SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-13826
PEERLESS INDUSTRIAL GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
MINNESOTA 41-1456350
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2430 METROPOLITAN CENTRE, 333 SOUTH SEVENTH STREET, MINNEAPOLIS, MINNESOTA 55402
(Address of Principal Executive Offices, including Zip Code)
(612) 305-0339
(Issuer's Telephone Number, including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK (NO PAR VALUE)
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $45,002,000.
The aggregate market value of the voting stock held by non-affiliates of
the issuer based on the average bid and asked prices of the common stock as
reported on the Bulletin Board operated by the National Association of
Securities Dealers, Inc. as of March 3, 1997 was approximately $8,624,583.
The number of shares of the common stock of the registrant outstanding as
of March 3, 1997 was 6,272,424, including 1,227,273 Class B Common Shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
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Page
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PART I....................................................................................... 1
ITEM 1. DESCRIPTION OF BUSINESS.................................................... 1
ITEM 2. DESCRIPTION OF PROPERTY.................................................... 4
ITEM 3. LEGAL PROCEEDINGS.......................................................... 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................ 4
PART II...................................................................................... 5
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.................................................................... 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................................. 6
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA................................. 12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE....................................................... 31
PART III..................................................................................... 31
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934....................................................................... 31
ITEM 10. EXECUTIVE COMPENSATION..................................................... 33
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............. 35
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 37
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K........... 38
</TABLE>
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
STRATEGIC REPOSITIONING OF THE COMPANY
In June 1994, Discus Acquisition Corporation, now Peerless Industrial
Group, Inc. (the "Company"), sold to Fuddruckers Inc. its nine franchised
Fuddruckers(R) restaurants for a purchase price of approximately $5.5 million.
The restaurants sold included nine units operated by the Company's subsidiaries
in Minneapolis-St. Paul (4), Milwaukee (1), St. Louis (3) and Omaha (1). The
Company's remaining operations and property consisting of a Fuddruckers(R)
restaurant operated in Cottage Grove, Minnesota and a limited partnership
interest in a non-Fuddruckers restaurant facility were disposed of in 1995. The
Company used the major portion of the net proceeds from the sale of the
restaurants after payment of obligations, together with other equity and debt
financing raised in 1995 and 1996, to acquire Peerless Chain Company in December
1995.
The Company was incorporated in Minnesota in 1983. Its principal
executive offices are located at 2430 Metropolitan Centre, 333 South Seventh
Street, Minneapolis, Minnesota 55402. Its telephone number is (612) 371-9650.
Effective May 1, 1996, Discus Acquisition Corporation was renamed
Peerless Industrial Group, Inc.
GENERAL
The Company's business is conducted through its operating subsidiaries,
Peerless Chain Company, founded in 1917 in Winona, Minnesota, and Peerless Chain
of Iowa Inc. (together "Peerless"). The business of Peerless is comprised of
one industry segment: the manufacture and sale of a varied line of traction
products, all types of hardware and industrial chain, and wire form products in
various lengths, diameters and shapes.
Principal Products, Markets and Methods of Distribution. Peerless'
products, consisting primarily of hardware and industrial chain, traction
products (tire chains) and wire form products, are sold to customers throughout
the United States and most of Canada with expanding sales in Latin America. Its
major customers include retailers and distributors engaged in selling
automotive, farm, hardware and home center products, industrial and specialty
distributors and original equipment manufacturers ("OEM").
Traction Products. Peerless' traction products primarily include
automobile, farm tractor, truck, snowblower and garden tractor tire chains
available in numerous sizes, weights, and cross link designs. Traction cable
products for automobiles and light trucks are also manufactured and sold.
Hardware and Industrial Chain. These chains include a broad variety of
both welded and unwelded chain available in various link sizes and designs,
finishes and wire diameters up to 13". Many of these chains are sold in
straight, continuous lengths of 100 feet or more and are merchandised with
special packaging and displays to facilitate resale by retail customers. A
substantial portion of Peerless' chain sales is comprised of chain assemblies
fabricated by Peerless with attachments. Applications for Peerless' lower
strength chains and chain assemblies include an extremely broad range of home,
farm, shop and recreational uses, such as for animal restraints, playground
equipment, padlocks, boats, sign hangings, towing, load binding and
comparatively light lifting. Higher strength chain and chain assemblies have
many heavy duty industrial and commercial applications, such as auto tie downs,
flailing, heavy binding, and heavy overhead lifting and hoisting.
Wire Form Products. Peerless has the wire forming, welding, flattening,
punching and plating capacities to manufacture a wide variety of wire form
products calling for a continuous piece or pieces of wire. Principal examples of
its numerous products include axles for toys, peg board hooks, "S" hooks, soft
tie-down hooks and hitch pin clips. A significant portion of Peerless wire form
products is custom designed to meet specific customer requirements. The balance
of its wire form products is sold to a broad range of retail customers and to
support Peerless traction products.
Sources and Availability of Raw Materials. Peerless' operations are
based upon the continuing availability of steel, primarily in the form of steel
wire rod, special wire, chain attachments and forgings, all of which are now
generally available to it at competitive prices from alternative sources of
supply.
Patents. Peerless has four U.S. patents relating to its products.
Management believes its success depends primarily on the proprietary know-how,
the manufacturing skills and marketing abilities of its employees.
SALES AND DISTRIBUTION
Peerless' sales network presently consists of direct employee sales
people and selected manufacturers' representative firms. Major retail,
distributor and OEM customers are served from Peerless' manufacturing facilities
in Minnesota and Iowa and strategically located company distribution centers
within the United States. Foreign sales are generally served through
distributors. Peerless-owned distribution centers are maintained in Atlanta,
Georgia; Dallas, Texas; and Sparks, Nevada; with public warehouse facilities
utilized in Denver, Colorado; and York, Pennsylvania to provide regional
customers with convenient, quick service. Many sizable customers have been added
over the past several years due to improved deliveries, a higher level of
customer service, continuing efforts to become more cost effective, adaptation
of information technology and expanded product assortments. Peerless does not
make a material portion of its annual sales to any government.
Peerless has developed a major relationship with its primary customer,
Wal-Mart, which accounted for approximately 22% and 18% of total sales for
fiscal years 1996 and 1995, respectively. While other significant customers are
served by Peerless, management believes that the loss of one such customer would
not materially affect operating results.
Seasonal Operations. Apart from traction products, Peerless' business
is not seasonal in nature. The major portion of traction product sales occurs
from September to January in anticipation of consumer and commercial use during
the winter season. These sales also fluctuate according to winter severity.
Despite these seasonal aspects, manufacture of traction products is relatively
even throughout the year with inventory stockpiled until needed.
Backlog. Since purchase orders for Peerless products are generally
processed and shipped within one to three weeks, Peerless' backlog of unfilled
orders is not significant to its business. It generally endeavors to maintain a
30 to 60 day inventory of standardized products, work-in-process and raw
materials. Backlog as of December 31, 1996 was $2,754,000, as compared to
$3,954,000 on the same date in 1995. See Item 6 in this Form 10-KSB for a
discussion of the economic and climatic conditions which contributed to this
decrease.
COMPETITION
Peerless is subject to substantial competition with respect to all of
its product groups. Management believes it is one of the major manufacturers of
hardware and industrial chain in the country. There are four other significant
manufacturers of these products, which are part of large companies and have
greater financial resources than Peerless. There are several other smaller
competitors which are quite cost effective for the products they manufacture. In
the absence of published statistics for the industry or for specific
competitors, it is not possible to state reliably Peerless' relative position in
the industry, although management believes it is the third leading producer of
chain products in the country. Peerless also competes with many small,
independent or local firms, as well as with a number of larger national firms,
in the manufacture of wire form products, but it does not believe that it is a
significant entity in this industry. Management believes that its products are
generally competitive in price, product quality and performance, and speed of
manufacture and delivery, the principal competitive factors in the foregoing
industries.
Peerless maintains an engineering staff, headed by its Director of
Engineering. This staff includes design and industrial engineers, draftsmen and
a metallurgist. These employees expend a substantial portion of their time
designing and developing new equipment or improving the operation of existing
equipment to upgrade product quality. Although engineering, research and
development expenditures have not been significant in themselves, these
expenditures and the need for ever greater productive capacity have led to
substantial capital expenditures and are anticipated to lead to substantial new
and replacement equipment expenditures annually in the immediately foreseeable
future. Such expenditures during 1996 were approximately $1,555,000 compared to
$3,174,000 for Peerless' fiscal 1995 (including expenditures prior to the
acquisition by the Company).
COMPLIANCE WITH ENVIRONMENTAL PROVISIONS
Peerless believes that compliance with federal, state and local
statutes, ordinances and regulations, which have been enacted or adopted to
regulate the discharge of materials into the environment, will not have a
material adverse effect upon its capital expenditures, earnings or competitive
position in the foreseeable future, and that it is presently in substantial
compliance with all such provisions applicable to it. Accordingly, Peerless does
not anticipate the need to make any material capital expenditures for
environmental control facilities in the foreseeable future.
EMPLOYEES
At December 31, 1996, Peerless had 322 employees, of which 320 were
full-time, 223 of whom were engaged in production, 16 in engineering, 28 in
sales, 30 in clerical and 25 in administrative capacities. Two persons were
employed in various capacities on a part-time basis.
Approximately 195 employees at Peerless' Winona, Minnesota plant are
represented by the Winona Chain Makers, Local 1030, affiliated with the
International Association of Machinists and Aerospace Workers, under an
agreement effective September 1, 1994, expiring September 1, 1997. Peerless
experienced an eleven-day strike in September 1991. Management believes that its
current relations with its union and non-union employees are good.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Harry W. Spell 73 Chairman and Director
William H. Spell 40 Chief Executive Officer and
Director
Jan C. van Osnabrugge 54 President
Robert E. Deter 52 Chief Financial Officer
Bruce A. Richard 67 Secretary and Director
Harry W. Spell has been a Director of the Company since 1994 and is the
father of William H. Spell. He has been Chairman of the Board of Eagle Pacific
Industries, Inc. ("Eagle Pacific") since 1992. Eagle Pacific manufactures PVC
pipe and polyethylene tubing in plants in Nebraska, Oregon and Utah. He was
employed by Northern States Power from 1949 until August 1988, when he retired
from all positions. Mr. Spell was Senior Vice President - Finance and Chief
Financial Officer of Northern States Power Company from May 1983 until April
1988. Mr. Spell currently serves as a Director of Appliance Recycling Centers of
America, Inc.
William H. Spell has been a Director of the Company since 1994 and is
the son of Harry W. Spell. He has been Chief Executive Officer of Eagle Pacific
and a member of its Board of Directors since January 1992. From October 1990
through May 1993, Mr. Spell was a founder and President of National Acquisition
Corp., a public company which merged with Garment Graphics, Inc., a designer,
producer and marketer of silk-screen imprinted, embroidered and decorative
activewear. From 1981 to May of 1988, Mr. Spell was Vice President and Director
of Corporate Finance for John G. Kinnard and Company, Incorporated, a regional
investment banking firm. Mr. Spell holds a BS degree and an MBA from the
University of Minnesota. Mr. Spell is subject to an employment agreement with
the Company dated December 13, 1995.
Jan C. van Osnabrugge has been employed by Peerless since January 1994
and served as President of the Company since December 1995. Prior to joining
Peerless, he served as Chief Executive Officer of Wolfking Belam BV (NL) from
September 1992 through September 1993. Between November 1990 and September 1992
he was employed by Stork RMS BV and Stork NON BV in various executive
capacities, including Chief Executive Officer and Vice President of Sales and
Marketing. Mr. van Osnabrugge is subject to an employment agreement with the
Company dated December 13, 1995.
Robert E. Deter has been employed by Peerless since 1979. Mr. Deter
served as Peerless' Controller from 1987 to April 1995 and as its Chief
Financial Officer from April 1995 to December 1995, when he was named Chief
Financial Officer of the Company. Mr. Deter is subject to an employment
agreement with the Company dated December 13, 1995.
Bruce A. Richard has been a Director of the Company since 1994 and
currently serves as its Secretary. He has been a Director of Eagle Pacific since
March 1992, is its Vice Chairman, and has served as its Vice Chairman,
Secretary, Treasurer and a Director since September 1993. From 1985 through
October 1986, he was President and Chief Operating Officer of Northern States
Power Company, from which duties he retired. From July 1954 through 1984, Mr.
Richard held various management and other positions with Northern States Power
Company.
All executive officers are elected by the Company's Board of Directors
and serve subject to termination, resignation or until their successors are duly
elected.
ITEM 2. DESCRIPTION OF PROPERTY
The executive offices of Peerless Industrial Group, Inc. are located at
2430 Metropolitan Centre, 333 South Seventh Street, Minneapolis, Minnesota. The
principal manufacturing operations of Peerless are located at a one acre site
located in Winona, Minnesota. The Minnesota manufacturing facility consists of a
324,700 square foot building and an adjacent 13,000 square foot office building
which is not currently utilized by Peerless. The facility is leased from CPA
Peerless Limited Partnership under a full net lease expiring in July 2011 and
providing for monthly rent in the amount of $121,952 subject to increases tied
to the Consumer Price Index in 2001 and 2006. Peerless' Iowa manufacturing
facility consists of a 30,000 square foot building located in Manchester, Iowa,
leased from Manchester Enterprises, Inc., under a lease expiring in 2005. The
Manchester lease provides for an annual net rent of approximately $83,040.
Peerless also leases warehouse facilities in Manchester, Iowa; Atlanta, Georgia;
Dallas, Texas; and Sparks, Nevada.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to litigation in the ordinary course of its
business, generally involving product liability claims for which the Company
submits claims to its product insurance carrier. The Company does not expect
that any pending claims or proceedings will have a material adverse effect upon
the Company or its results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the Company's
most recently completed fiscal year.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded under the symbol "PEER" on a
limited basis in the over-the-counter market on the Bulletin Board, an
interdealer electronic quotation system operated by the National Association of
Securities Dealers, Inc. for securities not quoted on the Nasdaq SmallCap Market
or the Nasdaq National Market System. From August 1985 until June 1992, the
Company's Common Stock was traded on Nasdaq under the symbol "DISC." On June 17,
1992, the Company's Common Stock was delisted from Nasdaq because its capital
and surplus and the bid price of its Common Stock did not meet requirements for
continued listing. Bid prices reflect interdealer prices, without retail
markups, markdowns or commissions and may not reflect actual transactions.
1995 1996
---------------- ------------------
HIGH LOW HIGH LOW
---- --- ---- ---
Calendar Quarter
First 7/8 7/8 1-7/8 1-5/8
Second 1-1/8 7/8 2-1/8 1-7/8
Third 1-3/4 1 1-1/2 1-1/8
Fourth 1-1/2 1-1/4 1-5/16 1-5/16
The loss of the Nasdaq listing for the Company's Common Stock has had
an adverse effect on the market for such shares because the shares are
classified as a "designated security" under Rule 15c2-6 of the Securities and
Exchange Commission (the "Commission"). Under such rule, a broker or dealer may
not effect transactions in a designated security unless the transaction is
exempt or the broker or dealer has made certain suitability determinations,
obtained information from the purchaser, and maintains certain information, all
procedures which discourage trading in the Company's shares.
The Company has paid no dividends on its Common Stock since its
inception, and the Board of Directors intends to retain any earnings for use in
operations for the foreseeable future. At March 20, 1997, the Company had 376
Class A shareholders of record and one Class B shareholder of record.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES," "ANTICIPATES," "EXPECTS," AND "INTENDS," OR
COMPARABLE TERMINOLOGY. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED. POTENTIAL PURCHASERS OF THE COMPANY'S SECURITIES ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS WHICH ARE QUALIFIED IN
THEIR ENTIRETY BY THE CAUTIONS AND RISKS DESCRIBED HEREIN.
TWO YEAR SUMMARY
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1995
HISTORICAL HISTORICAL(1) PRO FORMA (2)
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 45,002 $ 1,419 $ 41,951
Cost of sales 36,495 1,162 33,798
----------- ----------- -----------
Gross profit 8,507 257 8,153
Selling, general and
administrative expenses 7,327 513 7,354
----------- ----------- -----------
Operating income (loss) 1,180 (256) 799
Interest expense (1,543) (32) (1,404)
Other income 25 116 304
----------- ----------- -----------
Loss before income taxes (338) (172) (301)
Benefit (provision) for
income taxes 123 (30) (30)
----------- ----------- -----------
Net loss (215) (202) (331)
=========== =========== ===========
Net loss per common share $ (.03) $ (.08) $ (.05)
=========== =========== ===========
Weighted average number of
common shares outstanding (3) 6,223,490 2,508,334 6,221,174
=========== =========== ===========
</TABLE>
BALANCE SHEET DATA
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1996 1995
------- -------
Working Capital $ 3,213 $ 1,923
Total Assets 38,395 39,497
Long-term debt, less current portion 6,861 7,767
Shareholders' Equity 6,278 5,094
(1) Includes the results of operations of the Company's wholly-owned
subsidiary, Peerless Chain Company, for the period from date of
acquisition (December 15, 1995) to December 31, 1995.
(2) The pro forma statement of operations for the year ended December 31,
1995 is based on the assumption that the acquisition had occurred on
January 1, 1995. The pro forma data includes the effects of adjustments
to historical asset values as required by the purchase accounting
method, adjustments to interest expense to reflect financing costs of
the acquisition, amortization of intangibles related to the acquisition
and the related income tax effect of the preceding items (see Note 2 to
the Consolidated Financial Statements). These pro forma results have
been prepared for comparative purposes only and do not purport to be
indicative of the Company's consolidated operating performance had the
acquisition been made at January 1, 1995, or the results which may
occur in the future.
(3) As noted in the Consolidated Statement of Shareholders' Equity and
discussed in Note 8 to the Consolidated Financial Statements, in early
January 1996, 1,260,000 shares of common stock were sold for total
proceeds of $1,386,000. The January 1996 equity sale is deemed an
integral part of the December 15, 1995 acquisition of Peerless and,
accordingly, proceeds have been incorporated in the comparative
presentations set forth above, with respect to pro forma earnings per
share and weighted average number of shares for the fiscal year ended
December 31, 1995.
GENERAL
On December 15, 1995, the Company completed the acquisition of Peerless
from Bridgewater Resources Corp. Peerless, a manufacturer and distributor of
long-standing branded consumer and industrial chain and other products,
represents the "continuing operations" of the Company. Details summarizing the
acquisition of Peerless and the related financing are as follows:
* The purchase price of Peerless was approximately $23 million,
of which approximately $20.5 million was cash, including $1.2
million funded in January 1996, with the remaining $2.5
million consisting of a seller subordinated note which
requires only interest payments until it matures in December
1998.
* The Company had approximately $2.3 million in shareholders'
equity shortly before the acquisition. This was supplemented
by approximately $4.2 million of additional equity that was
raised through a private placement of 3.8 million shares of
common stock at $1.10 per share. The $2.3 million of
pre-acquisition equity represented $0.97 per share before the
private placement. The new shares were placed with a select
group of institutional and accredited individual investors.
The price of $1.10 per share was determined by the Board of
Directors taking into account the book value per share
beforehand, the price of the public stock, and the demand for
Company stock in the marketplace. The Board of Directors also
obtained an opinion/fairness letter from Summit Investment
Corp.
* The Company obtained a $23.7 million senior credit facility
from CIT Business Credit ("CIT"). CIT is a joint venture of
Dai-Ichi Kangyo Bank of Japan and Chemical Bank of New York.
The credit facility includes $6.7 million in term loans (the
"term loans"), a $13 million revolving line of credit (the
"revolver"), and a $4 million capital investment line of
credit (the "CAPEX line of credit") which can be used for
capital expenditures. The Company used the term loans and
approximately $8 million of the revolver to complete the
acquisition, resulting in an aggregate of approximately $15
million borrowed under the CIT senior credit facility. In
addition to the amounts paid to the seller, approximately $1.8
million of total debt placement and transaction costs were
incurred in 1995 and 1996.
Prior to June 7, 1994, the Company operated ten Fuddruckers(R)
restaurants located in Minnesota, Missouri, Nebraska and Wisconsin pursuant to
individual restaurant franchise agreements with Fuddruckers, Inc.
("Fuddruckers"). All ten restaurants were either sold or closed and were
reported as discontinued operations in 1994. Certain assets held for disposition
at the end of 1994 were disposed of in 1995, and the completion and settlement
of these dispositions were not materially different from the amounts recorded as
"net assets held for disposition" in the Company's 1994 financial statements.
Effective July 25, 1995, the Board of Directors voted to change the
Company's fiscal year end from the last Sunday in December of each year to
December 31. This change in financial reporting did not have a material impact
on the Company's reported results of operations or cash flows for the years
ended December 31, 1995, or interim periods in 1995 subsequent to the change.
RESULTS OF OPERATIONS
The discussion below compares the consolidated statement of operations
for the year ended December 31, 1996, to the unaudited pro forma consolidated
statement of operations for the year ended December 31, 1995, assuming that the
acquisition of Peerless had taken place on January 1, 1995. The 1995 proforma
results may not be indicative of results that actually would have occurred had
the acquisition taken place at the beginning of the period presented or of
results which may occur in the future.
COMPARISON OF CONTINUING OPERATIONS
In 1995, prior to the acquisition of Peerless, the Company earned
approximately $116,000 on cash and cash equivalents. The Company utilized all
such funds in connection with the acquisition of Peerless, and accordingly, does
not anticipate interest income of any significance in the future.
The Company's continuing operations are solely the operations of
Peerless, which was acquired on December 15, 1995. Accordingly, the Company's
fiscal year ended December 31, 1995, included less than 10 business days of the
operations of Peerless, which are not representative of any indication of
interim operating results largely due to the impact of lower levels of
production and shipping activity during the holiday season.
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
---------------------------------------------------------------
HISTORICAL FISCAL 1996 PRO FORMA FISCAL 1995
------------------------ -----------------------
% OF % OF
DOLLARS NET SALES DOLLARS NET SALES
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Net sales $ 45,002 100.0 $ 41,951 100.0
Gross profit 8,507 18.9 8,153 19.4
-------- ------ -------- ------
Selling, general and
administrative expenses 7,327 16.3 7,354 17.5
Operating income 1,180 2.6 799 1.9
-------- ------ -------- ------
Interest expense 1,543 3.4 1,404 3.3
Other income 25 .1 304 .7
-------- ------ -------- ------
Loss before income taxes (338) (.8) (301) (.7)
Benefit (provision) for income taxes 123 (30)
-------- ---------
Net loss (215) (.5) (331) (.8)
======== =========
Net loss per common share (.03) (.05)
======== =========
</TABLE>
NET SALES
Net sales and overall shipment volume increased by $3,051 or 7.3% to
$45,002 for the year ended December 31, 1996, principally due to a strong
increase in tractor chain demand in the first and fourth quarter of 1996 as the
result of a late severe winter in 1995 in the Northeastern United States and an
early severe winter in 1996 in the Northwestern and Midwestern United States. In
addition, Peerless introduced its cordage product lines, which are sold through
existing distribution channels, in the second quarter of 1996. The cordage
product lines grew steadily during 1996 and are expected to continue growing in
the next twelve months. The core chain product line experienced strong demand in
the third and fourth quarters of 1996 compared to weaker core chain product
sales in the first two quarters of 1996. Management expects that the core chain
products will continue to experience moderate increases during the next twelve
months reflecting the general growth in the overall economy. The increases in
sales from the various product lines discussed above were offset by lower sales
in the wire form business where Peerless continued to eliminate certain product
lines with low margins. The discontinued product lines represented $265 in sales
in 1995. In addition, sales of debarking chain products remained flat during the
first three quarters of 1996 due to the overabundance of wood chips already
available in the market, reducing the need for Peerless debarking products.
Peerless experienced increasing sales in the debarking product line towards the
end of 1996 and anticipates growth from this area in 1997. Actual sales could
materially differ from those expressed in the foregoing forward-looking
statements. Actual sales are influenced by many factors including weather, and
the corresponding effect on Peerless' estimates of net product shipments in
1997, and selling prices, and could be negatively impacted by soft economic
conditions or downturns in selected markets served, including the OEM debarking
specialty products sales.
Peerless has over 2,000 customers with approximately 500 active
accounts greater than $10,000 in annual sales. Of these active accounts, 85%
have been customers for at least three years. Wal-Mart Stores, Inc.
("Wal-Mart"), a customer for over 25 years, accounted for approximately 22% and
18% of 1996 and 1995 net sales, respectively. Peerless is the sole source
supplier for Wal-Mart's chain, traction and packaged peg wire form products. The
remaining top four customers accounted for approximately 8% and 7% of 1996 and
1995 net sales, respectively, with no one account representing more than 5% of
total sales.
GROSS PROFIT
Gross profit as a percentage of sales decreased to 18.9% in 1996,
compared to 19.4% in 1995, principally as a result of the recognition of
amortization of approximately $1.8 million of the Peerless business acquisition
purchase price allocated to opening January 1, 1995 inventories of finished
goods and work-in-process acquired in a finished or semi-finished state as part
of the Peerless acquisition. This step-up in inventory value was amortized based
on the estimated inventory turns and was fully amortized in 1996. Excluding the
effects of the inventory step-up amortization, gross profit would have been
$10,082 or 22.4% of net sales for the year in 1996 compared to $9,953 or 23.7%
of pro forma net sales in 1995. The decrease in gross margin was primarily due
to competitive pricing pressures. Peerless successfully reduced certain
production costs in the latter half of 1996 by reducing headcount and expects
that gross profit margins will continue to reflect improvements based on the
production cost reductions.
The Peerless employees working in manufacturing operations,
constituting approximately 60% of the total workforce, are employed under a
union agreement through September 1997. This union agreement contains annual
wage increases of 2.0 to 2.5%, which is relatively consistent with past years.
Peerless cannot predict if it will be able to increase product prices or
identify and implement labor efficiencies necessary to maintain historical gross
margins adequate to meet the contractual increases in cost of labor.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased by $27 to $7,327
or 16.3% of net sales in 1996 compared to $7,354 or 17.5% of net sales in 1995.
The decrease in selling, general and administrative expenses in 1996 is
primarily attributed to reductions in headcount. The Company expects selling,
general and administrative costs to continue to stay relatively stable in 1997
and to decrease as a percentage of net sales. Actual selling, general and
administrative expenses are dependent on many factors, including achievement of
the Company's sales objectives and the ability to attract and retain quality
sales and administrative team members.
INTEREST EXPENSE
Interest expense increased by $139 to $1,543 in 1996, compared to a pro
forma expense of $1,404 in 1995. Interest expense increased due to increased
borrowing levels to support higher production and additional capital
expenditures in 1996.
OTHER INCOME
Other income in 1995 principally consisted of a gain realized on the
disposition of certain production equipment no longer needed in Peerless' wire
form manufacturing operations. Gains realized on the disposition of equipment in
1996 were minimal.
PROVISION FOR INCOME TAXES
The provision in 1995 reflects minimum required state taxes. The 1996
benefit represents federal and state taxes at the statutory rates.
LIQUIDITY AND CAPITAL RESOURCES
As described under the caption "General" above, the Company acquired
Peerless on December 15, 1995, in a leveraged transaction, utilizing
approximately $2.3 million of existing cash and cash equivalents that originated
in June 1994 from the sale of its discontinued restaurant operations, $4.2
million in equity raised in late 1995 and early 1996, and approximately $16.5
million in lender and seller financing. See Note 4 to the Company's Consolidated
Financial Statements for further details as to the Company's financing
arrangements.
At December 31, 1996, only the seller financing of $2.5 million carries
a fixed interest rate (8%) payable monthly, which represents a relatively minor
portion of the overall debt incurred to acquire and operate Peerless. The
Company's CIT floating rate financing totaled approximately $14.2 million at
December 31, 1996 and bears interest payable monthly that floats at rates
ranging from 0.5% to 2.5%, over the bank's reference rate. Accordingly, the
Company is subject to interest rate fluctuations. In addition, $6.7 million of
the original CIT term financing requires monthly scheduled principal repayments.
The $2.5 million of seller financing requires no principal repayment until
maturity in December 1998. The Company is regarded as highly leveraged but
believes the cash flows from continuing operations are adequate to fund debt
service.
Based on an evaluation of operating needs, market conditions and cash
flows of the Company, the Company expects to expend approximately $2.4 million
in capital expenditures during 1997 to add manufacturing capacity and to replace
older equipment. The entire amount is intended to be funded by cash flows
generated from operations, although if necessary, the Company will be able to
borrow up to 75% of the expected capital expenditures under the $3.25 million
remaining availability under its $4 million CAPEX line of credit with CIT.
Actual capital expenditures are influenced by many factors, including product
demands discussed under the caption "Net Sales" above. As a result, actual
capital expenditures could materially differ from those expressed in the
foregoing forward-looking statements.
Management believes that cash generated from operations and amounts
available under the revolver and CAPEX line of credit will be sufficient to fund
its anticipated capital expenditures and required debt repayments for the
foreseeable future. Funding availability under the CIT financing agreement is
dependent on the Company's maintenance of adequate levels of borrowing base
(inventory and receivables) as well as compliance with financial and technical
covenants (see Note 4 to the Consolidated Financial Statements for summary
information concerning financial covenant requirements). There can be no
assurance that additional financing will not be required or that it will be
available. Actual financing available could materially differ from that
expressed in the foregoing forward-looking statements for the reasons set forth
above under this caption.
Cash flow from operations was $2,394. The most significant items
included in these cash flows are for depreciation and amortization and the
change in inventory resulting from the aforementioned fair value step-up which
occurred in 1995 relating to the acquisition. Cash flow of $884 was provided by
changes in operating assets and liabilities, including a $2,885 decrease in
inventory, which includes the aforementioned inventory step-up as a result of
the acquisition in 1995. The decrease in inventory was offset by an increase in
accounts receivable of $1,606 as a result of increased sales in the latter part
of the fourth quarter resulting from an early severe winter in the Northwest and
the Midwest.
Net cash used in investing activities was $2,003. The Company had
capital expenditures of $1,555 during the year and had additions to intangible
assets of $538 resulting from additional acquisition related costs in the first
quarter of 1996. The Company borrowed $750 under its CIT CAPEX line of credit in
1996 to fund a portion of the capital expenditures at an interest rate of 1.5%
over the bank's reference rate.
Net cash used in financing activities was $499 which reflects the net
reduction in debt of $2,336 offset by proceeds of $1,386 from equity placements
completed in January 1996, proceeds of $13 from the exercise of certain stock
options, and the increase in cash overdrafts of $438. Under terms of its lending
agreement with CIT, the Company has monthly principal payment requirements on
its term loans. The CIT revolver is paid down with collections on receivables
and additional amounts are borrowed under the line by the Company as needed to
finance operations. As noted above, during the second quarter of 1996, the
Company borrowed $750 under the CAPEX line of credit.
Actual cash flows could materially differ from those expressed in the
foregoing forward-looking statements. Actual sales are influenced by many
factors including the weather, and its corresponding effect on Peerless' current
estimates of net product shipments in 1997, and selling prices and could be
negatively impacted by any downturn in demand for Peerless products. Such a
downturn in demand could result if interest rates increase and, in turn,
increase the costs to customers of maintaining their historical investment in
inventories of Peerless products for resale to consumers or end users.
Covenants associated with the senior debt require the Company to
maintain certain financial levels and ratios, including net worth and net income
(loss) levels and fixed charge coverage and leverage ratios. At December 31,
1996 and at times during 1996, the Company was not in compliance with certain
financial covenants associated with the senior debt agreement. The lender
granted waivers of these events of noncompliance in 1996 and modified certain
financial covenant requirements for 1997 and future years.
The Company did not pay dividends in 1996 or 1995, and restrictive
covenants in the Peerless CIT financing agreement significantly limit the
Company's ability to pay dividends.
INFLATION
Management believes that inflation has not had a material effect on the
Company's results of operations or financial condition, as Peerless has been
able to identify and implement labor efficient processes to offset increasing
labor costs as discussed earlier under the caption "Gross Profit."
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128), a new
standard of accounting and reporting for earnings per share. The Company is not
permitted to adopt the new standard until the fourth quarter of 1997. The
Company has not determined what effect the provisions of SFAS No. 128 will have
on its financial statements.
SUBSEQUENT EVENT
On March 28, 1997, the Company announced that it was negotiating with a
potential buyer who may purchase all of the Company's outstanding common stock
and all shares subject to options, warrants and other purchase rights, for $1.67
per share in cash. The transaction will be subject to a number of conditions,
including the negotiation of a definitive merger agreement, the completion of
the buyer's due diligence investigation, the availability of debt and equity
financing, and the receipt of all governmental and other consents and
approvals.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEX TO FINANCIAL STATEMENTS
PAGE
PEERLESS INDUSTRIAL GROUP, INC.
Financial Statements
Balance Sheets................................................13
Statements of Operations......................................14
Statements of Shareholder's Equity............................15
Statements of Cash Flows......................................16
Notes to Financial Statements.................................17
Report of Independent Public Accountants...............................30
Restated Quarterly Financial Data (Unaudited and Unreviewed)...........31
PEERLESS INDUSTRIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 108
Accounts receivable, less allowance for doubtful accounts of
$228 and $202 in 1996 and 1995, respectively $ 7,671 6,091
Inventories 11,138 14,093
Deferred tax assets 619
Other current assets 472 510
-------- --------
Total current assets 19,900 20,802
Deferred tax assets 153
Property and equipment, net 12,372 12,586
Intangible assets, net 6,123 5,956
-------- --------
Total assets $ 38,395 $ 39,497
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 9,870 11,300
Accounts payable, including cash overdrafts of $923 and
$485 in 1996 and 1995, respectively 3,488 2,823
Accrued liabilities 3,329 4,756
-------- --------
Total current liabilities 16,687 18,879
Long-term debt, less current portion 6,861 7,767
Accrued pension benefit liability, less current portion 1,359 1,045
Accrued postretirement healthcare benefit liability, less current portion 7,022 6,712
Deferred tax liabilities 188
-------- --------
Total liabilities 32,117 34,403
-------- --------
Shareholders' equity:
Class A common stock, no par value; 30,000,000 and 10,000,000 shares
authorized, 5,045,151 and 4,971,174 shares issued and
outstanding at December 31, 1996 and 1995, respectively 6,678 6,629
Class B common stock, no par value; 1,227,273 shares authorized,
issued and outstanding at December 31, 1996 1,350
Accumulated deficit (1,750) (1,535)
-------- --------
Total shareholders' equity 6,278 5,094
-------- --------
Total liabilities and shareholders' equity $ 38,395 $ 39,497
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
PEERLESS INDUSTRIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------
DECEMBER 31, DECEMBER 31,
1996 1995
----------- -----------
<S> <C> <C>
Net sales $ 45,002 $ 1,419
Cost of sales 36,495 1,162
----------- -----------
Gross profit 8,507 257
Selling, general and administrative expenses 7,327 513
----------- -----------
Operating income (loss) 1,180 (256)
Interest expense (1,543) (32)
Other income 25 116
----------- -----------
Loss before income taxes (338) (172)
Benefit (provision) for income taxes 123 (30)
----------- -----------
Net loss $ (215) $ (202)
=========== ===========
Net loss per common share $ (0.03) $ (0.08)
=========== ===========
Weighted average number of common shares outstanding 6,223,490 2,508,334
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
PEERLESS INDUSTRIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 25, 1994 2,356,140 $ 3,769 $ (1,333) $ 2,436
Issuance of common stock 2,595,034 2,854 2,854
Exercise of stock options 20,000 6 6
Net loss for the year (202) (202)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 4,971,174 6,629 (1,535) 5,094
Issuance of Class B common
stock 1,227,273 $ 1,350 1,350
Issuance of Class A common
stock 32,727 36 36
Exercise of Class A stock
options 41,250 13 13
Net loss for the year (215) (215)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 5,045,151 $ 6,678 1,227,273 $ 1,350 $ (1,750) $ 6,278
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
PEERLESS INDUSTRIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
DECEMBER 31, DECEMBER 31,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (215) $ (202)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 1,702 105
Amortization of intangible assets 371 6
Deferred income tax benefit (421) (10)
(Gain) loss on disposal of property and equipment (23) 61
Provision for doubtful accounts receivable 26
Provision for inventory obsolescence 70
Changes in operating assets and liabilities 884 126
-------- --------
Net cash provided by operating activities 2,394 86
-------- --------
Cash flows from investing activities:
Purchase of Peerless Chain Company, net of cash acquired (538) (5,259)
Acquisitions of property and equipment, net of proceeds from disposals
of property and equipment (1,465) (507)
-------- --------
Net cash used in investing activities (2,003) (5,766)
-------- --------
Cash flows from financing activities:
Long-term debt:
Borrowings 46,028 2,831
Payments (48,364) (2,996)
Proceeds from issuance of stock and exercise of stock options 1,399 2,860
Change in cash overdrafts 438 485
-------- --------
Net cash (used in) provided by financing activities (499) 3,180
-------- --------
Decrease in cash and cash equivalents (108) (2,500)
Cash and cash equivalents:
Beginning of year 108 2,608
-------- --------
End of year $ -- $ 108
======== ========
Changes in operating assets and liabilities:
Accounts receivable (1,606) 983
Inventories 2,885 (453)
Other current assets 38 (52)
Accounts payable 227 (306)
Accrued liabilities (875) (71)
Accrued retiree benefit liabilities 215 25
-------- --------
$ 884 $ 126
======== ========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
PEERLESS INDUSTRIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS:
In December 1995, Discus Acquisition Corporation purchased the stock of
Peerless Chain Company (Peerless), as described in Note 2. Effective May 1,
1996, Discus Acquisition Corporation was renamed Peerless Industrial Group,
Inc. (the Company). Peerless' principal operations include the manufacture
and sale of chain and wire form products. From the third quarter of 1994 and
through the acquisition of Peerless, the Company did not have any significant
operating activities.
CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
FISCAL YEAR:
During 1995, the Company changed its fiscal year-end from the last Sunday in
December to December 31. This change did not have a significant impact on the
Company's results of operations or cash flows.
CASH EQUIVALENTS:
The Company considers its investments in all highly liquid instruments with
original maturities of three months or less at date of purchase to be cash
equivalents. The carrying amount approximates fair value because of the short
maturity of those instruments.
INVENTORIES:
Inventories consist principally of chain and wire form products and are
stated at the lower of cost or market with cost determined on the first-in,
first-out method. An allowance for obsolete inventories is established, as
necessary, based on the Company's continuing analysis of inventory levels in
excess of current requirements or considered to be obsolete. An allowance to
reduce inventories to estimated net realizable value is also established,
when necessary.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. Depreciation of property and
equipment are computed on the straight-line method over the estimated useful
lives of the assets. Maintenance and repairs are charged to expense as
incurred. Renewals and betterments are capitalized. The cost and related
accumulated depreciation of assets disposed of are removed from the accounts
and the resulting gain or loss included in operations.
INTANGIBLE ASSETS:
Intangible assets recorded in connection with the 1995 acquisition of
Peerless are amortized on a straight-line basis over estimated useful lives
ranging from 5 to 40 years. The Company periodically evaluates the
recoverability of the intangible assets based on analysis of estimated future
undiscounted cash flows.
REVENUE RECOGNITION:
Revenue is recognized at the time of shipment. Estimates for sales returns
and cash discounts are recorded in the same period as the related sale.
INCOME TAXES:
Deferred income taxes are recognized for the expected future tax consequences
of differences between the tax bases of assets and liabilities and their
financial reporting amounts using enacted tax rates for the year in which the
differences are expected to reverse. A valuation allowance is provided when
necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the year and the change
in deferred tax assets and liabilities during the year.
NET LOSS PER SHARE:
Net loss per share is computed by dividing net loss by the weighted average
number of common and common equivalent shares outstanding. Common equivalent
shares relate to common stock options and warrants when their effect is
dilutive.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The most significant areas
which require the use of management's estimates relate to the determination
of the allowances for uncollectible accounts receivable, product returns and
obsolete inventories, and the assessment of the possible need for a valuation
allowance for deferred taxes.
RECLASSIFICATION:
Certain reclassifications have been made to the December 31, 1995, balance
sheet to conform to the classifications used in the December 31, 1996,
balance sheet. These reclassifications had no effect on shareholders' equity,
net loss or net cash flows as previously reported.
2. ACQUISITION:
The Company purchased all outstanding shares of common stock of Peerless on
December 15, 1995, for approximately $23,178 plus $1,268 in related
acquisition costs incurred through December 31, 1995. The acquisition was
accounted for under the purchase method of accounting. Accordingly, the
results of operations of the acquired company have been included in the
consolidated statement of operations since the date of the acquisition.
The cost of the acquisition was allocated based on the estimated fair values
on the date of acquisition as follows:
Assets:
Accounts receivable $ 7,074
Inventories 13,640
Other current assets 448
Property and equipment 12,184
Deferred tax assets 153
Intangible assets 5,962
Liabilities:
Accounts payable (2,624)
Accrued liabilities (3,673)
Accrued pension benefit liability (1,662)
Accrued postretirement healthcare benefit liability (7,056)
--------
$ 24,446
========
Additional acquisition-related costs of approximately $538 were incurred
during fiscal year 1996, all of which are included in intangible assets as of
December 31, 1996.
The following represents the unaudited pro forma results of operations as if
the Peerless acquisition had occurred on January 1, 1995:
YEAR ENDED
DECEMBER 31, 1995
-----------------
Net sales $ 41,951
===========
Net loss $ (331)
===========
Net loss per common share $ (.05)
===========
Weighted average number of common shares outstanding 6,221,174
===========
These pro forma results may not be indicative of results that actually would
have occurred had the acquisition taken place at the beginning of the period
presented or of results which may occur in the future.
3. SELECTED FINANCIAL STATEMENT INFORMATION:
The following provides additional information for selected consolidated
balance sheet accounts as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
INVENTORIES:
1996 1995
-------- --------
<S> <C> <C>
Raw materials $ 2,277 $ 1,688
Work-in-process 3,054 5,585
Finished goods 5,586 6,536
Supplies 641 634
-------- --------
11,558 14,443
Less reserve for inventory obsolescence (420) (350)
-------- --------
Total $ 11,138 $ 14,093
======== ========
PLANT AND EQUIPMENT:
1996 1995
-------- --------
Equipment $ 12,748 $ 10,226
Leasehold improvements 505 435
Construction in progress 926 2,030
-------- --------
14,179 12,691
Less accumulated depreciation (1,807) (105)
-------- --------
Total $ 12,372 $ 12,586
======== ========
INTANGIBLE ASSETS:
1996 1995
-------- --------
Proprietary equipment technology $ 3,574 $ 3,574
Customer lists 586 586
Tradename 518 518
Goodwill 1,822 1,284
-------- --------
6,500 5,962
Less accumulated amortization (377) (6)
-------- --------
Total $ 6,123 $ 5,956
======== ========
ACCRUED LIABILITIES:
1996 1995
-------- --------
Accrued payroll and employee benefits $ 1,443 $ 1,692
Current portion of accrued pension benefit liability 225 642
Current portion of accrued postretirement healthcare
benefit liability 352 344
Income taxes payable 298
Deferred tax liabilities 143
Other 1,011 1,935
-------- --------
Total $ 3,329 $ 4,756
======== ========
</TABLE>
The following provide supplemental disclosures of cash flow activity and
noncash transactions:
1996 1995
------ ------
Cash paid for interest $1,553 $ 33
====== ======
Cash paid for income taxes $ 14 $ 153
====== ======
In connection with the Peerless acquisition, the Company received $3,700 in
seller financing and issued $2,854 in common stock during 1995.
4. FINANCING ARRANGEMENTS:
Consolidated long-term debt of the Company is as follows as of December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Senior debt:
Revolving credit facility, interest payable monthly at the
Chemical Bank rate (CBR) plus 1/2% $ 8,287 $ 8,442
Term note payable, interest payable monthly at the CBR
plus 1-1/2%, principal of $50 payable monthly 3,590 4,200
Term note payable, interest payable monthly at the CBR
plus 2-1/2%, principal of $69 payable monthly 1,667 2,500
CAPEX credit facility, interest payable monthly at the
CBR plus 1-1/2%, principal of $13 payable monthly 687 --
-------- --------
Total senior debt (a) 14,231 15,142
-------- --------
Subordinated debt:
Acquisition notes payable (seller financing):
Stock purchase note, repaid January 1996 1,200
Redemption note, maturing December 1998,
interest payable monthly at 8% (b) 2,500 2,500
-------- --------
Total subordinated debt 2,500 3,700
-------- --------
Other acquisition financing, provided by certain shareholders,
repaid January 1996 225
--------
Total debt 16,731 19,067
Less current portion (9,870) (11,300)
-------- --------
Long-term portion $ 6,861 $ 7,767
======== ========
</TABLE>
(a) The senior debt originated on December 15, 1995, to fund the
acquisition of Peerless. The debt is collateralized by substantially
all assets and stock of Peerless and has been guaranteed by the
Company. The CBR was 8.25% and 8.75% at December 31, 1996 and 1995,
respectively.
Covenants associated with the senior debt require Peerless to maintain
certain financial levels and ratios, including net worth and net income
(loss) levels and fixed charge coverage and leverage ratios. Peerless must
achieve budgeted performance at each month-end in 1997 and future years, as
well as annual budgeted performance to remain in compliance with its
financial ratio covenants. At December 31, 1996, and during fiscal year 1996,
the Company was not in compliance with certain financial covenants associated
with the senior debt agreement. These events of noncompliance have been
waived by the creditors. In March 1997, the loan agreement was amended to
modify certain financial ratio covenant requirements associated with the
noncompliance.
The agreement also requires the Company to continue to own 100% of the voting
stock of Peerless, and has certain restrictions on new debt, changes in
subordinate indebtedness, acquisitions, dividends and transactions with
affiliates. In the event of a default under the terms of the agreement, the
senior debt bears interest at 2% above the rate otherwise payable, and all
unpaid principal, interest and fees may be declared due and payable. The
agreement also contains cross default provisions with certain other
indebtedness of Peerless.
Under the revolving credit facility, Peerless may borrow up to a maximum of
$23,700, subject to a defined borrowing base that is based on certain
percentages of accounts receivable and inventories. Continuing advances under
the revolving credit facility are dependent on, among other conditions,
compliance with the terms and conditions of the senior debt agreement. As of
December 31, 1996, total borrowings available under the revolving credit
facility were limited to $13,000. At the Company's option, borrowings under
the revolving credit facility may bear interest at 2-3/4% above the LIBOR
rate.
Under the CAPEX credit facility, $4,000 is available for the funding of
capital improvements, other than real estate, for up to 75% of the total cost
of the capital improvement. The loans are to be repaid in 60 monthly payments
beginning the month after origination of the CAPEX loan. In 1996, the Company
borrowed $750 under this line, leaving $3,250 available for future
borrowings.
(b) Collateralized by the common stock of Peerless, subordinate to the
senior debt collateral interest in the Peerless stock, and guaranteed
by the Company.
Scheduled maturities of long-term debt at December 31, 1996, are as follows:
FISCAL YEAR ENDING
1997 $ 9,870
1998 4,083
1999 750
2000 750
2001 688
Thereafter 590
--------
$ 16,731
========
5. RETIREMENT PLANS:
Peerless maintains a defined contribution profit sharing plan and a 401(k)
savings plan covering substantially all of its employees. Employer
contributions to the profit sharing plan are made at the discretion of the
Board of Directors. Peerless' contributions to the 401(k) savings plan are
based upon matching of nonunion participant contributions to specified
levels. The aggregate amount of contributions to the defined contribution
plans were $35 and $11 during 1996 and 1995, respectively.
Peerless also maintains noncontributory defined benefit pension plans for
union and for nonunion employees. The plans provide for monthly benefits
based upon a percentage of the participant's average monthly compensation
multiplied by years of service. The pension expense recognized for the
defined benefit pension plans was $539 and $25 during 1996 and 1995,
respectively.
The Company's general funding policy is to contribute amounts sufficient to
satisfy regulatory funding standards. Assets of the two plans are invested
principally in equity and bond funds.
Components of net periodic pension cost for the year ended December 31, 1996,
and the funded status of the defined benefit pension plans as of December 31,
1996 and 1995, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Net periodic pension cost:
Service cost (benefits earned during the period) $ 498
Interest cost 434
Net amortization and deferral 334
Return on plan assets (727)
-------
Net periodic pension cost $ 539
=======
1996 1995
------- -------
Funded status:
Vested benefit obligations $ 4,992 $ 4,839
Nonvested benefits 423 426
------- -------
Accumulated benefit obligation 5,415 5,265
Effect of projected salary increases 1,130 1,207
------- -------
Projected benefit obligation 6,545 6,472
Less plan assets at fair value (5,959) (4,785)
------- -------
Projected benefit obligation in excess of plan assets 586 1,687
Add unrecognized net gain 998 --
------- -------
Accrued pension benefit liability $ 1,584 $ 1,687
Less current portion (225) (642)
------- -------
Long-term portion $ 1,359 $ 1,045
======= =======
Significant actuarial assumptions for the plans are as follows:
1996 1995
------- -------
Discount rate for service and interest cost 6.75% 8.50%
Projected salary increases, weighted average 6.00 6.00
Expected return on assets 8.00 8.00
Discount rate for year-end benefit obligations 7.50 6.75
</TABLE>
6. POSTRETIREMENT BENEFITS:
Peerless provides certain postretirement healthcare benefits for retired
employees. Substantially all union employees may become eligible for these
benefits if they remain employed until normal retirement (age 55). All other
employees are eligible to receive benefits under the plan only if they had
reached age 60 by April 1, 1993. Benefits are paid to eligible retired
employees by the Company in the course of normal operations. The
postretirement benefits expense was $670 in 1996. There was no expense in
1995.
Components of the net periodic postretirement benefit cost for the year ended
December 31, 1996, and the accumulated postretirement benefit obligation as
of December 31, 1996 and 1995, are as follows:
Net periodic postretirement benefit cost:
Service cost (benefits earned
during the period) $ 195
Interest cost 475
-------
Net periodic postretirement benefit cost $ 670
=======
1996 1995
------- -------
Accumulated postretirement healthcare benefit obligation:
Retirees $ 3,190 $ 3,272
Fully eligible active plan participants 923 668
Other active plan participants 2,929 3,116
Unrecognized net gain 332
------- -------
Accrued postretirement healthcare benefit liability 7,374 7,056
Less current portion (352) (344)
------- -------
Long-term portion $ 7,022 $ 6,712
======= =======
The accumulated postretirement benefit obligation was determined using a
discount rate of 7.25% and 6.75% and healthcare cost trend rates of 7.8% and
8.2% for pre-age 65 retirees and 7.2% and 7.4% for post-age 65 retirees for
the years ended December 31, 1996 and 1995, respectively. The healthcare cost
trend rates were assumed to decrease gradually to 5.5% by 2021 and remain
level thereafter. An increase in the healthcare cost trend rate of one
percentage point in each year would increase the accumulated postretirement
healthcare benefit obligation as of December 31, 1996 by approximately $968
and the net periodic postretirement benefit cost for the year ended December
31, 1996, by approximately $119.
7. SHAREHOLDERS' EQUITY:
EMPLOYEE 1984 STOCK OPTION PLAN:
The Company's employee stock option plan, established in 1984 and amended in
1987, provides for the grant of both incentive stock options and nonqualified
stock options for key employees, to purchase up to 250,000 shares of common
stock at prices not less than fair value at date of grant. Options granted
are exercisable for up to a 10-year period, are nonassignable, and cannot be
exercised until the optionee has remained an employee of the Company for one
year from the date the option is granted. At December 31, 1995, 31,250
incentive stock options were outstanding, all of which were exercised at a
price of $0.32 per share during 1996. As of December 31, 1996, no options are
outstanding and 62,710 remain available for grant.
NONQUALIFIED NONEMPLOYEE DIRECTORS' STOCK OPTIONS:
On May 27, 1993, the Company granted options to purchase 30,000 shares of its
common stock to each of three current and former nonemployee directors. The
options were to become exercisable at a rate of 10,000 annually for each
director beginning on May 27, 1994. The option price per share is $0.29, the
estimated fair value at date of grant. Pursuant to an action taken by the
Board of Directors as a result of the sale of the Company's restaurant
operations in 1994, the options became immediately exercisable for each
director on May 24, 1994. As of the beginning of fiscal 1995, 60,000 options
were remaining, of which 20,000 were exercised during 1995 and 10,000 were
exercised during 1996. The options for the remaining 30,000 shares are
exercisable at December 31, 1996 and have a remaining contract life of six
years.
PEERLESS INDUSTRIAL GROUP, INC. STOCK OPTION PLAN:
In 1994, the Company adopted the Discus Corporation 1994 Stock Option Plan
pursuant to which 600,000 shares of common stock were reserved at that time
for grants of incentive or nonqualified options. In May 1996, the number of
shares reserved for grants was increased to 1,000,000, and the name of the
plan was changed to the Peerless Industrial Group, Inc. Stock Option Plan
(the Plan). The Plan permits the grant of options to employees, members of
the Board of Directors, consultants and advisors to the Company at the
discretion of the Board. Options are granted at prices not less than fair
value at date of grant and are nontransferable. Incentive stock options
granted under the Plan have a maximum term of 10 years.
In April 1994, the Company granted to certain members of the Board of
Directors options to purchase an aggregate of 100,000 shares of the Company's
common stock at $0.75 per share and options to purchase an aggregate of
300,000 shares at $1.35 per share. The options were to become exercisable
over a three-year period starting December 1, 1996. Pursuant to a clause in
these option agreements accelerating the options' vesting date to the date of
closing by the Company of an exchange of securities, sale, merger,
consolidation or similar transaction involving a reorganization of, or
acquisition by, the Company, the options became immediately exercisable on
December 15, 1995, the date the Company acquired Peerless. None of these
options were exercised in 1995 or 1996.
In July and August 1994, the Company granted options to outside consultants
and an employee to purchase 24,000 and 3,000 shares of the Company's common
stock at $0.94 and $0.875 per share, respectively. Subsequently, options to
purchase 8,000 shares at $0.94 have been forfeited. None of the options are
exercisable until one year following the date of grant, with one third of
such options becoming exercisable in each of the two years following the date
of grant, and the remainder becoming exercisable on September 5, 1997. None
of these options granted under the Plan were exercised during 1995 or 1996.
In November 1995, the Company granted 203,000 options to certain employees
and nonemployee directors at an exercise price of $1.10 per share.
Ninety-five thousand options were exercisable at December 31, 1996. The
remaining options become exercisable at a rate of 36,000 annually through
1999.
In December 1995, the Company granted 263,500 options to employees at an
exercise price of $1.10 per share. The options become exercisable in December
2000.
The Plan provides for the automatic grant to nonemployee directors of
five-year options for 18,000 shares of common stock when a nonemployee
director first becomes a director, exercisable as to 12,000 options on the
first anniversary and 6,000 on the second anniversary of the date of grant to
such director. Pursuant to the Plan, options to purchase 18,000 shares of
common stock were granted in 1994 to each of four nonemployee directors at an
exercise price of $0.875 per share. An amendment to the Plan was approved in
January 1996 whereby each of the four nonemployee directors elected prior to
January 1, 1996 received an additional automatic grant of 44,000 options,
exercisable as to 4,000 options on the first anniversary of the date of
grant, 10,000 options six months thereafter, and 10,000 options of each of
the following three years. Nonemployee directors elected after January 1,
1996, receive an automatic grant of 50,000 options to purchase common stock,
exercisable at a rate of 20% per year over five years starting on the first
anniversary of the date of grant. Pursuant to the amendment, the Company
automatically granted 100,000 options to new Board members in January 1996
and 50,000 options to a new Board member in May 1996, at exercise prices of
$1.10 and $1.63, respectively. The 50,000 options granted in May 1996 lapsed
during the year, unexercised.
Based on the number of shares reserved for issuance under the Plan, 283,500
options granted by the Board of Directors are considered to be outside of
the Plan's provisions.
The weighted average exercise prices per share applicable to options issued
are as follows:
As of December 31, 1994 $ 1.14
Granted in 1995 1.10
As of December 31, 1995 1.12
Exercisable as of December 31, 1995 1.15
Granted in 1996 1.18
Cancelled in 1996 1.63
As of December 31, 1996 1.12
Exercisable as of December 31, 1996 1.14
Stock options outstanding at December 31, 1996 had an average remaining
contract life of four years.
STOCK WARRANTS:
In January and March 1996, the Company granted 50,000 and 60,000 common stock
warrants, respectively, to a partnership that has one of the members of the
Company's Board of Directors as a partner and to other members of the Board
of Directors, at an exercise price of $1.10 per share. The 50,000 warrants
issued in January become exercisable at a rate of 20% per year over five
years starting on the first anniversary of the date of grant. The 60,000
warrants issued in March were exercisable as of the date of grant. None of
these warrants have been exercised as of December 31, 1996 and the weighted
average remaining contract life of the warrants is four years.
FAIR VALUE METHOD OF STOCK BASED COMPENSATION:
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, a new standard of accounting and
reporting for stock-based compensation plans. The Company adopted the new
standard in 1996. The Company has continued to measure compensation cost for
its stock option plans, employee stock purchase plan and common stock
warrants using the intrinsic value method of accounting it has historically
used and, therefore, the new standard has no effect on the Company's
operating results.
Had the Company used the fair value method of accounting for the Plan
beginning in 1995 and charged compensation cost against income, over the
vesting period, net loss and net loss per share for the years ended December
31, 1996 and 1995, would have been reduced to the following pro forma
amounts:
1996 1995
---- ----
Net loss $ (529) (236)
Net loss per common share (0.09) (0.09)
The weighted-average grant-date fair value of options and warrants granted
during 1996 and 1995 was $0.46. The weighted-average grant-date fair value of
options and warrants was determined separately for each grant under the
Company's various plans by using the fair value of each option grant on the
date of grant, utilizing the Black-Scholes option-pricing model and the
following key assumptions:
1996 1995
---- ----
Risk-free interest rates 5.3% to 6.4% 5.5% to 5.7%
Expected life 5 years 5 years
Expected volatility 37% 37%
Expected dividends None None
EMPLOYEE STOCK PURCHASE PLAN:
In December 1988, the Board of Directors established an employee stock
purchase plan available to substantially all full-time employees of Discus
Acquisition Corporation (now renamed Peerless Industrial Group, Inc.). Under
the terms of the plan, an aggregate of 200,000 shares of the Company's
authorized, nonissued common stock has been made available for purchase. No
shares have been issued under the plan.
CLASS B COMMON STOCK:
In January 1996, the Company issued 1,227,273 shares of Class B common stock
to a partnership that has one of the members of the Company's Board of
Directors as a partner at $1.10 per share for a total purchase price of
$1,350. No other material transactions with related parties took place in
1995 or 1996.
The Class B common stock is convertible to Class A common stock, if certain
conditions are met, initially at the rate of one share of Class A common
stock for each Class B share. The conversion rate is subject to adjustment
from time to time based on the prices of future Class A common stock
issuances and other factors pursuant to the Class B Stock Purchase Agreement.
The Class B common stock is equivalent in all respects to the Class A common
stock, except that voting privileges, dividends and other pro rata rights for
the Class B shares are equal to the number of Class A shares into which the
Class B shares are convertible at that time.
8. LEASE COMMITMENTS:
The Company leases its office and manufacturing facilities as well as various
equipment and warehouses under noncancellable operating lease agreements.
Peerless' primary office and manufacturing facility's lease has a term
through June 2011. Annual lease payments are $1,463 and are to be adjusted
for inflation every five years with the next adjustment scheduled for 2001.
The lease imposes various restrictions which, among other things, require
Peerless to maintain certain financial covenants and prohibit the Company
from making significant acquisitions or disposals of property or businesses
without prior approval by the lessor.
Future minimum lease payments under the lease agreements at December 31, 1996
are:
1997 $ 1,820
1998 1,695
1999 1,608
2000 1,566
2001 1,561
Thereafter 14,285
The Company incurred rent expense of $1,841 and $91 during 1996 and 1995,
respectively.
9. BUSINESS AND CREDIT CONCENTRATION:
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, does not require collateral from its customers. The
Company establishes an allowance for doubtful accounts based on factors
surrounding the credit risk of specific customers and other information.
The Company's most significant customer accounted for 22% and 18% of net
sales in 1996 and 1995, respectively, and 17% and 20% of accounts receivable
at December 31, 1996 and 1995, respectively.
10. INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
1996 1995
---- ----
Current $ 298 $ 40
Deferred (421) (10)
$(123) $ 30
===== =====
The components of the net deferred tax assets and liabilities are as follows:
1996 1995
------- -------
Accrued liabilities $ 447
Asset valuation allowances 37 $ (136)
Other 135 (7)
Current deferred tax assets (liabilities) $ 619 $ (143)
======= =======
Accrued postretirement healthcare benefits 2,703 2,682
Intangible assets (2,270) (2,439)
Depreciation (785) (90)
Alternative minimum tax credit carryforwards 164
------- -------
Long-term deferred tax (liabilities) assets $ (188) $ 153
======= =======
No valuation allowance has been established as management believes it is more
likely than not that future taxable income will be adequate to realize the
tax benefits associated with the deferred tax assets.
The Company's effective tax rate differs from the federal statutory rate
primarily as a result of state income taxes.
11. COMMITMENTS:
In connection with the acquisition of Peerless in 1995, the Company provided
certain members of Peerless management the opportunity to acquire a
proprietary interest in the Company through the purchase of common stock. The
Company arranged for loans to nine members of Peerless management totaling
$468,000. The Company, as well as certain individual directors of the
Company, guaranteed the repayment of such loans. As collateral for the
guarantees by the Company and the directors, the nine management members
pledged their shares of common stock to the Company and the directors.
12. NEW ACCOUNTING STANDARD:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS No. 128), a new standard of
accounting and reporting for earnings per share. The Company is not permitted
to adopt the new standard until the fourth quarter of 1997. The Company has
not determined what effect the provisions of SFAS No. 128 will have on its
financial statements.
13. SUBSEQUENT EVENT:
On March 28, 1997, the Company announced that it was negotiating with a
potential buyer who may purchase all of the Company's outstanding common
stock and all shares subject to options, warrants and other purchase rights,
for $1.67 per share in cash. The transaction will be subject to the
negotiation of a definitive merger agreement, the completion of the buyer's
due diligence investigation, the availability of debt and equity financing,
and the receipt of all governmental and other consents and approvals.
PEERLESS INDUSTRIAL GROUP, INC.
REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
To the Shareholders and Board of Directors of
Peerless Industrial Group, Inc.:
We have audited the accompanying consolidated balance sheets of Peerless
Industrial Group, Inc. (formerly known as Discus Acquisition Corporation) as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Peerless Industrial Group, Inc. as of December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
March 14, 1997, except as to the information presented
in Note 13, for which the date is March 28, 1997
The Company has determined that it is necessary to restate certain
quarterly financial information and, as a result, presents the following
summary:
<TABLE>
<CAPTION>
Restated quarterly financial data (UNAUDITED AND UNREVIEWED)
(In Thousands except per share data)
Quarter ended
-----------------------------------------------
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1996
Net Sales 10,681 9,890 11,583 12,848
Gross Profit 826(a) 1,247 2,710(b) 3,724
Net loss (1,422)(a) (973) 629(b) 1,551
Net loss per common share (0.24)(a) (0.16) 0.10(b) 0.25
1995
Net sales 1,419
Gross profit 257
Net loss (59) (55) (58) (30)
Net loss per common share (0.03) (0.02) (0.02) (0.01)
</TABLE>
The summation of quarterly net income (loss) per share may not equate
to the year-end calculation because quarterly calculations are performed on a
discrete basis.
(a) Restated to add $447 of inventory costs previously classified as intangible
assets as of December 31, 1995, which increased costs of goods sold for the
quarter ended March 31, 1996 by $447.
(b) Restated to add $982 of goodwill costs which were previously classified
as property and equipment as of June 30, 1996. The effect of the restatement was
to decrease depreciation expense by $57 and to increase amortization of
intangible assets by $10, for a net increase in net income of $47 for the
quarter ended September 30, 1996.
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
MANAGEMENT
Set forth below is certain information about the directors and
executive officers of the Company
NAME AGE POSITION
- ---- --- --------
Harry W. Spell 73 Chairman and Director
William H. Spell 40 Chief Executive Officer and Director
Jan C. van Osnabrugge 54 President
Robert E. Deter 52 Chief Financial Officer
Bruce A. Richard 67 Secretary and Director
Reynold M. Anderson 66 Director
Michael E. Platt 55 Director
Richard W. Perkins 66 Director
Brian K. Smith 37 Director
HARRY W. SPELL. See "Description of Business -- Executive Officers of the
Company."
WILLIAM H. SPELL. See "Description of Business -- Executive Officers of the
Company."
JAN C. VAN OSNABRUGGE. See "Description of Business -- Executive Officers of the
Company."
ROBERT E. DETER. See "Description of Business -- Executive Officers of the
Company."
BRUCE A. RICHARD. See "Description of Business -- Executive Officers of the
Company."
REYNOLD M. ANDERSON. Reynold M. Anderson is a founder of the Company
and served as Executive Vice President from April 1985 through November 1991. He
also served as the Company's Chief Financial Officer and Secretary between 1983
and April 1985. Since 1985, he has been a general partner of Zaeco Associates
Limited Partnership, which engages in the ownership and management of real
estate. From 1984 to June 1992, Mr. Anderson served as a Director and executive
officer of Mintesota, Inc., which operated two Perkins Restaurants in Florida.
From 1986 to May 1992, he served as a Director and executive officer of T.H.I.S.
Corporation ("T.H.I.S."), which operated seven Perkins Restaurants in the Palm
Beach County, Florida area. In November 1991, T.H.I.S. filed a Petition for
Reorganization under Chapter 11 of the Bankruptcy Code of 1978 in the United
States Bankruptcy Court for the Southern District of Florida. T.H.I.S. was
subsequently liquidated. Mr. Anderson is a professional civil engineer
registered in the State of Minnesota and received a degree in civil engineering
from the University of Minnesota.
MICHAEL E. PLATT. Michael E. Platt is a founder of the Company and was
employed as its Chief Executive Officer from August 1983 through June 1994, and
served as the Company's President from June 1994 through January 1996. He
currently serves as President and Chief Executive Officer of Fresh Food
Ventures, Inc., which operates a Mexican-style restaurant. He is also President
and a Director of Regal One Corporation, which is engaged in the development of
an automatic emission control product. Between 1976 and July 1983, he held
various marketing positions with The Pillsbury Company and was its Director of
Acquisitions between 1980 and 1983. Prior to joining Pillsbury, he was Vice
President of Marketing with Steak & Shake, Inc., from October 1975 to May 1976.
He served as Director of New Products and New Programs with Kentucky Fried
Chicken Corporation, from November 1972 to September 1975. He received a BS
degree from Massachusetts Institute of Technology and an MBA degree from Harvard
University.
RICHARD W. PERKINS. Richard W. Perkins has been President, Chief
Executive Officer and a Director of Perkins Capital Management, Inc. since
December 1985. He has over 30 years experience in the investment business. Prior
to establishing Perkins Capital Management, Inc., Mr. Perkins was a Senior Vice
President at Piper Jaffray Incorporated, where he was involved in corporate
finance and venture capital activities, as well as rendering investment advice
to domestic and international investment managers. He held various positions
with Piper Jaffray from May 1966 through December 1984. Mr. Perkins is also a
Director of the following public companies: Bio-Vascular, Inc., LifeCore
Biomedical, Inc., Children's Broadcasting Corporation, CNS, Inc., Eagle Pacific,
Nortech Systems, Inc. and Quantech Ltd.
BRIAN K. SMITH. Brian K. Smith was appointed to the Board of Directors
of the Company in January 1996. From 1994 to the present, he has been a General
Partner of Northland Business Capital, L.L.P., a provider of mezzanine and
equity funds. Northland Business Capital, L.L.P. is a subsidiary of the Northern
Company, a $1 billion private financial services company. From 1990 through
1994, Mr. Smith served as Vice President of Norwest Bank Minnesota, N.A.,
working in their Structured Finance Group providing senior and subordinate debt
for leveraged buy-outs. Norwest Bank Minnesota, N.A. is a subsidiary of Norwest
Corp.
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers, directors and persons who own more than
10% of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Commission. Such officers, directors
and shareholders are required by the Commission to furnish the Company with
copies of all such reports.
To the Company's knowledge, based solely on a review of copies of
reports filed with the Commission during 1996, all applicable Section 16(a)
filing requirements were complied with, except for (i) the acquisition of an
option to purchase 25,000 shares of Common Stock (one report) by Bruce A.
Richard; (ii) the purchase of 18,181 shares of Common Stock (one report) by the
Spell Family Foundation in which Harry W. Spell has beneficial ownership; (iii)
the event of becoming a director, the purchase of 22,400 shares of Common Stock
and the purchase of 9,900 shares of Common Stock (three reports) by Victor Reim;
(iv) the sale of 10,000 shares of Common Stock (one report) by Michael E. Platt;
and (v) the acquisition of an option to purchase 44,000 shares of Common Stock
(one report) by Reynold M. Anderson. To the Company's knowledge, all of the
above transactions have been reported.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information about compensation
paid to or accrued by the Company's Chief Executive Officer and each of the
Company's executive officers receiving in excess of $100,000 for services
rendered to the Company during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Securities All
------------------------------------ Underlying Other
Name and Principal Position Year Salary($) Bonus($) Other Options (#) Compensation ($)
- --------------------------- ---- --------- -------- ----- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jan C. van Osnabrugge 1996 192,000 12,210 17,455 -- --
President 1995 192,000(1) 37,082 -- 60,000 --
1994 32,493(2) -- -- -- --
William H. Spell 1996 96,000 -- 2,400 -- --
Chief Executive Officer 1995 60,000 125,000 -- 175,000 --
1994 35,000 -- -- 230,000 --
Gerald Faurote 1996 96,000 8,690 7,673 -- --
Vice President of Sales 1995 95,385 22,338 -- 40,000 --
and Marketing 1994 80,000 20,624 -- -- --
Dale Schwanke 1996 87,360 7,305 7,305 -- --
Vice President of Operations 1995 85,949 18,775 -- 33,000 --
1994 80,000 20,624 -- -- --
</TABLE>
- ------------------
(1) Mr. van Osnabrugge became the Company's President in December 1995.
(2) Mr. van Osnabrugge joined the Peerless Chain Company in October 1994.
The Company did not grant any options to the persons named in the
"Summary Compensation Table" during the fiscal year ended December 31, 1996. The
following table summarizes stock option exercises during the fiscal year ended
December 31, 1996 to or by such executive officers and certain other information
relative to such options.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-
UNEXERCISED OPTIONS MONEY OPTIONS AT
AT FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Jan C. van Osnabrugge -- -- 0/60,000 0/12,750
William H. Spell -- -- 300,000/105,000 37,375/22,313
Gerald Faurote -- -- 0/40,000 0/8,500
Dale Schwanke -- -- 0/33,000 0/7,013
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information as of March 3, 1997,
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each director, nominee for director and executive officer of
the Company, (iii) each of the named executive officers as defined in Item
402(a)(2), and (iv) the executive officers of the Company and directors as a
group, and as to the percentage of the outstanding shares held by them on such
date. Any shares which are subject to an option or a warrant exercisable within
60 days are reflected in the following table and are deemed to be outstanding
for the purpose of computing the percentage of Common Stock owned by the option
or warrant holder but are not deemed to be outstanding for the purpose of
computing the percentage of Common Stock owned by any other person. Unless
otherwise noted, each person identified below possesses sole voting and
investment power with respect to such shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OUTSTANDING STOCK(1)
- ------------------------------------ ----------------------- --------------------
<S> <C> <C>
Richard W. Perkins 2,294,949(2) 36.0%
730 East Lake Street
Wayzata, Minnesota 55391
Perkins Capital Management, Inc. 1,368,500 21.8%
730 East Lake Street
Wayzata, Minnesota 55391
Northland Business Capital L.L.P. 1,247,273(3) 19.8%
1285 Northland Lane
St. Paul, Minnesota 55120
Brian K. Smith 1,247,273(3) 19.8%
1285 Northland Lane
St. Paul, Minnesota 55120
Reynold M. Anderson 1,108,220(4) 17.5%
4130 Burton Lane
Minneapolis, Minnesota 55406
William H. Spell 857,266(5) 13.0%
2430 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
Harry W. Spell 646,902(6) 10.1%
2430 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
Bruce A. Richard 602,630(7) 9.5%
2458 Farrington Circle
Roseville, Minnesota 55113
Michael E. Platt 542,500(8) 8.6%
7173 Oak Pointe Curve
Bloomington, Minnesota 55438
Z. Albin E. Anderson Irrevocable Trust 370,000 5.9%
c/o Reynold M. Anderson
4130 Burton Lane
Minneapolis, Minnesota 55406
Jan C. van Osnabrugge 109,090(9) 1.7%
1416 East Sanborn Street
Winona, Minnesota 55987
Robert E. Deter 59,090(9) 0.9%
1416 East Sanborn Street
Winona, Minnesota 55987
Gerald Faurote 54,545(9) 0.9%
1416 East Sanborn Street
Winona, Minnesota 55987
Dale Schwanke 54,545(9) 0.9%
1416 East Sanborn Street
Winona, Minnesota 55987
All Directors and Officers as a Group 4,211,263(10) 60.4%
(11 Persons)
- ---------------------
</TABLE>
(1) Calculated assuming the conversion of all Class B Common Stock into
Common Stock.
(2) Includes: (i) 1,368,500 shares owned by Perkins Capital Management,
Inc. ("PCM") over which Mr. Perkins, President of PCM, disclaims
beneficial ownership, (ii) 72,000 shares owned by the Richard W.
Perkins Trust dated 6/14/78, (iii) 25,000 owned by the Perkins Capital
Management, Inc. Profit Sharing Plan & Trust dated 12/15/86, (iv)
50,000 shares owned by Quest Venture Partners, (v) 250,000 shares owned
by Pyramid Partners, LP, (vi) 89,000 shares purchasable upon the
exercise of vested stock options, (vii) 15,000 shares purchasable
pursuant to warrants, and (viii) 425,449 shares owned by the management
of Peerless Chain Company over which Mr. Perkins holds shared voting
power.
(3) Includes 1,227,273 shares of Class B Common Stock, which is convertible
into an equal number of shares of Common Stock, and 10,000 shares
purchasable upon the exercise of vested stock options granted to Brian
K. Smith. Also includes 10,000 shares purchasable pursuant to a warrant
owned by Northland Business Capital, L.L.P., of which Mr. Smith is a
General Partner.
(4) Includes 370,000 shares owned by the Z. Albin E. Anderson Irrevocable
Trust, of which Mr. Anderson is a trustee and a beneficiary, 771 shares
owned by Mr. Anderson's spouse, 52,000 shares purchasable upon the
exercise of vested stock options, 10,000 shares purchasable pursuant to
a warrant, and 425,449 shares owned by the management of Peerless Chain
Company over which Mr. Anderson holds shared voting power.
(5) Includes 18,181 shares owned by the Spell Family Foundation of which
Mr. Spell is a director, 300,000 shares purchasable upon the exercise
of vested stock options, 10,000 shares purchasable pursuant to a
warrant, and 425,449 shares owned by the management of Peerless Chain
Company over which Mr. Spell holds shared voting power.
(6) Includes 18,181 shares owned by the Spell Family Foundation of which
Mr. Spell is a director, 89,000 shares purchasable upon the exercise of
vested stock options, 15,000 shares purchasable pursuant to warrants,
and 425,449 shares owned by the management of Peerless Chain Company
over which Mr. Spell holds shared voting power.
(7) Includes 83,000 shares purchasable upon the exercise of vested stock
options, 10,000 shares purchasable pursuant to a warrant, and 425,449
shares owned by the management of Peerless Chain Company over which Mr.
Richard holds shared voting power.
(8) Includes 14,000 shares owned by Mr. Platt's spouse and 10,000 shares
purchasable upon the exercise of vested stock options.
(9) Represents shares over which Messrs. Richard W. Perkins, Reynold M.
Anderson, William H. Spell, Harry W. Spell and Bruce A. Richard hold
shared voting power.
(10) Includes: (i) 1,227,273 shares of Class B Common Stock, which is
convertible into an equal number of shares of Common Stock, owned by
Northland Business Capital, L.L.P., of which Mr. Smith is a General
Partner, (ii) 633,000 shares purchasable upon the exercise of vested
stock options, (iii) 70,000 shares purchasable pursuant to warrants,
(iv) 18,181 shares owned by the Spell Family Foundation of which
Messrs. Harry W. Spell and William H. Spell are directors, (v) 425,449
shares owned by the management of Peerless Chain Company over which
Messrs. Harry W. Spell, William H. Spell, Bruce A. Richard, Richard W.
Perkins and Reynold M. Anderson hold shared voting power, (vi) 72,000
shares owned by the Richard W. Perkins Trust dated 6/14/78, (vii)
25,000 shares owned by the Perkins Capital Management, Inc. Profit
Sharing Plan & Trust dated 12/15/86, (viii) 50,000 shares owned by
Quest Venture Partners, (ix) 250,000 shares owned by Pyramid Partners,
LP, (x) 370,000 shares owned by the Z. Albin E. Anderson Irrevocable
Trust of which Mr. Reynold M. Anderson is a trustee and a beneficiary,
(xi) 771 shares owned by Mr. Reynold M. Anderson's spouse,and (xii)
14,000 shares owned by Mr. Michael E. Platt's spouse.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's acquisition of the Peerless Chain
Company in December 1995, the Company sold an aggregate of 2,388,874 shares of
Common Stock for a purchase price of $2,627,761, or $1.10 per share, to a group
of investors in a private placement transaction, including five of the Company's
directors or their affiliates. The proceeds from such private placement of
Common Stock were used to partially fund the acquisition of Peerless. The
following officers/directors participated in the private placement, individually
or indirectly through other entities in which they had beneficial interests,
purchasing the number of shares indicated: William H. Spell, Chief Executive
Officer and a Director (81,817 shares); Harry W. Spell, Chairman and a Director
(95,453 shares); Reynold M. Anderson, Director (100,000 shares); Bruce A.
Richard, Director (68,181 shares); and Richard W. Perkins, Director (375,000
shares). Pursuant to negotiations which commenced immediately prior to the
acquisition of Peerless, Northland Business Capital, L.L.P. ("Northland"), of
which Brian K. Smith is a General Partner, acquired 1,227,273 shares of Class B
Common Stock pursuant to the terms of a Stock Purchase Agreement entered into
between the Company and Northland in January 1996. The Common Stock sold to the
foregoing persons was issued directly by the Company to the purchasers in a
private placement transaction without registration of such shares under the
Securities Act of 1933, as amended (the "Act"), pursuant to a claimed exemption
therefrom. The shares constitute "restricted securities" as that term is defined
under Rule 144 of the Act and may not be resold unless registered under the Act
or an exemption from registration becomes available under Rule 144 or another
provision under the Act.
On November 1, 1995 the Board of Directors of the Company authorized
the sale of the shares as a part of the plan to acquire Peerless and finance
that acquisition, subject to receiving a fairness opinion. The Board of
Directors engaged Summit Investment Corporation ("Summit"), an investment
banking firm, to provide an opinion to the Company as to the fairness of the
purchase price for the Common Stock. On November 29, 1995, Summit rendered its
opinion that the financing involving the sale of the Company's equity securities
was fair from a financial point of view to the Company and its shareholders. On
that date the bid and ask prices for the Company, based upon information
available from the NASD Bulletin Board, were $1.375 and $1.75 per share,
respectively. In establishing the price for the Common Stock to be sold, the
Board of Directors also took into account the market price for the Common Stock
of the Company and the fact that the shares to be sold were not registered under
the Act and would be restricted as to sale, transfer and disposition.
In connection with the acquisition of Peerless, the Company determined
that it was desirable to permit certain members of the Peerless management to
participate in the acquisition, by providing them the opportunity to acquire a
proprietary interest in the Company through the purchase of Common Stock. The
Company arranged for loans to nine members of the Peerless management from
American Commercial Bank totalling $468,000. The Company has guaranteed the
repayment of such loans. To induce the American Commercial Bank to make such
loan, and as a condition of such financing, the Bank required additional credit
enhancements in the form of personal guarantees from certain directors of the
Company. Accordingly, and in consideration of the issuance of warrants to them,
William H. Spell, Harry W. Spell, Reynold M. Anderson, Richard W. Perkins, and
Bruce A. Richard personally guaranteed payment of such obligations, in
consideration for which the Company issued to each of them five-year warrants to
purchase 10,000 shares of the Company's Common Stock at $1.10 per share. As
security for the guarantees by the Company and the directors, the nine members
of the Peerless management (along with their wives if stock was issued to them
jointly) pledged their shares of Common Stock to the Company and the directors
to secure payment of the obligations guaranteed.
BRIDGE LOANS FROM DIRECTORS
In connection with the Peerless acquisition, Pyramid Partners, L.P., an
affiliate of Richard W. Perkins, and Harry W. Spell loaned the Company $125,000
and $100,000, respectively, in December 1995, on the basis of short-term
unsecured promissory notes bearing interest at the rate of 20 percent per annum.
The notes were repaid in January, February and March 1996.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation, as amended, including Certificate
of Designation of Rights and Preferences of Class B Common
Stock of the Registrant dated January 4, 1996 (incorporated by
reference to Exhibit No. 3.1 to Registrant's Quarterly Report
on Form 10-QSB for the quarter ended June 30, 1996).
3.2 Bylaws, as amended (incorporated by reference to Exhibit No.
3.2 to Registrant's Annual Report on Form 10-K for the year
ended December 28, 1986).
4 See Exhibit 3.1.
10.1 Registrant's Employee Stock Purchase Plan (incorporated by
reference to Exhibit No. 10.6 to Registrant's Annual Report on
Form 10-KSB for the year ended December 25, 1994).
10.2 Lease Agreement dated June 18, 1986, as amended, between
Peerless Chain Company and CPA Peerless Limited Partnership
(incorporated by reference to Exhibit No. 10.13 to
Registrant's Current Report on Form 8-K dated December 14,
1995).
10.3 Stock Option Agreement dated May 27, 1993 between the
Registrant and Michael Platt for the purchase of 31,250 shares
(incorporated by reference to Exhibit No. 10.19 to
Registrant's Annual Report on Form 10-KSB for the year ended
December 25, 1994).
10.4 Stock Purchase Agreement dated March 3, 1994 between the
Registrant and members of the Spell Group (incorporated by
reference to Exhibit No. 10.9 to Registrant's Annual Report on
Form 10-KSB for the year ended December 25, 1994).
10.5 Peerless Industrial Group, Inc. Stock Option Plan
(incorporated by reference to Appendix 1 to Registrant's
Definitive Schedule 14A (Proxy Statement) relating to the
Company's Annual Meeting of Shareholders held on May 1, 1996).
10.6 Form of Nonqualified Stock Option Agreement dated April 8,
1994 between the Registrant and Richard W. Perkins
(incorporated by reference to Exhibit No. 10.11 to
Registrant's Annual Report on Form 10-KSB for the year ended
December 25, 1994).
10.7 Form of Nonqualified Stock Option Agreement dated April 8,
1994 between the Registrant and Harry W. Spell (incorporated
by reference to Exhibit No. 10.12 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.8 Form of Nonqualified Stock Option Agreement dated April 8,
1994 between the Registrant and William H. Spell (incorporated
by reference to Exhibit No. 10.13 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.9 Nonqualified Stock Option Agreement dated April 8, 1994
between the Registrant and Bruce A. Richard for the purchase
of 16,000 shares (incorporated by reference to Exhibit No.
10.14 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.10 Nonqualified Stock Option Agreement dated April 8, 1994
between the Registrant and Richard W. Perkins for the purchase
of 45,000 shares (incorporated by reference to Exhibit No.
10.15 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.11 Nonqualified Stock Option Agreement dated April 8, 1994
between the Registrant and Harry W. Spell for the purchase of
45,000 shares (incorporated by reference to Exhibit No. 10.16
to Registrant's Annual Report on Form 10-KSB for the year
ended December 25, 1994).
10.12 Nonqualified Stock Option Agreement dated April 8, 1994
between the Registrant and William H. Spell for the purchase
of 190,000 shares (incorporated by reference to Exhibit No.
10.17 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.13 Nonqualified Stock Option Agreement dated April 8, 1994
between the Registrant and Bruce A. Richard for the purchase
of 20,000 shares (incorporated by reference to Exhibit No.
10.18 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.14 Asset Purchase Agreement dated April 15, 1994 between the
Registrant and Fuddruckers, Inc. (incorporated by reference to
Exhibit No. 10.8 to Registrant's Annual Report on Form 10-KSB
for the year ended December 25, 1994).
10.15 Incentive Stock Option Agreement dated November 1, 1995 by and
between the Registrant and William H. Spell for the purchase
of 175,000 shares (incorporated by reference to Exhibit No.
10.15 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.16 Incentive Stock Option Agreement dated November 1, 1995 by and
between the Registrant and Bruce A. Richard for the purchase
of 25,000 shares (incorporated by reference to Exhibit No.
10.16 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.17 Stock Purchase Agreement dated November 22, 1995, as amended
December 1, 1995 and December 13, 1995, between the Registrant
and Bridgewater Resources Corp. (incorporated by reference to
Exhibit No. 10.1 to Registrant's Current Report on Form 8-K
dated December 14, 1995).
10.18 Form of Incentive Stock Option Agreement dated December 12,
1995 by and between the Registrant and Jan C. van Osnabrugge
(incorporated by reference to Exhibit No. 10.18 to
Registrant's Annual Report on form 10-KSB for the year ended
December 31, 1995).
10.19 Financing Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and Peerless Chain Company and
Peerless Chain of Iowa, Inc. (incorporated by reference to
Exhibit No. 10.2 to Registrant's Current Report on Form 8-K
dated December 14, 1995).
10.20 $2,500,000 Redemption Note dated December 13, 1995 between
Peerless Chain Company and Bridgewater Resources Corp.
(incorporated by reference to Exhibit No. 10.3 to Registrant's
Current Report on Form 8-K dated December 14, 1995).
10.21 $1,200,000 Stock Purchase Note dated December 13, 1995 between
the Registrant and Bridgewater Resources Corp. (incorporated
by reference to Exhibit No. 10.4 to Registrant's Current
Report on Form 8-K dated December 14, 1995).
10.22 Stock Purchase Note dated December 13, 1995 in the amount of
$100,000 between the Registrant and Harry W. Spell
(incorporated by reference to Exhibit No. 10.5 to Registrant's
Current Report on Form 8-K dated December 14, 1995).
10.23 Stock Purchase Note dated December 13, 1995 in the amount of
$125,000 between the Registrant and Pyramid Investors
(incorporated by reference to Exhibit No. 10.6 to Registrant's
Current Report on Form 8-K dated December 14, 1995).
10.24 Subordination Agreement dated December 13, 1995 between
Bridgewater Resources Corp. and The CIT Group/Business Credit,
Inc. (incorporated by reference to Exhibit No. 10.7 to
Registrant's Current Report on Form 8-K dated December 14,
1995).
10.25 Stock Pledge Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and the Registrant (incorporated
by reference to Exhibit No. 10.8 to Registrant's Current
Report on Form 8-K dated December 14, 1995).
10.26 Stock Pledge Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and Peerless Chain Company
(incorporated by reference to Exhibit No. 10.9 to Registrant's
Current Report on Form 8-K dated December 14, 1995).
10.27 Grant of security interest in patents, trademarks and licenses
dated December 13, 1995 between Peerless Chain Company,
Peerless Chain of Iowa, Inc. and The CIT Group/Business
Credit, Inc. (incorporated by reference to Exhibit No. 10.10
to Registrant's Current Report on Form 8-K dated December 14,
1995).
10.28 Guaranty of Parent Agreement dated December 13, 1995 between
The CIT Group/Business Credit, Inc. and the Registrant
(incorporated by reference to Exhibit No. 10.11 to
Registrant's Current Report on Form 8-K dated December 14,
1995).
10.29 Guaranty of Borrower dated December 13, 1995 between The CIT
Group Business Credit, Inc. and Peerless Chain Company and
Peerless Chain of Iowa, Inc. (incorporated by reference to
Exhibit No. 10.12 to Registrant's Current Report on Form 8-K
dated December 14, 1995).
10.30 Employment Agreement dated December 13, 1995 by and between
William H. Spell and Peerless Chain Company (incorporated by
reference to Exhibit No. 10.30 to Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1995).
10.31 Employment Agreement dated December 13, 1995 by and between
Jan C. van Osnabrugge and Peerless Chain Company (incorporated
by reference to Exhibit No. 10.31 to Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.32 Employment Agreement dated December 13, 1995 by and between
Robert E. Deter and Peerless Chain Company (incorporated by
reference to Exhibit No. 10.32 to Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1995).
10.33 Employment Agreement dated December 13, 1995 by and between
Gerald Faurote and Peerless Chain Company (incorporated by
reference to Exhibit No. 10.33 to Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1995).
10.34 Employment Agreement dated December 13, 1995 by and between
Dale Schwanke and Peerless Chain Company (incorporated by
reference to Exhibit No. 10.34 to Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1995).
10.35 Employment Agreement dated December 13, 1995 by and between
John McCauley and Peerless Chain Company (incorporated by
reference to Exhibit No. 10.35 to Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1995).
10.36 Warrant dated January 9, 1996 between the Registrant and
Northland Business Capital, L.L.P. for the purchase of 50,000
shares (incorporated by reference to Exhibit No. 10.37 to
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1995).
10.37 Form of Warrant dated March 12, 1996 between the Registrant
and Richard W. Perkins (incorporated by reference to Exhibit
No. 10.38 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.38 Stock Purchase Agreement dated January 9, 1996, between the
Registrant and Northland Business Capital, L.L.P.
(incorporated by reference to Exhibit No. 10.1 to Registrant's
Current Report on Form 8-K dated January 9, 1996).
10.39 Nonqualified Stock Option Agreement dated May 15, 1996,
between the Registrant and Victor Reim for the purchase of
50,000 shares.
10.40 Nonqualified Stock Option Agreement dated January 10, 1996,
between the Registrant and Harry W. Spell for the purchase of
44,000 shares.
10.41 Nonqualified Stock Option Agreement dated January 10, 1996,
between the Registrant and Brian K. Smith for the purchase of
50,000 shares.
10.42 Nonqualified Stock Option Agreement dated January 10, 1996,
between the Registrant and Bruce A. Richard for the purchase
of 44,000 shares.
10.43 Nonqualified Stock Option Agreement dated January 10, 1996,
between the Registrant and Michael E. Platt for the purchase
of 50,000 shares.
10.44 Nonqualified Stock Option Agreement dated January 10, 1996,
between the Registrant and Richard W. Perkins for the purchase
of 44,000 shares.
10.45 Nonqualified Stock Option Agreement dated January 10, 1996,
between the Registrant and Reynold M. Anderson for the
purchase of 44,000 shares.
10.46 Warrant dated March 12, 1996, between the Registrant and
Richard W. Perkins for the purchase of 5,000 shares.
10.47 Warrant dated March 12, 1996, between the Registrant and
Richard W. Perkins for the purchase of 10,000 shares.
10.48 Warrant dated March 12, 1996, between the Registrant and
Harry W. Spell for the purchase of 5,000 shares.
10.49 Warrant dated March 12, 1996, between the Registrant and
Harry W. Spell for the purchase of 10,000 shares.
10.50 Warrant dated March 12, 1996, between the Registrant and
Reynold M. Anderson for the purchase of 10,000 shares.
10.51 Warrant dated March 12, 1996, between the Registrant and
William H. Spell for the purchase of 10,000 shares.
10.52 Warrant dated March 12, 1996, between the Registrant and
Bruce A. Richard for the purchase of 10,000 shares.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with Section 13 or 15(d) 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, in the City of Minneapolis, State
of Minnesota, on March 28, 1997.
PEERLESS INDUSTRIAL GROUP, INC.
By /s/William H. Spell
-------------------------------
William H. Spell
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant, and in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William H. Spell Chief Executive Officer and Director
- -------------------------- (principal executive officer) March 28, 1997
William H. Spell
/s/ Robert E. Deter Chief Financial Officer (principal financial
- -------------------------- and accounting officer) March 28, 1997
Robert E. Deter
Chairman and Director
- --------------------------
Harry W. Spell
/s/ Michael E. Platt Director March 28, 1997
- --------------------------
Michael E. Platt
Director
- --------------------------
Reynold M. Anderson
/s/ Bruce A. Richard Director March 28, 1997
- --------------------------
Bruce A. Richard
Director
- --------------------------
Richard W. Perkins
/s/ Brian K. Smith Director March 28, 1997
- --------------------------
Brian K. Smith
</TABLE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.1 Articles of Incorporation, as amended, including Certificate of
Designation of Rights and Preferences of Class B Common Stock of the
Registrant dated January 4, 1996 (incorporated by reference to Exhibit
No. 3.1 to Registrant's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1996).
3.2 Bylaws, as amended (incorporated by reference to Exhibit No. 3.2 to
Registrant's Annual Report on Form 10-K for the year ended December 28,
1986).
4 See Exhibit 3.1.
10.1 Registrant's Employee Stock Purchase Plan (incorporated by reference to
Exhibit No. 10.6 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.2 Lease Agreement dated June 18, 1986, as amended, between Peerless Chain
Company and CPA Peerless Limited Partnership (incorporated by reference
to Exhibit No. 10.13 to Registrant's Current Report on Form 8-K dated
December 14, 1995).
10.3 Stock Option Agreement dated May 27, 1993 between the Registrant and
Michael Platt for the purchase of 31,250 shares (incorporated by
reference to Exhibit No. 10.19 to Registrant's Annual Report on Form
10-KSB for the year ended December 25, 1994).
10.4 Stock Purchase Agreement dated March 3, 1994 between the Registrant and
members of the Spell Group (incorporated by reference to Exhibit No.
10.9 to Registrant's Annual Report on Form 10-KSB for the year ended
December 25, 1994).
10.5 Peerless Industrial Group, Inc. Stock Option Plan (incorporated by
reference to Appendix 1 to Registrant's Definitive Schedule 14A (Proxy
Statement) relating to the Company's Annual Meeting of Shareholders
held on May 1, 1996).
10.6 Form of Nonqualified Stock Option Agreement dated April 8, 1994 between
the Registrant and Richard W. Perkins (incorporated by reference to
Exhibit No. 10.11 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.7 Form of Nonqualified Stock Option Agreement dated April 8, 1994 between
the Registrant and Harry W. Spell (incorporated by reference to Exhibit
No. 10.12 to Registrant's Annual Report on Form 10-KSB for the year
ended December 25, 1994).
10.8 Form of Nonqualified Stock Option Agreement dated April 8, 1994 between
the Registrant and William H. Spell (incorporated by reference to
Exhibit No. 10.13 to Registrant's Annual Report on Form 10-KSB for the
year ended December 25, 1994).
10.9 Nonqualified Stock Option Agreement dated April 8, 1994 between the
Registrant and Bruce A. Richard for the purchase of 16,000 shares
(incorporated by reference to Exhibit No. 10.14 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.10 Nonqualified Stock Option Agreement dated April 8, 1994 between the
Registrant and Richard W. Perkins for the purchase of 45,000 shares
(incorporated by reference to Exhibit No. 10.15 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.11 Nonqualified Stock Option Agreement dated April 8, 1994 between the
Registrant and Harry W. Spell for the purchase of 45,000 shares
(incorporated by reference to Exhibit No. 10.16 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.12 Nonqualified Stock Option Agreement dated April 8, 1994 between the
Registrant and William H. Spell for the purchase of 190,000 shares
(incorporated by reference to Exhibit No. 10.17 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.13 Nonqualified Stock Option Agreement dated April 8, 1994 between the
Registrant and Bruce A. Richard for the purchase of 20,000 shares
(incorporated by reference to Exhibit No. 10.18 to Registrant's Annual
Report on Form 10-KSB for the year ended December 25, 1994).
10.14 Asset Purchase Agreement dated April 15, 1994 between the Registrant
and Fuddruckers, Inc. (incorporated by reference to Exhibit No. 10.8 to
Registrant's Annual Report on Form 10-KSB for the year ended December
25, 1994).
10.15 Incentive Stock Option Agreement dated November 1, 1995 by and between
the Registrant and William H. Spell for the purchase of 175,000 shares
(incorporated by reference to Exhibit No. 10.15 to Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.16 Incentive Stock Option Agreement dated November 1, 1995 by and between
the Registrant and Bruce A. Richard for the purchase of 25,000 shares
(incorporated by reference to Exhibit No. 10.16 to Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.17 Stock Purchase Agreement dated November 22, 1995, as amended December
1, 1995 and December 13, 1995, between the Registrant and Bridgewater
Resources Corp. (incorporated by reference to Exhibit No. 10.1 to
Registrant's Current Report on Form 8-K dated December 14, 1995).
10.18 Form of Incentive Stock Option Agreement dated December 12, 1995 by and
between the Registrant and Jan C. van Osnabrugge (incorporated by
reference to Exhibit No. 10.18 to Registrant's Annual Report on form
10-KSB for the year ended December 31, 1995).
10.19 Financing Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and Peerless Chain Company and Peerless
Chain of Iowa, Inc. (incorporated by reference to Exhibit No. 10.2 to
Registrant's Current Report on Form 8-K dated December 14, 1995).
10.20 $2,500,000 Redemption Note dated December 13, 1995 between Peerless
Chain Company and Bridgewater Resources Corp. (incorporated by
reference to Exhibit No. 10.3 to Registrant's Current Report on Form
8-K dated December 14, 1995).
10.21 $1,200,000 Stock Purchase Note dated December 13, 1995 between the
Registrant and Bridgewater Resources Corp. (incorporated by reference
to Exhibit No. 10.4 to Registrant's Current Report on Form 8-K dated
December 14, 1995).
10.22 Stock Purchase Note dated December 13, 1995 in the amount of $100,000
between the Registrant and Harry W. Spell (incorporated by reference to
Exhibit No. 10.5 to Registrant's Current Report on Form 8-K dated
December 14, 1995).
10.23 Stock Purchase Note dated December 13, 1995 in the amount of $125,000
between the Registrant and Pyramid Investors (incorporated by reference
to Exhibit No. 10.6 to Registrant's Current Report on Form 8-K dated
December 14, 1995).
10.24 Subordination Agreement dated December 13, 1995 between Bridgewater
Resources Corp. and The CIT Group/Business Credit, Inc. (incorporated
by reference to Exhibit No. 10.7 to Registrant's Current Report on Form
8-K dated December 14, 1995).
10.25 Stock Pledge Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and the Registrant (incorporated by
reference to Exhibit No. 10.8 to Registrant's Current Report on Form
8-K dated December 14, 1995).
10.26 Stock Pledge Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and Peerless Chain Company (incorporated by
reference to Exhibit No. 10.9 to Registrant's Current Report on Form
8-K dated December 14, 1995).
10.27 Grant of security interest in patents, trademarks and licenses dated
December 13, 1995 between Peerless Chain Company, Peerless Chain of
Iowa, Inc. and The CIT Group/Business Credit, Inc. (incorporated by
reference to Exhibit No. 10.10 to Registrant's Current Report on Form
8-K dated December 14, 1995).
10.28 Guaranty of Parent Agreement dated December 13, 1995 between The CIT
Group/Business Credit, Inc. and the Registrant (incorporated by
reference to Exhibit No. 10.11 to Registrant's Current Report on Form
8-K dated December 14, 1995).
10.29 Guaranty of Borrower dated December 13, 1995 between The CIT Group
Business Credit, Inc. and Peerless Chain Company and Peerless Chain of
Iowa, Inc. (incorporated by reference to Exhibit No. 10.12 to
Registrant's Current Report on Form 8-K dated December 14, 1995).
10.30 Employment Agreement dated December 13, 1995 by and between William H.
Spell and Peerless Chain Company (incorporated by reference to Exhibit
No. 10.30 to Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.31 Employment Agreement dated December 13, 1995 by and between Jan C. van
Osnabrugge and Peerless Chain Company (incorporated by reference to
Exhibit No. 10.31 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.32 Employment Agreement dated December 13, 1995 by and between Robert E.
Deter and Peerless Chain Company (incorporated by reference to Exhibit
No. 10.32 to Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.33 Employment Agreement dated December 13, 1995 by and between Gerald
Faurote and Peerless Chain Company (incorporated by reference to
Exhibit No. 10.33 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.34 Employment Agreement dated December 13, 1995 by and between Dale
Schwanke and Peerless Chain Company (incorporated by reference to
Exhibit No. 10.34 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.35 Employment Agreement dated December 13, 1995 by and between John
McCauley and Peerless Chain Company (incorporated by reference to
Exhibit No. 10.35 to Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1995).
10.36 Warrant dated January 9, 1996 between the Registrant and Northland
Business Capital, L.L.P. for the purchase of 50,000 shares
(incorporated by reference to Exhibit No. 10.37 to Registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1995).
10.37 Form of Warrant dated March 12, 1996 between the Registrant and Richard
W. Perkins (incorporated by reference to Exhibit No. 10.38 to
Registrant's Annual Report on Form 10-KSB for the year ended December
31, 1995).
10.38 Stock Purchase Agreement dated January 9, 1996, between the Registrant
and Northland Business Capital, L.L.P. (incorporated by reference to
Exhibit No. 10.1 to Registrant's Current Report on Form 8-K dated
January 9, 1996).
10.39 Nonqualified Stock Option Agreement dated May 15, 1996, between the
Registrant and Victor Reim for the purchase of 50,000 shares.
10.40 Nonqualified Stock Option Agreement dated January 10, 1996, between the
Registrant and Harry W. Spell for the purchase of 44,000 shares.
10.41 Nonqualified Stock Option Agreement dated January 10, 1996, between the
Registrant and Brian K. Smith for the purchase of 50,000 shares.
10.42 Nonqualified Stock Option Agreement dated January 10, 1996, between the
Registrant and Bruce A. Richard for the purchase of 44,000 shares.
10.43 Nonqualified Stock Option Agreement dated January 10, 1996, between the
Registrant and Michael E. Platt for the purchase of 50,000 shares.
10.44 Nonqualified Stock Option Agreement dated January 10, 1996, between the
Registrant and Richard W. Perkins for the purchase of 44,000 shares.
10.45 Nonqualified Stock Option Agreement dated January 10, 1996, between the
Registrant and Reynold M. Anderson for the purchase of 44,000 shares.
10.46 Warrant dated March 12, 1996, between the Registrant and
Richard W. Perkins for the purchase of 5,000 shares.
10.47 Warrant dated March 12, 1996, between the Registrant and
Richard W. Perkins for the purchase of 10,000 shares.
10.48 Warrant dated March 12, 1996, between the Registrant and
Harry W. Spell for the purchase of 5,000 shares.
10.49 Warrant dated March 12, 1996, between the Registrant and
Harry W. Spell for the purchase of 10,000 shares.
10.50 Warrant dated March 12, 1996, between the Registrant and
Reynold M. Anderson for the purchase of 10,000 shares.
10.51 Warrant dated March 12, 1996, between the Registrant and
William H. Spell for the purchase of 10,000 shares.
10.52 Warrant dated March 12, 1996, between the Registrant and
Bruce A. Richard for the purchase of 10,000 shares.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule.
EXHIBIT 10.39
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 15th day of May, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Victor Reim (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 50,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.625 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate five (5) years from the date the
option was granted and shall be exercisable to the extent of 10,000 shares
commencing May 15, 1997, 10,000 shares commencing May 15, 1998, 10,000 shares
commencing May 15, 1999, 10,000 shares commencing May 15, 2000, and 10,000
shares commencing May 15, 2001.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other than by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares covered by this option until the date of
the issuance of a stock certificate for such shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 13 of
the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death, this option shall continue through its term as defined in Paragraph 3
hereof as to any shares that are exercisable pursuant to Paragraph 3 as of the
termination date of such directorship and any unvested shares shall never become
exercisable.
11. Death of Optionee. If the Optionee dies while a director of the
Company or any Subsidiary, this option shall terminate on the earlier of (i) the
close of business on the twelve-month anniversary date of the Optionee's death,
or (ii) the expiration date under this option. In such period following the
Optionee's death, this option may be exercised by the person or persons to whom
the Optionee's rights under this option shall have passed by the Optionee's will
or by the laws of descent and distribution only to the extent the option was
exercisable on the date of death, but had not previously been exercised. Any
unvested shares at the time of the death of the Optionee shall never become
exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Victor Reim
----------------------------
Victor Reim
EXHIBIT 10.40
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Harry W. Spell (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 44,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate on January 10, 2001, and shall
be exercisable to the extent of 4,000 shares commencing January 1, 1997, 10,000
shares commencing June 7, 1997, 10,000 shares commencing June 7, 1998, 10,000
shares commencing June 7, 1999, and 10,000 shares commencing June 7, 2000.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other than by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee (or the Optionee's successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by this option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death or disability, this option shall continue through its term as defined in
Paragraph 3 hereof as to any shares that are exercisable pursuant to Paragraph 3
as of the termination date of such directorship and any unvested shares shall
never become exercisable.
11. Death or Disability of Optionee. If the Optionee dies or becomes
disabled while a director of the Company or any Subsidiary, this option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the Optionee's death or disability, or (ii) the expiration
date under this option. In such period following the Optionee's death, this
option may be exercised by the person or persons to whom the Optionee's rights
under this option shall have passed by the Optionee's will or by the laws of
descent and distribution only to the extent the option was exercisable on the
date of death, but had not previously been exercised. Any unvested shares at the
time of the death or disability of the Optionee shall never become exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
-----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Harry W. Spell
-----------------------------
Harry W. Spell
EXHIBIT 10.41
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Brian K. Smith (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 50,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate five (5) years from the date the
option was granted and shall be exercisable to the extent of 10,000 shares
commencing January 10, 1997, 10,000 shares commencing January 10, 1998, 10,000
shares commencing January 10, 1999, 10,000 shares commencing January 10, 2000,
and 10,000 shares commencing January 10, 2001.
4. Transfer by Optionee. This option shall, during the lifetime of the
Optionee, be exercisable only by said Optionee and shall not be transferable by
Optionee in whole or in part, other than by will or by the laws of descent and
distribution. The Company acknowledges and consents to any transfer by the
Optionee to Northland Business Capital, L.L.P. of any shares of Common Stock
received by said Optionee upon exercise of the Option.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares covered by this option until the date of
the issuance of a stock certificate for such shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 13 of
the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death, this option shall continue through its term as defined in Paragraph 3
hereof as to any shares that are exercisable pursuant to Paragraph 3 as of the
termination date of such directorship and any unvested shares shall never become
exercisable.
11. Death of Optionee. If the Optionee dies while a director of the
Company or any Subsidiary, this option shall terminate on the earlier of (i) the
close of business on the twelve-month anniversary date of the Optionee's death,
or (ii) the expiration date under this option. In such period following the
Optionee's death, this option may be exercised by the person or persons to whom
the Optionee's rights under this option shall have passed by the Optionee's will
or by the laws of descent and distribution only to the extent the option was
exercisable on the date of death, but had not previously been exercised. Any
unvested shares at the time of the death of the Optionee shall never become
exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Brian K. Smith
----------------------------
Brian K. Smith
EXHIBIT 10.42
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Bruce A. Richard (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 44,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate on January 10, 2001, and shall
be exercisable to the extent of 4,000 shares commencing January 1, 1997, 10,000
shares commencing June 7, 1997, 10,000 shares commencing June 7, 1998, 10,000
shares commencing June 7, 1999, and 10,000 shares commencing June 7, 2000.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other Ithan by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee (or the Optionee's successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by this option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death or disability, this option shall continue through its term as defined in
Paragraph 3 hereof as to any shares that are exercisable pursuant to Paragraph 3
as of the termination date of such directorship and any unvested shares shall
never become exercisable.
11. Death or Disability of Optionee. If the Optionee dies or becomes
disabled while a director of the Company or any Subsidiary, this option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the Optionee's death or disability, or (ii) the expiration
date under this option. In such period following the Optionee's death, this
option may be exercised by the person or persons to whom the Optionee's rights
under this option shall have passed by the Optionee's will or by the laws of
descent and distribution only to the extent the option was exercisable on the
date of death, but had not previously been exercised. Any unvested shares at the
time of the death or disability of the Optionee shall never become exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Bruce A. Richard
----------------------------
Bruce A. Richard
EXHIBIT 10.43
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Michael E. Platt (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 50,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate five (5) years from the date the
option was granted and shall be exercisable to the extent of 10,000 shares
commencing January 10, 1997, 10,000 shares commencing January 10, 1998, 10,000
shares commencing January 10, 1999, 10,000 shares commencing January 10, 2000,
and 10,000 shares commencing January 10, 2001.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other than by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares covered by this option until the date of
the issuance of a stock certificate for such shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 13 of
the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death, this option shall continue through its term as defined in Paragraph 3
hereof as to any shares that are exercisable pursuant to Paragraph 3 as of the
termination date of such directorship and any unvested shares shall never become
exercisable.
11. Death of Optionee. If the Optionee dies while a director of the
Company or any Subsidiary, this option shall terminate on the earlier of (i) the
close of business on the twelve-month anniversary date of the Optionee's death,
or (ii) the expiration date under this option. In such period following the
Optionee's death, this option may be exercised by the person or persons to whom
the Optionee's rights under this option shall have passed by the Optionee's will
or by the laws of descent and distribution only to the extent the option was
exercisable on the date of death, but had not previously been exercised. Any
unvested shares at the time of the death of the Optionee shall never become
exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Michael E. Platt
---------------------------
Michael E. Platt
EXHIBIT 10.44
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Richard W. Perkins (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 44,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate on January 10, 2001, and shall
be exercisable to the extent of 4,000 shares commencing January 1, 1997, 10,000
shares commencing June 7, 1997, 10,000 shares commencing June 7, 1998, 10,000
shares commencing June 7, 1999, and 10,000 shares commencing June 7, 2000.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other than by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee (or the Optionee's successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by this option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be a
director of the Company or any Subsidiary for any reason other than because of
death or disability, this option shall continue through its term as defined in
Paragraph 3 hereof as to any shares that are exercisable pursuant to Paragraph 3
as of the termination date of such directorship and any unvested shares shall
never become exercisable.
11. Death or Disability of Optionee. If the Optionee dies or becomes
disabled while a director of the Company or any Subsidiary, this option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the Optionee's death or disability, or (ii) the expiration
date under this option. In such period following the Optionee's death, this
option may be exercised by the person or persons to whom the Optionee's rights
under this option shall have passed by the Optionee's will or by the laws of
descent and distribution only to the extent the option was exercisable on the
date of death, but had not previously been exercised. Any unvested shares at the
time of the death or disability of the Optionee shall never become exercisable.
12. Recapitalization, Sales, Mergers, Exchanges, Consolidations,
Liquidation. In the event of a stock dividend or stock split, the number of
shares of Option Shares and option exercise price shall be adjusted as provided
in Section 13 of the Plan. Similarly, in the event of a sale, merger, exchange,
consolidation or liquidation of the Company, this option shall be adjusted as
provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Richard W. Perkins
----------------------------
Richard W. Perkins
EXHIBIT 10.45
PEERLESS INDUSTRIAL GROUP, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 10th day of January, 1996, by and between
Peerless Industrial Group, Inc., a Minnesota corporation (the "Company"), and
Reynold M. Anderson (the "Optionee");
W I T N E S S E T H :
WHEREAS, the Optionee on the date hereof is a nonemployee director of
the Company or a Subsidiary of the Company;
WHEREAS, the Company has adopted a stock option plan known as the
"Peerless Industrial Group, Inc. Stock Option Plan" (hereinafter referred to as
the "Plan") providing for the automatic grant of nonqualified stock options to
nonemployee directors; and
WHEREAS, the Plan, in compliance with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, has been approved by the shareholders of the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee, on the
date of this Agreement, the option to purchase 44,000 shares of Common Stock of
the Company (the "Option Shares") subject to the terms and conditions herein
contained, and subject only to adjustment in such number of shares as provided
in Section 13 of the Plan. Optionee acknowledges receipt of a copy of the Plan.
2. Option Price. During the term of this option, the purchase price for
the shares of Option Shares granted herein is $1.10 per share, subject only to
adjustment of such price as provided in Section 13 of the Plan.
3. Term of Option/Vesting. Subject to the terms and conditions of the
Plan, including, but not limited to, provisions for continued service on the
Board of Directors, this option shall terminate on January 10, 2001, and shall
be exercisable to the extent of 4,000 shares commencing January 1, 1997, 10,000
shares commencing June 7, 1997, 10,000 shares commencing June 7, 1998, 10,000
shares commencing June 7, 1999, and 10,000 shares commencing June 7, 2000.
4. Personal Exercise by Optionee. This option shall, during the
lifetime of the Optionee, be exercisable only by said Optionee and shall not be
transferable by the Optionee in whole or in part, other than by will or by the
laws of descent and distribution.
5. Manner of Exercise of Option. This option is to be exercised by the
Optionee (or by the Optionee's successor or successors) by giving written notice
to the Company of an election to exercise such option. Such notice shall specify
the number of shares to be purchased hereunder and shall specify a date (not
more than 30 calendar days and not less than 10 calendar days from the date of
delivery of the notice to the Company) on which the Optionee shall deliver
payment of the full purchase price for the shares being purchased and the
Company shall deliver certificates to the Optionee representing the shares so
purchased. Such notice shall be delivered to the Company at its principal place
of business. An option shall be considered exercised at the time the Company
receives such notice. Upon receipt of such notice and subject to the provisions
of Paragraph 9 below, the Company shall, on the date specified in such notice
and against payment by the Optionee of the required purchase price, deliver to
the Optionee certificates for the shares so purchased. Payment for shares of
Option Shares may be made in the form of cash, certified check, or, if
authorized by the Board of Directors or a committee established to administer
the Plan, in the form of Common Stock of the Company, or any combination
thereof. Any stock so tendered as part of such payment shall be valued at its
then "fair market value" as provided in the Plan. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
6. Rights as a Shareholder. The Optionee (or the Optionee's successor
or successors) shall have no rights as a shareholder with respect to any shares
covered by this option until the date of the issuance of a stock certificate for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
7. Stock Option Plan. The option evidenced by this Agreement is
intended to constitute a nonqualified stock option, and shall not be construed
as an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended. The option is granted pursuant to the Plan, a copy of which
Plan is attached hereto or has been made available to the Optionee and is hereby
made a part of this Agreement. This Agreement is subject to and in all respects
limited and conditioned as provided in the Plan. The Plan governs this option
and the Optionee, and in the event of any question as to the construction of
this Agreement or of a conflict between the Plan and this Agreement, the Plan
shall govern, except as the Plan otherwise provides.
8. Withholding Taxes. In order to permit the Company to receive a tax
deduction in connection with the exercise of this option, the Optionee agrees
that as a condition to any exercise of this option, the Optionee will also pay
to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, local or other taxes required by law to be
withheld with respect to the option's exercise.
9. Investment Purpose. The Company requires as a condition to the grant
and exercise of this option that any stock acquired pursuant to this option be
acquired for only investment if, in the opinion of counsel for the Company, such
is required or deemed advisable under securities laws or any other applicable
law, regulation or rule or any government or governmental agency. In this
regard, if requested by the Company, the Optionee, prior to the acquisition of
any shares pursuant to this option, shall execute an investment letter to the
effect that the Optionee is acquiring shares pursuant to the option for
investment purposes only and not with the intention of making any distribution
of such shares and will not dispose of the shares in violation of the applicable
federal and state securities laws.
10. Termination of Directorship. If the Optionee ceases to be
a director of the Company or any Subsidiary for any reason other than because of
death or disability, this option shall continue through its term as defined in
Paragraph 3 hereof as to any shares that are exercisable pursuant to Paragraph 3
as of the termination date of such directorship and any unvested shares shall
never become exercisable.
11. Death or Disability of Optionee. If the Optionee dies or
becomes disabled while a director of the Company or any Subsidiary, this option
shall terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the Optionee's death or disability, or (ii) the expiration
date under this option. In such period following the Optionee's death, this
option may be exercised by the person or persons to whom the Optionee's rights
under this option shall have passed by the Optionee's will or by the laws of
descent and distribution only to the extent the option was exercisable on the
date of death, but had not previously been exercised. Any unvested shares at the
time of the death or disability of the Optionee shall never become exercisable.
12. Recapitalization, Sales, Mergers, Exchanges,
Consolidations, Liquidation. In the event of a stock dividend or stock split,
the number of shares of Option Shares and option exercise price shall be
adjusted as provided in Section 13 of the Plan. Similarly, in the event of a
sale, merger, exchange, consolidation or liquidation of the Company, this option
shall be adjusted as provided in Section 13 of the Plan.
13. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and the Optionee and any
successor or successors of the Optionee permitted by Paragraph 4 above.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement in the manner appropriate to each, as of the day and year first above
written.
Company
PEERLESS INDUSTRIAL GROUP, INC.
By /s/ William H. Spell
----------------------------
William H. Spell
Its: Chief Executive Officer
Optionee
/s/ Reynold M. Anderson
----------------------------
Reynold M. Anderson
Exhibit 10.46
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, Richard W. Perkins, Sr.
(herein called "Purchaser") or registered assigns is entitled to subscribe for
and purchase from DISCUS ACQUISITION CORPORATION (herein called the "Company"),
a corporation organized and existing under the laws of the State of Minnesota at
the price specified below (subject to adjustment as noted below) and subject to
the terms and conditions specified below, five thousand (5,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 10,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints _________________________ to
transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated:_______________________________________
In the presence of:___________________________
Signature_____________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
_____________________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated:_____________________________________
Signature_____________________________________
Note: The signature on this Subscription Form must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
Exhibit 10.47
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, Richard W. Perkins, Sr.
(herein called "Purchaser") or registered assigns is entitled to subscribe for
and purchase from DISCUS ACQUISITION CORPORATION (herein called the "Company"),
a corporation organized and existing under the laws of the State of Minnesota at
the price specified below (subject to adjustment as noted below) and subject to
the terms and conditions specified below, ten thousand (10,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 50,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints_____________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated: _____________________________________
In the presence of:_________________________
Signature __________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
_____________________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: _____________________________________
Signature __________________________________
Note: The signature on this Subscription Form must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
Exhibit 10.48
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, Harry W. Spell (herein called
"Purchaser") or registered assigns is entitled to subscribe for and purchase
from DISCUS ACQUISITION CORPORATION (herein called the "Company"), a corporation
organized and existing under the laws of the State of Minnesota at the price
specified below (subject to adjustment as noted below) and subject to the terms
and conditions specified below, five thousand (5,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 10,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints_____________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated: _____________________________________
In the presence of:_________________________
Signature___________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
_____________________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: _____________________________________
Signature___________________________________
Note: The signature on this Subscription Form must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
Exhibit 10.49
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, Harry W. Spell (herein called
"Purchaser") or registered assigns is entitled to subscribe for and purchase
from DISCUS ACQUISITION CORPORATION (herein called the "Company"), a corporation
organized and existing under the laws of the State of Minnesota at the price
specified below (subject to adjustment as noted below) and subject to the terms
and conditions specified below, ten thousand (10,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 50,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints_____________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated:_____________________________________
In the presence of: _______________________
Signature _________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
_____________________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: _____________________________________
Signature __________________________________
Note: The signature on this Subscription Form must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
Exhibit 10.50
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, Reynold M. Anderson (herein
called "Purchaser") or registered assigns is entitled to subscribe for and
purchase from DISCUS ACQUISITION CORPORATION (herein called the "Company"), a
corporation organized and existing under the laws of the State of Minnesota at
the price specified below (subject to adjustment as noted below) and subject to
the terms and conditions specified below, ten thousand (10,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 50,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints_____________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated: _____________________________________
In the presence of: ________________________
Signature___________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
_____________________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: _____________________________________
Signature __________________________________
Note: The signature on this Subscription Form must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
Exhibit 10.51
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, William H. Spell (herein
called "Purchaser") or registered assigns is entitled to subscribe for and
purchase from DISCUS ACQUISITION CORPORATION (herein called the "Company"), a
corporation organized and existing under the laws of the State of Minnesota at
the price specified below (subject to adjustment as noted below) and subject to
the terms and conditions specified below, ten thousand (10,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 50,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints_____________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated: _____________________________________
In the presence of:_________________________
Signature __________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
-------------------------
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common
Stock be issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated: _____________________________________
Signature __________________________________
Note: The signature on this Subscription Form must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
Exhibit 10.52
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (I) THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE
SECURITIES LAWS, OR (II) REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS.
WARRANT
To Subscribe for and Purchase Common Stock of
DISCUS ACQUISITION CORPORATION
THIS CERTIFIES THAT, for value received, Bruce A. Richard (herein
called "Purchaser") or registered assigns is entitled to subscribe for and
purchase from DISCUS ACQUISITION CORPORATION (herein called the "Company"), a
corporation organized and existing under the laws of the State of Minnesota at
the price specified below (subject to adjustment as noted below) and subject to
the terms and conditions specified below, ten thousand (10,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below). This Warrant is one of a series of Warrants exercisable for the
purchase of an aggregate of 50,000 shares (the "Warrant Stock") of the Company's
Common Stock. This Warrant shall be exercisable from and after the date hereof
and until March 12, 2001.
The warrant purchase price (subject to adjustment as noted below) shall
be $1.10 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The right to purchase shares of Common Stock subject to this Warrant
shall vest immediately upon the issuance and delivery of this Warrant. The
rights represented by this Warrant may be exercised by the holder hereof, in
whole or in part, by written notice of exercise delivered to the Company at
least 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend above.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) If and whenever the Company shall issue or sell any shares of its
Common Stock for a consideration per share less than the lower of (i) the
warrant purchase price in effect immediately prior to the time of such issue or
sale, and (ii) the market price (as defined below) on the date of such issue or
sale, then, forthwith upon such issue or sale, the warrant purchase price shall
be reduced to the price (calculated to the nearest cent) determined as follows:
(i) by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale multiplied by the then existing warrant purchase price
and (2) the consideration, if any, received by the Company upon such
issue or sale, by (B) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale and (2) the number of shares of Common Stock thus issued or sold;
or
(ii) by multiplying the warrant purchase price in effect
immediately prior to the time of such issue or sale by a fraction, the
numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the market price immediately prior to such issue or sale,
plus (2) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (1) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, multiplied by (2) the market price immediately
prior to such issue or sale.
Solely for purposes of calculating the number of shares of Common Stock
outstanding in clauses (i) and (ii) above, the term "Common Stock outstanding"
shall include those shares of Common Stock issuable upon conversion of
outstanding shares of Class B Common Stock issued by the Company.
No adjustment of the warrant purchase price, however, shall be made in
an amount less than 2% of the warrant purchase price in effect on the date of
such adjustment, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward, shall be an amount
equal to or greater than 4% of the warrant purchase price then in effect.
For the purposes of this paragraph (b), the following provisions (i) to
(v), inclusive, shall also be applicable:
(i) In case at any time the Company shall grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, (aa)
Common Stock or (bb) any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Common Stock
(any of such obligations or shares of stock being hereinafter called
"Convertible Securities") whether or not such rights or options or the
right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by
dividing (aa) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in
the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible Securities
and upon the conversion or exchange thereof, by (bb) the total maximum
number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the lower of (i) the warrant purchase price
in effect immediately prior to the time of the granting of such rights
or options and (ii) the market price on the date of the granting of
such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or
options shall (as of the date of granting of such rights or options) be
deemed to have been issued for such price per share. Except as provided
in paragraph (e) below, no further adjustments of the warrant purchase
price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or options or
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) In case the Company shall issue or sell (whether directly
or by assumption in a merger or otherwise) any Convertible Securities,
whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock
is issuable upon such conversion or exchange (determined by dividing
(aa) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (bb)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be
less than the lower of (i) the warrant purchase price in effect
immediately prior to the time of such issue or sale and (ii) the market
price on the date of such issue or sale, then the total maximum number
of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale
of such Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share, provided that (x) except as
provided in paragraph (e) below, no further adjustments of the warrant
purchase price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities, and (y) if
any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
warrant purchase price have been or are to be made pursuant to other
provisions of this paragraph (b), no further adjustment of the warrant
purchase price shall be made by reason of such issue or sale.
(iii) In case any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such Common Stock
or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the
Board of Directors of the Company, without deducting therefrom any
expenses incurred or any underwriting commissions, discounts or
concessions paid or allowed by the Company in connection therewith. In
case any shares of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible Securities
shall be issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value as determined by the
Board of Directors of the Company of such portion of the assets and
business of the non-surviving corporation or corporations as such Board
shall determine to be attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In the event of any
consolidation or merger of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any other corporation, the Company shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and
if any such calculation results in adjustment of the warrant purchase
price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, conversion or sale, for purposes of paragraph (f) below, shall
be made after giving effect to such adjustment of the warrant purchase
price.
(iv) In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (aa) to receive a
dividend or other distribution payable in Common Stock or in
Convertible Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (bb) to subscribe for or
purchase Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such rights of subscription or purchase, as the case
may be.
(v) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this
paragraph (b).
(c) In case the Company shall (i) declare a dividend upon the Common
Stock payable in Common Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Common Stock, as described in paragraph
(d) below) or Convertible Securities, or in any rights or options to purchase
Common Stock or Convertible Securities, or (ii) declare any other dividend or
make any other distribution upon the Common Stock payable otherwise than out of
earnings or earned surplus, then thereafter the holder of this Warrant upon the
exercise hereof will be entitled to receive the number of shares of Common Stock
to which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause (ii) above which such
holder would have received by way of dividends or distributions if continuously
since such holder became the record holder of this Warrant such holder (i) had
been the record holder of the number of shares of Common Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Common Stock or Convertible Securities, and any rights or options to
purchase any Common Stock or Convertible Securities) payable in respect of such
Common Stock or in respect of any stock or securities paid as dividends or
distributions and originating directly or indirectly from such Common Stock. For
the purposes of the foregoing, a dividend or distribution other than in cash
shall be considered payable out of earnings or earned surplus only to the extent
that such earnings or earned surplus are charged an amount equal to the fair
value of such dividend or distribution as determined by the Board of Directors
of the Company.
(d) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
(e) If (i) the purchase price provided for in any right or option
referred to in clause (i) of paragraph (b), or (ii) the additional
consideration, if any, payable upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b), or (iii)
the rate at which any Convertible Securities referred to in clause (i) or clause
(ii) of paragraph (b) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the warrant purchase price then in effect shall
forthwith be increased or decreased to such warrant purchase price which would
have obtained had the adjustments made upon the issuance of such rights, options
or Convertible Securities been made upon the basis of (i) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities, and the total consideration received therefor, and (ii)
the issuance at the time of such change of any such options, rights or
Convertible Securities then still outstanding for the consideration, if any,
received by the Company therefor and to be received on the basis of such changed
price; and on the expiration of any such option or right or the termination of
any such right to convert or exchange such Convertible Securities, the warrant
purchase price then in effect hereunder shall forthwith be increased to such
warrant purchase price which would have obtained had the adjustments made upon
the issuance of such rights or options or Convertible Securities been made upon
the basis of the issuance of the shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of
such rights or options or upon the conversion or exchange of such Convertible
Securities. If the purchase price provided for in any such right or option
referred to in clause (i) of paragraph (b) or the rate at which any Convertible
Securities referred to in clause (i) or clause (ii) of paragraph (b) are
convertible into or exchangeable for Common Stock, shall decrease at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or exchange of any such
Convertible Security, the warrant purchase price then in effect hereunder shall
forthwith be decreased to such warrant purchase price as would have obtained had
the adjustments made upon the issuance of such right, option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.
(f) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including
without limitation provisions for adjustments of the warrant purchase price and
of the number of shares purchasable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(g) Upon any adjustment of the warrant purchase price, then and in each
such case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(h) In case at any time:
(1) the Company shall declare any cash dividend on its Common Stock
at a rate in excess of the rate of the last cash dividend theretofore
paid;
(2) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to,
another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
(i) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(j) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market price" shall mean, if
the Common Stock is traded on a securities exchange or on the NASDAQ National
Market System, the closing price of the Common Stock on such exchange or the
NASDAQ National Market System, or, if the Common Stock is otherwise traded in
the over-the-counter market, the average bid price at the end of the day in the
over-the-counter market, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined;
provided, however, that in the event of a private placement of the Common Stock
the term "market price" shall mean the fair value of the Common Stock as
determined by an independent appraiser mutually acceptable to the Company and
the holder of this Warrant. If at any time the Common Stock is not traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within 15 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(f)
above.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
10. The holder of this Warrant and of the Common Stock issuable or
issued upon the exercise hereof shall be entitled to the following registration
rights.
(a) If the Company shall receive a written request therefor from the
record holder or holders of an aggregate of at least a majority of the shares of
Warrant Stock not theretofore registered under the Securities Act and sold, the
Company shall prepare and file a registration statement under the Securities Act
covering the shares of Warrant Stock which are the subject of such request and
shall use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of shares of Warrant
Stock not theretofore registered under the Securities Act and sold that such
registration is to be effected. The Company shall include in such registration
statement such shares of Warrant Stock for which it has received written
requests to register by such other record holders within 20 days after the
delivery of the Company's written notice to such other record holders. The
Company shall be obligated to prepare, file and cause to become effective only
two registration statements (other than on Form S-3 or any successor form
promulgated by the Commission ("Form S-3")) pursuant to this Section 10(a), and
to pay the expenses associated with such registration statements;
notwithstanding the foregoing, the record holder or holders of an aggregate of
at least a majority of the shares of Warrant Stock not theretofore registered
under the Securities Act and sold may require, pursuant to this Section 10(a),
the Company to file, and to pay the expenses associated with, any number of
registration statements on Form S-3, if such form is then available for use by
the Company and such record holder or holders and at least 100,000 shares are to
be included on any such registration statement. In the event that the holders of
a majority of the Warrant Stock for which registration has been requested
pursuant to this Section 10(a) determine for any reason not to proceed with a
registration at any time before a registration statement has been declared
effective by the Commission, and such registration statement, if theretofore
filed with the Commission, is withdrawn with respect to the Warrant Stock
covered thereby, and the holders of such Warrant Stock agree to bear their own
expenses incurred in connection therewith and to reimburse the Company for the
expenses incurred by it attributable to the registration of such Warrant Stock,
then the holders of such Warrant Stock shall not be deemed to have exercised
their right to require the Company to register Warrant Stock pursuant to this
Section 10(a).
If, at the time any written request for registration is received by the
Company pursuant to this Section 10(a), the Company shall have previously
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section
10(b) hereof rather than this Section 10(a), and the rights of the holders of
Warrant Stock covered by such written request shall be governed by Section 10(b)
hereof.
Without the written consent of the holders of a majority of the Warrant
Stock for which registration has been requested pursuant to this Section 10(a)
neither the Company nor any other holder of securities of the Company may
include securities in such registration if in the good faith Judgment of the
managing underwriter of such public offering the inclusion of such securities
would interfere with the successful marketing of the Warrant Stock or require
the exclusion of any portion of the Warrant Stock to be registered.
If the Company delivers written notice to all record holders of Warrant
Stock of its determination to file a registration statement under the Securities
Act in connection with the proposed offer and sale for cash of any of its
securities, such holders of Warrant Stock agree not to exercise their right to
demand registration of any shares of Warrant Stock pursuant to this Section
10(a) for a period not to exceed 120 days from the date of such registration.
(b) Each time 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 for cash of any of its securities by
it or any of its security holders (other than a registration statement on a form
that does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record holders of
Warrant Stock not theretofore registered under the Securities Act and sold. Upon
the written request of a record holder of any shares of Warrant Stock given
within 10 business days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such shares of Warrant Stock,
the record holders of which have so requested registration thereof, 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 Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or delaying any such
registration initiated by it; provided further, however, that if the Company
determines not to proceed with a registration after the registration statement
has been filed with the Commission and the Company's decision not to proceed is
primarily based upon the anticipated public offering price of the securities to
be sold by the Company, the Company shall promptly complete the registration for
the benefit of those selling security holders who wish to proceed with a public
offering of their securities and who bear all expenses in excess of $25,000
incurred by the Company as the result of such registration after the Company has
decided not to proceed. If any registration pursuant to this Section 10(b) shall
be underwritten in whole or in part, the Company may require that the Warrant
Stock requested for inclusion pursuant to this Section 10(b) be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter of such public offering the inclusion of all of the Warrant Stock
originally covered by a request for registration would reduce the number of
shares to be offered by the Company or interfere with the successful marketing
of the shares of stock offered by the Company, the number of shares of Warrant
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting such
registration. Those shares of Warrant Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(c) If and whenever the Company is required by the provisions of
Section 10(a) or 10(b) hereof to effect the registration of shares of Warrant
Stock under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(ii) prepare and file with the Commission 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, not to exceed nine months;
(iii) furnish to the security holders 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
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(iv) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 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;
(v) notify the security holders 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;
(vi) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of any such holders, 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 the Warrant Stock by
such holder;
(viii) prepare and promptly file with the Commission and
promptly notify such 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 the 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;
(ix) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission 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;
(x) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(xi) at the request of any such holder, furnish: (1) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(d) With respect to each registration, including registrations pursuant
to Form S-3, requested pursuant to Section 10(a) hereof (except as otherwise
provided in such Section with respect to registrations voluntarily terminated at
the request of the requesting security holders) and with respect to each
inclusion of shares of Warrant Stock in a registration statement pursuant to
Section 10(b) hereof (except as otherwise provided in Section 10(b) with respect
to registrations initiated by the Company but with respect to which the Company
has determined not to proceed), the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company and/or selling security holders are required to bear such fees
and disbursements), all internal Company expenses, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes relating to the shares
included in the offering by the selling security holders, and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
(e) In the event that any Warrant Stock is included in a registration
statement under Section 10(a) or 10(b) hereof:
(i) The Company will indemnify and hold harmless each holder
of shares of Warrant Stock which are included in a registration
statement pursuant to the provisions of this Section 10(a), 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 expense
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.
(ii) Each holder of shares of Warrant Stock which are included
in a registration pursuant to the provisions of this Section 11 will
indemnify and hold harmless the Company, its directors and officers,
any controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue 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 the 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, 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 such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10(e) 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, 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 additional 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 such 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 proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel 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 indemnifying party.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of March 12, 1996.
DISCUS ACQUISITION CORPORATION
By /s/ William H. Spell
--------------------------------
William H. Spell
Chief Executive Officer
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________ this Warrant, and appoints_____________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated:
In the presence of: ___________________________________________________________
_______________________________________________________________________________
Signature _____________________________________________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such
Holder Desires to Exercise this Warrant in Whole
or in Part:
To: Discus Acquisition Corporation (the "Company")
The undersigned _____________________________________
Please insert Social Security or other
identifying number of Subscriber:
-------------------------
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $__________, such payment being made as provided on the face of
this Warrant.
The undersigned requests that certificates for such shares of Common Stock be
issued as follows:
Name:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Deliver to:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated:_______________________________________
Signature____________________________________
Note: The signature on this Form of Assignment must conform in all respects to
the name of the holder as specified on the face of this Warrant in every
particular, without alteration, enlargement or any change whatsoever, and the
signature must be guaranteed in the usual manner.
EXHIBIT 21
SUBSIDIARIES
NAME STATE OF INCORPORATION
---- ----------------------
Discus of Cottage Grove, Inc. Minnesota
Beaneries of the Midwest, Inc. Minnesota
Peerless Chain Company Minnesota
Peerless Chain of Iowa Inc. Iowa
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Peerless Industrial Group, Inc. (formerly Discus Acquisition
Corporation) on Form S-8 (SEC File No. 33-83034) and on Form S-8 (SEC File No.
333-10767) of our report dated March 14, 1997, except as to the information
presented in Note 13, for which the date is March 28, 1997, on our audits of the
consolidated financial statements of Peerless Industrial Group, Inc. as of
December 31, 1996 and 1995, and for the years ended December 31, 1996 and 1995,
which report is included in this Annual Report on Form 10-KSB.
/s/ Coopers & Lybrand L.L.P.
--------------------------
COOPERS & LYBRAND L.L.P
Minneapolis, Minnesota
March 28, 1997
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,671
<ALLOWANCES> 0
<INVENTORY> 11,138
<CURRENT-ASSETS> 19,900
<PP&E> 12,372
<DEPRECIATION> (1,702)
<TOTAL-ASSETS> 38,395
<CURRENT-LIABILITIES> 16,687
<BONDS> 0
0
0
<COMMON> 8,028
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 38,395
<SALES> 45,002
<TOTAL-REVENUES> 45,002
<CGS> 36,495
<TOTAL-COSTS> 7,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,543
<INCOME-PRETAX> (338)
<INCOME-TAX> 123
<INCOME-CONTINUING> (215)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
