such other address as the
Company shall have designated by written notice to such registered owner as
herein provided. Notice by mail shall be deemed to have been given upon
delivery, if delivered personally, five business days after mailing, if mailed,
or one business day after delivery to the courier, if delivered by overnight
courier service.
-12-
<PAGE>
IN WITNESS WHEREOF, White Cloud Exploration, Inc. has caused this Warrant
to be signed on its behalf, in its corporate name, by its duly authorized
officer, all as of the day and year first above written.
WHITE CLOUD EXPLORATION, INC.
By: /s/ Steven Signer
-------------------------
Authorized Officer
Attest:
By: /s/ Dev Mahanti
-----------------------
Secretary
STATE OF )
) ss.:
COUNTY OF )
On this ______day of ___________ 1997, before me, the undersigned
Notary Public, personally appeared _________________ _________________, who
being by me duly sworn did depose and say that he is (the) (a) ______________ of
WHITE CLOUD EXPLORATION, INC., the entity that executed the foregoing instrument
and that he executed such instrument by order of the Board of Directors, and
that he signed his name by like order.
------------------------
Notary Public
-13-
<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing ____________ shares of Common Stock of White Cloud
Exploration, Inc. and hereby makes payment at the rate of $ ___ per share, or an
aggregate of $ ________________ in payment therefor.
- ------------------------- ----------------------------
Name of Registered Holder Signature, if held jointly
- ------------------------- ----------------------------
Signature Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered Holder of the within Warrant)
Name___________________________________________________________
(Please typewrite or print in block letters)
Address _______________________________________________________
_______________________________________________________
Social Security or Taxpayer
Identification Number ________________________________________
-14-
<PAGE>
ASSIGNMENT FORM
The Holder hereby assigns and transfers unto
Name __________________________________________________________
(Please typewrite or print in block letters)
Address _______________________________________________________
_______________________________________________________
the right to purchase Common Stock of White Cloud Exploration, Inc. represented
by this Warrant to the extent of ______________ shares of Common Stock as to
which such right is exercisable and does hereby irrevocably constitute and
appoint ____________________ Attorney, to transfer the same on the books of
White Cloud Exploration, Inc. with full power of substitution in the premises.
Date: ___________________, 199_
---------------------------
Name of Registered Holder
---------------------------
Signature
---------------------------
Signature, if held jointly
-15-
