<PAGE>
As filed with the Securities and Exchange Commission on September 14, 1999
Registration No. 333-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GRAND TOYS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
87-0454155
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(I.R.S. Employer Identification No.)
1710 Route Transcanadienne, Dorval, Quebec, Canada H9P 1H7
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(Address of Principal Executive Offices, including zip code)
Stephen Altro Copy to:
Chairman and President Paul J. Pollock, Esq.
Grand Toys International, Inc. Piper & Marbury L.L.P.
1710 Route Transcanadienne 1251 Avenue of the Americas
Dorval, Quebec, Canada H9P 1H7 New York, NY 10020
(514) 685-2180 (212) 835-6000
--------------
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Amount of
Securities to be Registered Registered (1) Price per Share Aggregate Offering Price Registration Fee
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 60,000 $12.50 $ 750,000.00 $208.50
- ------------------------------------------------------------------------------------------------------------------------
112,000 (2) $12.50 $1,450,000.00 $389.20
- ------------------------------------------------------------------------------------------------------------------------
1,000 (3) $ 4.44 $ 4,440.00 $ 1.23
- ------------------------------------------------------------------------------------------------------------------------
1,000 (3) $ 4.38 $ 4,380.00 $ 1.22
- ------------------------------------------------------------------------------------------------------------------------
478 (3) $ 7.65 $ 3,656.70 $ 1.02
- ------------------------------------------------------------------------------------------------------------------------
1,000 (3) $ 3.00 $ 3,000.00 $ 0.83
- ------------------------------------------------------------------------------------------------------------------------
5,000 (3) $ 7.50 $ 37,500.00 $ 10.43
========================================================================================================================
TOTAL 180,478 $2,202,976.70 $612.43
========================================================================================================================
</TABLE>
(1) This Registration Statement also includes an indeterminable number of
shares of common stock which may be issued under the antidilution provisions of
the various agreements setting forth the rights of the holders of the
convertible securities.
(2) Reflect shares of common stock issuable upon exercise of warrants. The
Proposed Maximum Offering Price per share was calculated in accordance with Rule
457(g) of the Securities Act of 1933, as amended.
(3) Reflect shares of common stock issuable upon exercise of stock options.
The Proposed Maximum Offering Price per share was calculated in accordance with
Rule 457(h) of the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
GRAND TOYS INTERNATIONAL, INC.
180,478 Shares of Common Stock
----------------
The stockholders selling the shares in this offering have the right to
determine both the numbers of shares they will offer and the time or times when
they will offer the shares. They may sell the shares at the market price at the
time of sale or at such other prices as they may negotiate.
The 180,478 shares of common stock covered by this prospectus include both
outstanding shares and shares issuable upon exercise of warrants and options
that may be offered and sold by certain stockholders named within this
prospectus. Grand will not receive any proceeds from the offering, but will
receive an aggregate of $748,851.70 if all of the warrants and options are
exercised.
The common stock is quoted on the Nasdaq SmallCap Market under the symbol
"GRIN." On September 10, 1999, the closing sale price of the common stock was
$12.625 per share.
----------------
Investment in the common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
----------------
The date of this prospectus is ______________, 1999.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (or parts thereof) filed by Grand with the SEC are
incorporated by reference in this prospectus:
1. The Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
2. The Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1999 and June, 30, 1999;
3. Proxy Statement, dated April 26, 1999 for the Annual Meeting of
Stockholders held on May 27, 1999;
4. All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual
report referred to in (1) above; and
5. The description of the common stock contained in Grand's registration
statement filed under the Exchange Act registering such common stock
under Section 12 of the Exchange Act, including any amendment or
report filed for the purpose of updating such description.
All documents filed by Grand pursuant to Sections 13(a), 13(c), 14, or 15(d) of
the Exchange Act after the date of this prospectus and prior to the filing of a
post-effective amendment indicating that all of the shares have been sold, or
deregistering all of the shares that, at the time of such post-effective
amendment, remain unsold, shall be deemed to be incorporated by reference in and
to be a part of this prospectus from the date of filing of such documents. Any
statement contained in this prospectus or in any document incorporated by
reference in this prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document, which also is or is
deemed to be incorporated by reference in this prospectus, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
Grand shall furnish without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents that are
incorporated by reference in this prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Written or telephone requests for such documents should be
directed to Tanya Clarke, Controller, Grand Toys International, Inc., 1710 Route
Transcanadienne, Dorval, Quebec H9P 1H7, Canada. Grand's telephone number is
(514) 685-2180.
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RISK FACTORS
Investing in our common stock is very risky. You should carefully consider
the following factors and other information in this prospectus before deciding
to invest in the shares. If you are not in a financial position to bear a
complete loss of your investment, you should not purchase any of the shares.
Portions of this prospectus and information incorporated into this prospectus
contain certain "forward-looking" statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements. Although we believe that the
assumptions underlying the forward-looking statements contained in this
prospectus and incorporated are reasonable, any of the assumptions could prove
inaccurate and cause such forward-looking statements to be inaccurate.
We may not be able to retain the key personnel we need to succeed
Our success is dependent on the expertise, experience and continued
services of Stephen Altro, our Chairman, President and a director, and David
Mars, our Vice Chairman and a director. Most decisions concerning our business
are made or significantly influenced by them. We do not maintain "key man"
insurance on the life of either of these persons. In the event of the loss of
either of Messrs. Altro or Mars, no assurances can be given that we will be able
to obtain the services of an adequate replacement.
The issuance of shares of common stock upon the exercise of options and warrants
and upon the conversion of our convertible redeemable preferred stock will cause
dilution to our current stockholders
We are authorized to issue 50,000,000 shares of common stock, of which
3,067,428 shares are outstanding. In addition:
. 72,600 shares are issuable upon the exercise of currently outstanding
options granted under our Amended and Restated 1993 Stock Option Plan
the sale of which has been registered on a registration statement on
Form S-8;
. 628,478 shares are issuable upon the exercise of options granted outside
our 1993 Stock Option Plan
. 112,000 shares are issuable upon the exercise of currently outstanding
warrants; and
. 200,000 shares are issuable upon conversion of currently outstanding
preferred stock.
If and when we issue these shares, the percentage of common stock owned by
each holder of common stock would be diluted. Moreover, the prevailing market
price for the common stock may be materially and adversely affected by the
addition of a substantial number of shares, including the shares offered by this
prospectus, into the market.
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We are also authorized to issue 5,000,000 shares of "blank check" preferred
stock, which is preferred stock that may be issued from time to time in such
classes or series and with such terms, rights and preferences as the Board of
Directors may choose. The Board of Directors has already designated and issued
200,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock.
The balance of the authorized preferred stock may be issued in the discretion of
the Board, without stockholder approval, with dividend, liquidation, conversion,
voting or other rights which could negatively affect the voting power or other
rights of owners of our common stock or other series of preferred stock. In the
event of issuance, the preferred stock could be used, under certain
circumstances, as a way to discourage, delay or prevent a change in control of
Grand which, in turn, could discourage bids for us and prevent stockholders from
receiving the maximum value for their shares.
Our attempts to acquire other companies may not prove fruitful
We may, at times, become involved in discussions with companies for
acquisition. This process may take a significant amount of management time and
effort. This will likely distract our management from our day-to-day
operations. Even if we do find companies that are worth acquiring, it may be
extremely difficult to integrate their operations into our existing operations.
In addition, there is no guaranty that our acquisitions will be financially
successful. Thus, any such acquisition could have an adverse effect on our
liquidity and earnings.
The life cycle for toy products is usually very short
As a result of changing consumer preferences, many toy products are
successfully marketed for only one or two years. In the event a new product
does not receive sufficient market acceptance, we may be required to sell
inventory of such products at a substantial discount. Accordingly, our success
is dependent in large part on our ability to secure the rights to distribute new
products and to secure new character and well-known brand name licenses for
existing or new product lines, which cannot be assured. Therefore, we cannot
assume that any new products will be successful or meet with the same success as
existing products.
Certain relationships among our management and affiliates create various
potential and actual conflicts of interest
Although it is our policy that all transactions and loans with our
affiliates be made on similar terms to those that can be obtained from
unaffiliated third parties and for such transactions to be approved by a
majority of the directors who do not have an interest in the transaction,
certain restrictions may arise in the future where an interested party would be
required to vote on actions that could benefit such person and negatively impact
Grand, or vice versa.
We are subject to significant government regulation.
We are subject to the provisions of various laws, certain of which have
been enacted by the federal government of Canada, the Province of Quebec and
other Canadian provinces. The laws of Canada, to which we are subject, include
the Hazardous Products Act which empowers
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the government to protect children from hazardous toys and other articles. Under
that legislation, the government has the authority to exclude from the market
those articles which are found to be hazardous. We are also subject to the
Consumer Packaging and Labeling Act enacted by the government of Canada, which
legislation prohibits the importation of prepackaged items and the sale or
importation or advertising of items which have misleading information on their
label. As a result, if any of these Canadian governmental entities should allege
that any of our products are hazardous to children or the packaging is
misleading, whether or not such items are dangerous or misleading, we could be
precluded from selling entire lines of toys until a full investigation is
completed. In such case, even if we were to prevail, a significant portion of
the value of the entire line could be lost during a time consuming investigation
because, as discussed above, the life cycle for toy products is usually very
short.
Competition in the toy distribution industry is intense
Many other companies involved in the toy distribution industry in Canada
and the United States have greater financial resources, larger sales forces,
greater name recognition, larger facilities for product development and products
that may be more competitively priced than our products. As a result, some of
our competitors may be able to obtain a greater volume of and more lucrative
distribution contracts than we can.
We do not expect to pay dividends on our stock
We have not paid any cash or other dividends on our common stock and do not
expect to declare or pay any cash dividends in the foreseeable future. In
addition, our current credit agreement with our bank restricts the payment of
any dividends without the bank's prior consent.
The failure to be Year 2000 compliant could negatively impact our business
The Year 2000 issue arose from computer programs which were written using
two digits rather than four to define the applicable year. For example, date-
sensitive software may recognize a date using "00" as the Year 1900 rather than
the Year 2000. Such misrecognition could result in system failures or
miscalculations causing disruptions of operations, including, among others, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities.
We rely on our systems in operating and monitoring all aspects of our
business. We also rely on the external systems of our suppliers and resellers.
We have already identified all of our significant internal software applications
which contain source codes that may be unable to appropriately interpret the
Year 2000 and have replaced those applications. Thus, our computer system is
now Year 2000 compliant.
In addition, certain of our major suppliers and resellers have informed us
that they do not anticipate problems in their business operations due to the
Year 2000 compliance issues. However, we are currently unable to determine the
extent to which Year 2000 issues will
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affect our other suppliers and resellers, or to the extent to which we would be
vulnerable to their failure to fix any of their Year 2000 problems.
USE OF PROCEEDS
Grand will not realize any proceeds from the sale of the shares pursuant to
this prospectus but will derive proceeds of approximately $748,851.70 if all of
the warrants and options are exercised. Such proceeds will be available to
Grand for working capital and general corporate purposes. See "Selling
Stockholders" and "Plan of Distribution."
DILUTION
We are authorized to issue 50,000,000 shares of common stock. Of such
shares, 3,067,428 shares are issued and outstanding, 300,000 shares are reserved
for issuance upon the exercise of options granted under Grand's Amended and
Restated 1993 Stock Option Plan, 628,478 shares are reserved for issuance upon
the exercise of options granted outside of the plan, 112,000 are reserved for
issuance upon the exercise of warrants, and 200,000 shares are reserved for
conversion of the Series A Cumulative Convertible Redeemable Preferred Stock.
In certain cases, the officers, directors and present stockholders of Grand
have acquired their shares at a cost substantially lower than that which
investors will pay for the common stock offered hereby. As a result, anyone
purchasing shares in this offering could incur dilution in the net tangible book
value per share.
SELLING STOCKHOLDERS
Identity of Selling Stockholders; Number of Shares Offered
- ----------------------------------------------------------
The following table sets forth:
(1) the name of each selling stockholder,
(2) the nature of any position, office, or other material relationship
which each such selling stockholder has had with Grand or any of its
affiliates within the last three years,
(3) the number of shares of common stock owned by each such selling
stockholder prior to the offering,
(4) the number of shares of common stock offered for each such selling
stockholder's account, and
(5) the number of shares of common stock and the percentage owned by each
such selling stockholder after completion of the offering.
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<TABLE>
<CAPTION>
Number of
Number of Shares Number of Shares Percentage
Relationship to Owned Prior to Shares Owned After Owned After
Selling Stockholder Company Offering to be Sold Offering Offering
- ------------------- -------------------- ---------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ron Goldenberg Executive Vice President, 5,478 5,478 (1) 0 -
Chief Financial Officer and
Former Director
James Rybakoff Director 1,500 1,500 (2) 0 -
Elliot Bier Director 1,500 1,500 (2) 0 -
Lawrence Bernstein Former President, Chief 30,000 30,000 0 -
Executive Officer and
Director
Robert Finn 30,000 30,000 0 -
Akin Bay Company 110,000 110,000 (3) 0 -
LLC
Robert E. Meshel 2,000 2,000 (4) 0 -
</TABLE>
---------------------------
(1) Represents currently exercisable options to purchase 5,000 shares of common
stock issued pursuant to Grand's Amended and Restated 1993 Stock Option
Plan and 478 shares of common stock issued upon exercise of options granted
outside the plan.
(2) Represents currently exercisable options to purchase 1,500 shares of common
stock issued pursuant to Grand's Amended and Restated 1993 Stock Option
Plan.
(3) Represents currently exercisable warrants to purchase 110,000 shares of
common stock granted to Akin Bay Company LLC as consideration for services
rendered. James Rybakoff is the President of that company and a director
of Grand.
(4) Represents currently exercisable warrants to purchase 2,000 shares of
common stock initially issued pursuant to that certain Warrant Agreement
dated as of May 10, 1994 to Berkeley Securities Corporation and
subsequently assigned to Robert E. Meshel, Esq. by Assignment form dated
January 9, 1995.
Ron Goldenberg has been Executive Vice President and Chief Financial Officer
since July 20, 1993. Mr. Goldenberg was also a director from July 20, 1993 until
August 9, 1999. Prior to that, he was the Vice President of Finance and Chief
Financial Officer for Grand Canada, Grand's Principal Canadian subsidiary, for
over seven years.
Elliot L. Bier has been a director of the Company since July 20, 1993. He has
been a practicing attorney in Montreal for the last 20 years. He is a senior
partner in Adessky Poulin, the Company's Canadian legal counsel.
James B. Rybakoff is the President of Akin Bay Company, an investment bank and
brokerage firm, which he co-founded in 1990. From 1992 to 1993, Mr. Rybakoff
served as an associate with Zilkha & Company, an international mergers and
acquisition investment banking and strategic planning firm.
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Lawrence Bernstein was a director of Grand from July 1998 to May 1999 and
President and Chief Executive Officer of Grand from September 1998 to May 1999.
In addition, Mr. Bernstein was President of Grand from August 1995 to September
1995. From July 1994 to July 1998, Mr. Bernstein owned and operated Rockport
Entertainment, a private company that provided consulting services to toy
distributors. From June 1989 to August 1994, Mr. Bernstein was an Executive
Vice President of Hasbro, Inc. and President of Hasbro's toy division.
Robert Finn was a consultant of Grand from March 1998 to March 1999.
Akin Bay Company LLC is an investment bank and brokerage firm, of which James
Rybakoff is President and a controlling member. Mr. Rybakoff is a director of
Grand. Akin Bay has acted as Grand's investment bank and advisor for over five
years.
PLAN OF DISTRIBUTION
Grand will receive no part of the proceeds of any sales made hereunder. See
"Use of Proceeds". Grand will pay expenses of registration incurred in
connection with this offering and in connection with the offering and sale of
the shares, other than commissions, discounts and fees of underwriters, dealers
or agents. All selling and other expenses incurred by the selling stockholders
will be borne by the selling stockholders.
The selling stockholders and any broker-dealers participating in the
distribution of the shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any commissions or discounts given to any such
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
The selling stockholders may from time to time sell all or a portion of the
shares on the Nasdaq SmallCap market or on any national securities exchange on
which the common stock may be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the then current market price
or at negotiated prices. The shares will not be sold in an underwritten public
offering. The shares may be sold directly or through brokers or dealers. The
methods by which the shares may be sold include:
(1) a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate
the transaction;
(2) purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
(3) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
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(4) privately negotiated transactions.
In effecting sales, brokers and dealers engaged by selling stockholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from selling stockholders (or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the selling stockholders to sell a specified number of such shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a selling stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
such selling stockholder. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and sales to and through other broker-
dealers, including transactions of the nature described above) in the over-the-
counter market or otherwise at prices and on terms then prevailing at the time
of sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may receive from
the purchasers of such shares commissions as described above.
In connection with the distribution of the shares, the selling stockholders
may enter into hedging transactions with broker-dealers. In connection with
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling stockholders. The
selling stockholders may also sell the shares short and redeliver the shares to
close out the short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers, which require the delivery to
the broker-dealer of the shares. The selling stockholders may also loan or
pledge the shares to a broker-dealer and the broker-dealer may sell the shares
so loaned or upon a default the broker-dealer may effect sales of the pledged
shares. In addition to the foregoing, the selling stockholders may enter into,
from time to time, other types of hedging transactions.
The selling stockholders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any profit on the sale of
shares by the selling stockholders and any commissions or discounts given to any
such broker-dealer may be deemed to be underwriting commissions or discounts
under the Securities Act.
The shares may also be sold pursuant to Rule 144 under the Securities Act
beginning one year after the shares were issued, provided such date is at least
90 days after the date of this prospectus.
INDEMNIFICATION
The rights of Grand or its stockholders to sue any director or officer of
Grand for misconduct in conducting the affairs of Grand as an officer or
director are limited by Article XII
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of Grand's Articles of Incorporation and Nevada statutory law to cases for
damages resulting from breaches of fiduciary duties involving acts or omissions
involving intentional misconduct, fraud, knowing violations of the law or the
unlawful payment of dividends. Ordinary negligence is not a ground for such a
suit. The statute does not limit the liability of directors or officers for
monetary damages under the federal securities laws. Grand also has the
obligation, pursuant to Article IX of Grand's Amended and Restated Bylaws, to
indemnify any and all of its directors or officers or former directors or
officers or any person who may have served at its request as a director or
officer of another corporation in which Grand owns shares of capital stock or of
which it is a creditor against expenses actually and necessarily incurred by any
such person in connection with the defense of any action, suit or proceeding in
which such person is made a party, by reason of being or having been a director
or officer of Grand, or of such other corporation, except in relation to matters
as to which any such person shall be adjudged in such action, suit or proceeding
to be liable for negligence or misconduct in the performance of duty.
Grand maintains a directors' and officers' liability insurance policy
covering certain liabilities that may be incurred by directors and officers in
connection with the performance of their duties. The entire premium for such
insurance is paid by Grand. Accordingly, indemnification may occur for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of Grand pursuant to the foregoing provisions
or otherwise, Grand has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
The legality of the securities offered by this prospectus has been passed
upon for Grand by Piper & Marbury L.L.P., 1251 Avenue of the Americas, New York,
New York 10020.
EXPERTS
The consolidated financial statements and schedules of Grand for each of
the years in the three-year period ended December 31, 1998, have been
incorporated by reference in this prospectus in reliance upon the report of KPMG
LLP, Chartered Accountants, and upon the authority of said firm as experts in
accounting and auditing.
10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth Grand's estimates (other than the Securities
and Exchange Commission registration fee and the Nasdaq SmallCap Market
additional shares listing fee) of the expenses to be incurred in connection with
the issuance and distribution of the shares of Common Stock being registered,
other than underwriting discounts and commissions:
Securities and Exchange Commission registration fee $ 612.43
-----------------
Nasdaq SmallCap Market listing fee 0
-----------------
Printing and engraving expenses 2,000.00 *
-----------------
Legal fees and expenses 15,000.00 *
-----------------
Accounting fees and expenses 5,000.00 *
-----------------
Transfer agent and registrar fees 1,875.00 *
-----------------
Miscellaneous expenses 512.57 *
-----------------
Total $ 25,000.00
=================
* estimated
Item 15. Indemnification of Directors and Officers
The rights of Grand or its stockholders to sue any director or officer of
Grand for misconduct in conducting the affairs of Grand as an officer or
director are limited by Article XII of Grand's Articles of Incorporation and
Nevada statutory law to cases for damages resulting from breaches of fiduciary
duties involving acts or omissions involving intentional misconduct, fraud,
knowing violations of the law or the unlawful payment of dividends. Ordinary
negligence is not a ground for such a suit. The statute does not limit the
liability of directors or officers for monetary damages under the federal
securities laws. Grand also has the obligation, pursuant to Article IX of
Grand's Amended and Restated Bylaws, to indemnify any and all of its directors
or officers or former directors or officers or any person who may have served at
its request as a director or officer of another corporation in which Grand owns
shares of capital stock or of which it is a creditor against expenses actually
and necessarily incurred by any such person in connection with the defense of
any action, suit or proceeding in which such person is made a party, by reason
of being or having been a director or officer of Grand, or of such other
corporation, except in relation to matters as to which any such person shall be
adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty.
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Grand maintains a directors' and officers' liability insurance policy
covering certain liabilities that may be incurred by directors and officers in
connection with the performance of their duties. The entire premium for such
insurance is paid by Grand. Accordingly, indemnification may occur for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of Grand pursuant to the foregoing provisions
or otherwise, Grand has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
Item 16. Exhibits
Exhibit No. Description
- ----------- -----------
4.1 Warrant Agreement dated April 10, 1996 by and between Akin Bay Company LLC
and Grand. (1)
4.2 Warrant Certificate dated April 10, 1996 issued to Akin Bay Company LLC by
Grand (included in Exhibit 4.1).
4.3 Warrant Agreement dated as of May 10, 1994 by and between Berkeley
Securities Corporation and Grand. (1)
4.4 Warrant Certificate dated May 10, 1994 issued to Berkeley Securities
Corporation by Grand. (included in Exhibit 4.3)
4.5 Stock Option Agreement between the Company and Ron Goldenberg, dated August
14, 1997. (2)
4.6 Grand Toys International, Inc. Amended and Restated 1993 Stock Option Plan.
(3)
4.7 Warrant to Purchase Stock of Grand Toys International, Inc. dated as of
August 13, 1999 granted to Akin Bay Company LLC. (1)
5.1 Opinion of Piper & Marbury L.L.P., as to the legality of the securities
being registered. (1)
23.1 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1).
23.2 Consent of KPMG LLP. (1)
24 Power of attorney (included on the signature page to this registration
statement).(1)
____________________
(1) Filed with this registration statement.
II-2
<PAGE>
(2) Filed as an Exhibit to the S-8 Registration Statement filed with the SEC on
December 15, 1998.
(3) Filed as Appendix A to Grand's Definitive Proxy Statement for the Annual
Meeting of Shareholders held on June 6, 1995.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs in contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
II-3
<PAGE>
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dorval, Province of Quebec, Canada, on this 14th day
of September, 1999.
GRAND TOYS INTERNATIONAL, INC.
By: /s/ Stephen Altro
-----------------------------------------
Stephen Altro
Chairman, President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Stephen
Altro and Tanya Clarke, or either of them, each with the power of substitution,
his or her attorney-in-fact, to sign any amendments (including post-effective
amendments) to this registration statement and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorney-in-fact, or his or her substitute, may do or choose to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Stephen Altro Chairman, President and Director September 14, 1999
- --------------------
Stephen Altro
/s/ David Mars Vice Chairman and Director September 14, 1999
- --------------------
David Mars
/s/ Ron Goldenberg Chief Financial Officer September 14, 1999
- --------------------
Ron Goldenberg
/s/ Elliot L. Bier Director September 14, 1999
- --------------------
Elliot L. Bier
/s/ James B. Rybakoff Director September 14, 1999
- --------------------
James B. Rybakoff
</TABLE>
<PAGE>
EXHIBIT 4.1
================================================================================
WARRANT AGREEMENT
GRAND TOYS INTERNATIONAL, INC.
and
AKIN BAY COMPANY
Dated as of April 10, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. Definitions................................................ 1
SECTION 2. Representations and Warranties............................. 6
SECTION 3. Issuance of Warrants....................................... 7
SECTION 4. Registration, Transfer and Exchange of
Certificates............................................. 7
SECTION 5. Mutilated or Missing Warrant
Certificates............................................. 8
SECTION 6. Duration and Exercise of Warrants.......................... 8
SECTION 7. No Fractional Shares....................................... 9
SECTION 8. Payment of Taxes........................................... 9
SECTION 9. Reservation and Issuance of Warrant
Shares................................................... 9
SECTION 10. Obtaining of Governmental Approvals and
Stock Exchange Listings.................................. 10
SECTION 11. Adjustment of Exercise Price and Number
of Warrant Shares Purchasable............................ 10
SECTION 12. Notices to Warrant Holders................................. 16
SECTION 13. Restrictions on Transfer................................... 17
SECTION 14. Registration............................................... 19
SECTION 15. Covenants of Issuer........................................ 32
SECTION 16. Change of Control.......................................... 33
SECTION 17. Amendments and Waivers..................................... 34
SECTION 18. Specific Performance....................................... 34
SECTION 19. Notices.................................................... 34
(i)
<PAGE>
SECTION 20. Binding Effect............................................. 34
SECTION 21. Termination................................................ 34
SECTION 22. Counterparts............................................... 35
SECTION 23. New York Law............................................... 35
SECTION 24. Benefits of this Warrant Agreement......................... 35
SECTION 25. Language................................................... 35
Exhibit A Form of Warrant Certificate
Exhibit B Warrant Register
(ii)
<PAGE>
WARRANT AGREEMENT dated as of April 1, 1996, between GRAND TOYS
INTERNATIONAL, INC. , a Nevada corporation (the "Issuer"), and AKIN
BAY COMPANY, a New York partnership ("ABC").
WHEREAS the Issuer and ABC are parties to a financial advisory agreement dated
January 11, 1996 (the "Advisory Agreement"), pursuant to which the Issuer
agreed, in order to induce ABC to enter into the Advisory Agreement and in
consideration of the services rendered and to be rendered by ABC thereunder, to
enter into this Warrant Agreement and to issue to ABC the Warrants hereinafter
described; and
WHEREAS, the conditions set forth in the Advisory Agreement to the issuance by
the Issuer to ABC of the Warrants have been fulfilled;
NOW, THEREFORE, in consideration of the premises, the parties hereto agree as
follows:
SECTION 1. Definitions. As used in this Warrant Agreement, the following
------------
terms shall have the following meanings, unless the context otherwise requires:
"Adjustment Event" shall have the meaning set forth in Section 11(b)(i) of
-----------------
this Agreement.
"Affiliate" of any specified person shall mean any other Person directly or
-----------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or which is a director, officer or general
partner of such specified Person.
"Associate" shall mean, when used to indicate a relationship to any Person,
-----------
(a) a body corporate of which that Person beneficially owns or controls,
directly or indirectly, shares or securities currently convertible into shares
carrying more than ten percent (10%) of the voting rights under all
circumstances or by reason of the occurrence of an event that has occurred and
is continuing, or a currently exercisable option or right to purchase such
shares or such convertible securities; (b) a partner of that Person acting on
behalf of the partnership of which they are partners; (c) a trust or estate in
which that Person has a substantial beneficial interest or in respect of which
he serves as a trustee or in a similar capacity; (d) a spouse or child of that
Person; and (e) a relative of that Person or of his spouse if that relative has
the same residence as that Person.
<PAGE>
"Business Day" shall mean a day on which banking institutions in Montreal,
--------------
Quebec, Canada are generally open for business.
"Cdollars" and the symbol "C$" each shall mean lawful money of Canada.
-------------------------------
"Change in Control" shall have the meaning given it in Section 16 of this
-------------------
Agreement.
"Closing Date" shall mean the date of the first loan to the Issuer under the
---------------
Credit Agreement.
"Commission" shall mean the United States Securities and Exchange Commission
----------
or any entity succeeding to any or all of its functions.
"Common Stock" shall mean the common shares, $.001 par value, of the Issuer.
------------
"Contractual Obligation" shall mean, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Convertible Securities" shall have the meaning set forth in Section 11(b)(ii)
----------------------
of this Agreement.
"Credit Agreement" shall mean the Credit Agreement dated as of March 28, 1996
----------------
between Congress Financial Corporation (Canada) and Grand Toys Ltd., as the same
may be amended from time to time hereafter.
"Current Market Price per Share" shall have the meaning set forth in Section
--------------------------------
11(c) of this Agreement.
"Designated Holders" shall mean each of (i) ABC, and (ii) any Person to whom
------------------
ABC has transferred not less than 50% of the aggregate Warrants and Warrant
Shares then outstanding.
"EBITDA" shall mean, for any period, an amount equal to net income of the
------
Issuer and its consolidated Subsidiaries for such period determined in
accordance with GAAP plus the following, to the extent deducted in computing
such net income: (i) interest expense on indebtedness of the Issuer and its
Subsidiaries, (ii) taxes and (iii) depreciation and amortization expense.
- 2 -
<PAGE>
"Exchange Act" shall mean the United States Securities Exchange Act of 1934,
------------
as amended, or any successor Federal statute.
"Exercise Price" shall mean the exercise price of a Warrant, which shall be US
--------------
$1.25 per Warrant Share, subject to adjustment as provided in Section 11.
"Expiration Date" shall mean March 31, 2006, or, if such day is not a Business
---------------
Day, the next succeeding Business Day.
"GAAP" shall mean generally accepted accounting principles in United States
----
applied on a consistent basis.
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Holders of Registrable Securities" shall mean all holders of Warrants and
---------------------------------
Nonpublic Warrant Shares.
"Management Holders" shall mean Stephen Altro, David Mars, Ronald Goldenberg
------------------
or any Affiliate of such Persons or any Parent of such an Affiliate, and any
other holder of Common Stock of the Issuer, or of Options to purchase such
Common Stock pursuant to any duly authorized stock option plan of the Issuer
hereafter adopted.
"Nonpublic Warrant Shares" shall mean Warrant Shares that have not been sold
------------------------
to the public (or pursuant to Rule 144, Rule 144A or Regulation S under the
Securities Act) and bear the legend set forth in Section 13(b) or a legend
substantially to the same effect.
"Options" shall have the meaning set forth in Section 11(b)(ii) of this
-------
Agreement.
"Parent" of a corporation shall mean any Person now or at any time or times
------
hereafter owning or controlling (alone or with any Affiliate or Associate of
such Person) at least a majority of the issued and outstanding stock of such
corporation or any Subsidiary of such corporation.
"Person" shall mean any individual, sole proprietorship, partnership, limited
------
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or local
government (whether federal, provincial, state municipal or
- 3 -
<PAGE>
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"Put Period" shall mean the period commencing on the Put Commencement Date and
----------
ending on the Expiration Date.
"Requirement of Law" shall mean, as to any Person, the Certificate of
------------------
Incorporation and By-laws or other organizational or governing documents of such
Person and any law, treaty, rule or regulation or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Securities Act" shall mean the United States Securities Act of 1933, as
--------------
amended, or any successor Federal statute.
"Subsidiary" of any Person shall mean any corporation of which more than 50%
----------
of the outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by such Person or any partnership or
joint venture of which more than 50% of the outstanding equity interests are at
the time, directly or indirectly, owned by such Person.
"Valuation Event" shall mean one or more of the following events occurring
---------------
within the applicable period specified in Section 17(e):
(a) a sale, exchange or other transfer of all or substantially all the
assets of the Issuer, of Grand Toys (US) Ltd or Grand Toys Ltd. (other than
any restructuring of any such corporations that is permitted pursuant to
the Credit Agreement and Section 16 hereof;
(b) a transfer or transfers by any Management Holder of more than 1% of
the Common Stock (or of Options to purchase such Common Stock) of the
Issuer in the aggregate with respect to all such Management Holders since
the date of purchase of any Warrants or Nonpublic Warrant Shares pursuant
to Sections 16 (a), (b), (c) and (d); or
(c) the first underwritten primary public offering of Common Stock or
other securities of the Issuer to occur after the date of this Agreement.
- 4 -
<PAGE>
"Warrant" shall mean a warrant issued pursuant to this Warrant Agreement
-------
entitling the record holder thereof to purchase from the Issuer at the Warrant
Office one share of Common Stock of the Issuer (subject to adjustment as
provided in Sections 11 and 18) at the Exercise Price at any time before 5:00
p.m., local time, on the Expiration Date.
"Warrant Certificate" shall mean a certificate evidencing one or more
-------------------
Warrants, substantially in the form of Exhibit A hereto, with such changes
therein as may be required to reflect any adjustments made pursuant to Sections
11 and 18.
"Warrant Office" shall mean the office or agency of the Issuer at which the
--------------
Warrant Register shall be maintained and where the Warrants may be presented for
exercise, exchange, substitution and transfer, which office or agency will be
the office of the Issuer at 1710 Rte. TransCanadienne, Dorval, Quebec, Canada
H9P 1H7, which office or agency may be changed by the Issuer pursuant to notice
in writing to the Persons named in the Warrant Register as the holders of the
Warrants.
"Warrant Register" shall mean the register, substantially in the form of
----------------
Exhibit B hereto, maintained by the Issuer at the Warrant Office.
"Warrant Shares" shall mean the shares of Common Stock issuable or issued upon
--------------
exercise of the Warrants, as the number and/or type of such shares may be
adjusted from time to time pursuant to Sections 11 and 18.
SECTION 2. Representations and Warranties. The Issuer hereby represents and
-------------------------------
warrants as follows:
(a) The Issuer is a corporation validly existing and in good standing
under the laws of the State of Nevada, and has the corporate power and
authority to execute and deliver this Warrant Agreement and the Warrant
Certificates, to issue the Warrants and to perform its obligations under
this Warrant Agreement and the Warrant Certificates.
(b) The execution, delivery and performance by the Issuer of this
Warrant Agreement and the Warrant Certificates, the issuance of the
Warrants and the issuance of the Warrant Shares upon exercise of the
Warrants have been duly authorized by all necessary corporate action and do
not and will not violate, or result in a breach of, or constitute a default
under, or require any consent under, or result in the creation of a lien
upon the assets of the Issuer pursuant to, any Law or any agreement binding
upon the Issuer.
- 5 -
<PAGE>
(c) This Warrant Agreement has been duly executed and delivered by the
Issuer and constitutes a legal, valid, binding and enforceable obligation
of the Issuer, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and except as equitable remedies may be limited
by general principles of equity (whether such remedies are sought in a
proceeding at law or in equity) and except to the extent enforcement of
certain rights to indemnification would violate any United States or Canada
Federal or state securities laws. When the Warrants and Warrant
Certificates have been issued as contemplated hereby, (i) the Warrants and
the Warrant Certificates will constitute legal, valid, binding and
enforceable obligations of the Issuer, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and except as equitable
remedies may be limited by general principles of equity (whether such
remedies are sought in a proceeding at law or in equity) and (ii) the
Warrant Shares, when issued upon exercise of the Warrants in accordance
with the terms thereof, will be duly authorized, validly issued, fully paid
and non-assessable shares of the Common Stock.
(d) (i) The Issuer's capital stock consists of 50,000,000 authorized
shares of its voting common shares, US$.001 par value, of which 7,704,500
shares have been issued and were outstanding at April 1, 1996, and
5,000,000 authorized shares of preferred shares, $0.01 par value, of which
none were issued and outstanding at April 10, 1996, (ii) the Warrant Shares
issuable to ABC upon exercise of the Warrants would, if issued on the date
hereof, represent 3.57% of the number of outstanding shares of the Common
Stock and (iii) other than the Warrants and the Warrant Shares issuable
upon exercise thereof, and except as disclosed in the Issuer's filings to
the date hereof under the Exchange Act there are no outstanding options,
warrants, conversion rights or other rights to obtain any shares of Common
Stock or any other security convertible into or exchangeable for shares of
the Common Stock.
SECTION 3. Issuance of Warrants. The Issuer hereby agrees to issue and
---------------------
deliver to ABC on the Closing Date Warrants evidencing rights to purchase
275,000 shares of the Common Stock, subject to adjustment as provided in
Sections 11 and 18, at any time on or before 5:00 p.m., local time, on the
Expiration Date, at a price per share equal to the Exercise Price. On the
Closing Date, the Issuer shall deliver to ABC one or more Warrant Certificates
evidencing the Warrants.
- 6 -
<PAGE>
SECTION 4. Registration, Transfer and Exchange of Certificates. (a) The
----------------------------------------------------
Issuer shall maintain at the Warrant Office the Warrant Register for
registration of the Warrants and Warrant Certificates and transfers thereof. On
the Closing Date the Issuer shall register the outstanding Warrants and Warrant
Certificates in the name of ABC. The Issuer may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof and the
Warrants represented thereby (notwithstanding any notation of ownership or other
writing on the Warrant Certificates made by any Person) for the purpose of any
exercise thereof or any distribution to the holder(s) thereof, and for all other
purposes, and the Issuer shall not be affected by any notice to the contrary.
(b) Subject to Section 13, the Issuer shall register the transfer of any
outstanding Warrants in the Warrant Register upon surrender of the Warrant
Certificate(s) evidencing such Warrants to the Issuer at the Warrant Office,
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to it, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof. Upon any
such registration of transfer, new Warrant Certificate(s) evidencing such
transferred Warrants shall be issued to the transferee(s) and the surrendered
Warrant Certificate(s) shall be canceled. If less than all the Warrants
evidenced by Warrant Certificate(s) surrendered for transfer are to be
transferred, new Warrant Certificate(s) evidencing such remaining number of
Warrants shall be issued to the holder surrendering such Warrant Certificate(s).
(c) Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Issuer at the Warrant Office, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered
for exchange shall be canceled.
(d) No charge shall be made for any such transfer or exchange except for any
tax or other governmental charge imposed in connection therewith. Except as
provided in Sections 13(b) and (c), each Warrant Certificate issued upon
transfer or exchange shall bear the legend set forth in Section 13(b) if the
Warrant Certificate presented for transfer or exchange bore such legend.
SECTION 5. Mutilated or Missing Warrant Certificates. If any Warrant
---------------------------- -------------
Certificate shall be mutilated, lost, stolen or destroyed, the Issuer shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate,
- 7 -
<PAGE>
or in lieu of and in substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Issuer of such loss, theft or destruction of such Warrant Certificate and,
if requested, indemnity or bond satisfactory to it or its transfer agent. No
service charge shall be made for any such substitution, but all expenses and
reasonable charges associated with procuring such indemnity and all stamp, tax
and other governmental duties that may be imposed in relation thereto shall be
borne by the holder of such Warrant Certificate. Each Warrant Certificate issued
in any such substitution shall bear the legend set forth in Section 13(b) if the
Warrant Certificate for which such substitution is made bore such legend.
SECTION 6. Duration and Exercise of Warrants. (a) The Warrants evidenced by
----------------------------------
a Warrant Certificate shall be exercisable in whole or in part by the registered
holder thereof on any Business Day at any time on or after the date hereof and
prior to 5:00 p.m., local time, on the Expiration Date.
(b) Subject to the provisions of this Warrant Agreement, upon presentation of
the Warrant Certificate evidencing the Warrants to be exercised, with the form
of election to purchase annexed thereto duly completed and signed by the
registered holder or holders thereof, to the Issuer at the Warrant Office, and
upon payment of the aggregate Exercise Price for the number of Warrant Shares in
respect of which such Warrants are being exercised in lawful money of the United
States of America, the Issuer shall issue and cause to be delivered to or upon
the written order of the registered holder(s) of such Warrants and in such name
or names as such registered holder(s) may designate, a certificate for the
Warrant Share or Warrant Shares issued upon such exercise of such Warrants. Any
Person(s) so designated to be named therein shall be deemed to have become
holder(s) of record of such Warrant Share or Warrant Shares as of the date of
exercise of such Warrants. Except as set forth in Sections 13(b) and (c), each
Warrant Share shall bear the legend set forth in Section 13(b).
(c) If less than all the Warrants evidenced by a Warrant Certificate are
exercised at any time, a new Warrant Certificate or Certificates shall be issued
for the remaining number of Warrants evidenced by such Warrant Certificate.
Each new Warrant Certificate so issued shall bear the legend set forth in
Section 13(b) if the Warrant Certificate presented in connection with partial
exercise thereof bore such legend. All Warrant Certificates surrendered upon
exercise of Warrants shall be canceled.
- 8 -
<PAGE>
SECTION 7. No Fractional Shares. The Issuer shall not be required to issue
---------------------
fractional shares of Common Stock upon exercise of the Warrants but may pay for
any such fraction of a share an amount in cash equal to the Current Market Price
per Share of such share (determined in accordance with the provisions of Section
11(c) hereof) multiplied by such fraction.
SECTION 8. Payment of Taxes. The Issuer will pay all taxes (other than any
-----------------
applicable income or similar taxes payable by the holders of the Warrants or
Warrant Shares) attributable to the initial issuance of Warrant Shares upon the
exercise of the Warrants; provided, that the Issuer shall not be required to pay
--------
any tax which may be payable in respect of any transfer involved in the issue of
any Warrant Certificate or any certificate for Warrant Shares in a name other
than that of the registered holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Issuer shall not be required to issue or deliver
such certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.
SECTION 9. Reservation and Issuance of Warrant Shares.
-------------------------------------------
(a) The Issuer will at all times have authorized, and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the
Warrants, the number of shares deliverable upon exercise of all outstanding
Warrants.
(b) Before taking any action which would cause an adjustment pursuant to
Section 11 hereof reducing the Exercise Price below the then par value (if any)
of the Warrant Shares issuable upon exercise of the Warrants, the Issuer will
take any corporate action which may be necessary in order that the Issuer may
validly and legally issue Warrant Shares at the Exercise Price as so adjusted.
(c) The Issuer covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant Agreement, be free from all taxes with
respect to the issuance thereof and from all liens, charges and security
interests.
SECTION 10. Obtaining of Governmental Approvals and Stock Exchange Listings.
----------------------------------------------------------------
The Issuer will, at its own expense, (a) obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities which
may from time to time be required of the Issuer in order to satisfy its
obligations hereunder and (b) take all action which may be necessary so that the
Warrant Shares or other securities, immediately upon their issuance upon the
exercise of Warrants,
- 9 -
<PAGE>
will be listed on each securities exchange, if any, on which the Common Stock is
then listed.
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
---------------------------------------------------------
Purchasable. Prior to the Expiration Date, the Exercise Price and the number of
- ------------
Warrant Shares purchasable upon the exercise of each Warrant are subject to
adjustment from time to time upon the occurrence of any of the events enumerated
in this Section 11.
(a) In the event that the Issuer shall at any time after the date of this
Agreement (i) declare a dividend on Common Stock in shares or other securities
of the Issuer, (ii) split or subdivide the outstanding Common Stock, (iii)
combine the outstanding Common Stock into a smaller number of shares or (iv)
issue by reclassification of its Common Stock any shares or other securities of
the Issuer, then, in each such event, the number of Warrant Shares purchasable
upon exercise of each Warrant immediately prior thereto shall be adjusted so
that the holder shall be entitled to receive the kind and number of shares or
other securities of the Issuer which the holder would have owned or have been
entitled to receive after the happening of any of the events described above had
such Warrant been exercised immediately prior to the happening of such event (or
any record date with respect thereto). Such adjustment shall be made whenever
any of the events listed above shall occur. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the effective date of the
event, retroactive to the record date, if any, for the event.
(b) (i) In the event that the Issuer shall at any time after the date of this
Agreement issue any shares of capital stock (excluding shares of Common Stock
issuable (A) upon the conversion or exchange of Convertible Securities, (B) upon
exercise of Options referred to in paragraph (b)(ii) below, or (C) upon exercise
of any Warrant, in any such case without consideration or at a price per share
less than the Current Market Price per share of Common Stock, then, in each such
event (an "Adjustment Event"), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto (the "Initial Number") shall
be adjusted so that the holder of any Warrant shall be entitled to receive the
number of shares of Common Stock determined by multiplying the Initial Number by
a fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such Adjustment Event plus the number of
----
additional shares of Common Stock issued in such Adjustment Event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately prior to such Adjustment Event plus the number of shares of Common
----
Stock which the aggregate issuance price of the total
- 10 -
<PAGE>
number of shares of Common Stock issued in such Adjustment Event would purchase
at the Current Market Price per share of Common Stock then in effect; provided,
--------
however, that no such adjustment shall be made for the issuance of shares of
- -------
Common Stock in connection with a merger or consolidation of the Issuer with
another corporation covered by subsection 11(g).
(ii) In the event that, at any time after the date of this Agreement, the
Issuer shall in any manner issue or sell any stock or other securities
convertible into or exchangeable for shares of Common Stock (such convertible or
exchangeable stock or securities being hereinafter referred to as "Convertible
Securities") or grant any rights to subscribe for or to purchase, or any options
or warrants for the purchase of, shares of Common Stock or Convertible
Securities (such rights, options or warrants being hereinafter referred to as
"Options"), and the minimum price per share for which shares of Common Stock are
issuable pursuant to such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (A) the total amount, if any,
received or receivable by the Issuer as consideration for the granting of such
Options, or issuance or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration payable to the Issuer upon the
exercise of such options, plus, in the case of such Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable pursuant to such Options or upon the conversion or
exchange of the total maximum amount of such Convertible Securities) shall be
less than the Current Market Price per Share of shares of Common Stock in effect
immediately prior to the time of the granting of such Options or issuance or
sale of such Options or Convertible Securities, then the total maximum number of
shares of Common Stock issuable pursuant to such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities (as of the
date of the granting of such Options or issuance or sale of such Convertible
Securities) shall be deemed to be outstanding and to have been issued or sold
for purposes of paragraph (b)(i) hereof for the minimum price per share as so
determined; provided that, except as provided in the following proviso, no
--------
further adjustment of the number of Warrant Shares issuable upon exercise of the
Warrants shall be made upon the actual issue of shares of Common Stock so deemed
to have been issued; provided, further, that upon the expiration or termination
-------- -------
of any unexercised Options or conversion or exchange privileges for which any
adjustment was made pursuant to paragraph (b)(i) and this paragraph (b)(ii) (or,
if the purchase price provided for in any Option referred to in this paragraph
(b)(ii), the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to
- 11 -
<PAGE>
in this paragraph (b)(ii), or the rate at which any Convertible Securities
referred to in this paragraph (b)(ii) are convertible into or exchangeable for
Common Stock shall change at any time), then the number of Warrant Shares
issuable upon exercise of the Warrants shall be readjusted and shall thereafter
be such number as would have prevailed had the number of shares of Common Stock
issuable upon exercise of the Warrants been originally adjusted (or had the
original adjustment not been required, as the case may be) on the basis of (A)
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such Options or conversion or exchange rights and (B) the consideration actually
received by the Issuer upon such exercise plus the consideration, if any,
actually received by the Issuer for the issuance, sale or grant of all of such
options or Convertible Securities whether or not exercised; provided, however,
that no such readjustment shall have the effect of decreasing the number of
Warrant Shares issuable upon exercise of the Warrants by an amount in excess of
the amount of the adjustment initially made for the issuance, sale or grant of
such Options or Convertible Securities.
(iii) In case any subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Issuer or,
if the holders of a majority of the Warrants shall, in the exercise of their
sole discretion, object to such determination, by an independent investment
banking firm mutually selected by the Issuer and the holders of a majority of
the Warrants (the cost of the engagement of such investment banking firm to be
borne by the Issuer unless such investment banking firm shall determine that the
value of such consideration is not more than the amount that is 5% greater than
the value of such consideration determined by the Board of Directors and not
less than the amount that is 5% less than such value determined by the Board of
Directors, in which case 50% of the cost of the engagement of such investment
banking firm shall be borne pro rata by the holders of the Warrants and 50% of
such cost shall be borne by the Issuer). Shares of Common Stock owned by or
held for the account of the Issuer or any majority-owned Subsidiary shall not be
deemed outstanding for the purpose of any computation pursuant to this Section
11(b).
(c) The "Current Market Price per Share" of Common Stock on any date shall be
------------------------------
deemed to be:
(i) the average of the daily closing prices for the 20 consecutive
trading days immediately preceding such date as reported on the Composite
Transactions Tape or, if the Common Stock is not reported on the Composite
Transactions Tape, the last sale price regular way of the Common Stock on
- 12 -
<PAGE>
the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way, in either
case on such securities exchange, or, if the Common Stock is not listed or
admitted to trading on such an exchange, the closing sales price or, if
there is no closing sales price, the average of the closing bid and asked
prices in the over-the-counter market as reported by the National
Association of Securities Dealers' Automated Quotation System ("NASDAQ"),
or, if not so reported, as reported by the National Quotation Bureau,
Incorporated, or any successor thereof, or, if not so reported, the average
of the closing bid and asked prices as furnished by any member of the
National Association of Securities Dealers, Inc., selected from time to
time by the Board of Directors of the Issuer for that purpose; or
(ii) if no such prices are furnished, the fair market value of a share
of Common Stock as determined by an independent investment banking firm
mutually selected by the Issuer and the holders of a majority of the
Warrants and Nonpublic Warrant Shares (or, in the case of any issuance of
securities pursuant to the Stock Option Plans, in good faith by the Board
of Directors of the Issuer or, if the holders of a majority of the Warrants
shall, in the exercise of their sole discretion, object to such
determination, by the independent investment banking firm mutually selected
by the Issuer and the holders of a majority of the Warrants and Nonpublic
Warrant Shares); provided, that if a valuation has been made by such an
--------
independent investment banking firm in accordance with the foregoing and
such valuation or determination has been made within six months prior to
any date as of which the Current Market Price per Share is to be determined
hereunder, then such valuation or determination shall be binding on the
Issuer and the holders of the Warrants and Nonpublic Warrant Shares unless
any event shall have occurred since the date of such valuation or
determination which, in the reasonable opinion of the Issuer's Board of
Directors or the holders of a majority of the Warrants and Nonpublic
Warrant Shares, materially affects the continued validity of such valuation
or determination.
The costs of engagement of said investment banking firm shall be borne by the
Issuer for all valuations by such firm required pursuant to this Section 11 (c).
(d) No adjustment in the number of Warrant Shares shall be required unless
such adjustment would require an
- 13 -
<PAGE>
increase or decrease of at least 1% in the aggregate number of Warrant Shares
purchasable upon exercise of all Warrants, provided that any adjustments which
--------
by reason of this Section 11(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; and provided,
--- --------
further, that notwithstanding the foregoing, all such adjustments shall be made
- -------
no later than three years from the date of the first event that would have
required an adjustment but for this paragraph. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest hundredth of a
share, as the case may be.
(e) If at any time, as a result of an adjustment made pursuant to this
Section 11, the holder of any Warrant thereafter exercised shall become entitled
to receive any shares of the Issuer other than shares of Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 11, and the provisions of this
Agreement with respect to the Warrant Shares shall apply on like terms to such
other shares.
(f) Whenever the number of Warrant Shares purchasable upon the exercise of
each Warrant is adjusted, the Exercise Price per Warrant Share payable upon
exercise of each Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the numerator of which shall
be the number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and the denominator of which shall be the
number of Warrant Shares purchasable immediately after such adjustment.
(g) In the event of any capital reorganization of the Issuer, or of any
reclassification of the Common Stock (other than a reclassification referred to
in paragraph (a)(iv) above), or in case of the consolidation of the Issuer with
or the merger of the Issuer with or into any other corporation or of the sale of
the properties and assets of the Issuer as, or substantially as, an entirety to
any other corporation, each Warrant shall, after such capital reorganization,
reclassification of Common Stock, consolidation, merger or sale, and in lieu of
being exercisable for Warrant Shares, be exercisable, upon the terms and
conditions specified in this Warrant Agreement, for the number of shares of
stock or other securities or assets to which a holder of the number of Warrant
Shares purchasable (at the time of such capital reorganization, reclassification
of Common Stock, consolidation, merger or sale) upon exercise of such Warrant
would have been entitled upon such capital reorganization, reclassification of
Common Stock, consolidation, merger or sale;
- 14 -
<PAGE>
and in any such case, if necessary, the provisions set forth in this Section 11
with respect to the rights thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as they may reasonably
be, to any shares of stock or other securities or assets thereafter deliverable
on the exercise of the Warrants. The Issuer shall not effect any such
consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof, the successor corporation (if other than the Issuer)
resulting from such consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall assume, by written
instrument, the obligation to deliver to the holder of each Warrant the shares
of stock, securities or assets to which, in accordance with the foregoing
provisions, such holder may be entitled, and all other obligations of the Issuer
under this Warrant Agreement. The provisions of this paragraph (g) shall apply
to successive reorganizations, reclassifications, consolidations, mergers and
sales.
(h) Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon exercise of the Warrants, Warrant Certificates
theretofore or thereafter issued may continue to express the same Exercise Price
per share and number and kind of shares as are stated on the Warrant
Certificates initially issuable pursuant to this Agreement.
(i) If any question shall at any time arise with respect to the adjusted
Exercise Price or adjusted number of Warrant Shares issuable upon exercise, such
question shall be determined by the independent auditors of the Issuer and such
determination shall be binding upon the Issuer and the holders of the Warrants
and the Warrant Shares.
SECTION 12. Notices to Warrant Holders. Upon any adjustment of the Exercise
---------------------------
Price or number of Warrant Shares issuable upon exercise pursuant to Section 11,
the Issuer shall promptly, but in any event within 10 days thereafter, cause to
be given to each of the registered holders of the Warrants, at its address
appearing on the Warrant Register, by registered mail, postage prepaid, a
certificate signed by its chief financial officer setting forth the Exercise
Price as so adjusted and/or the number of shares of Common Stock issuable upon
the exercise of each Warrant as so adjusted and describing in reasonable detail
the facts accounting for such adjustment and the method of calculation used.
Where appropriate, such certificate may be given in advance and included as a
part of the notice required to be mailed under the other provisions of this
Section 12.
- 15 -
<PAGE>
In the event:
(a) the Issuer shall authorize issuance to all holders of Common Stock
of rights or warrants to subscribe for or purchase capital stock of the
Issuer or of any other subscription rights or warrants;
(b) the Issuer shall authorize a dividend or other distribution to all
holders of Common Stock payable in evidences of its indebtedness, cash or
assets;
(c) of any consolidation or merger to which the Issuer is a party and
for which approval of any stockholders of the Issuer is required, or of the
conveyance or transfer of the properties and assets of the Issuer
substantially as an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Issuer;
(e) the Issuer proposes to take any other action which would require an
adjustment of the Exercise Price or number of Warrant Shares issuable upon
exercise pursuant to Section 11;
then the Issuer shall cause to be given to each of the registered holders of the
Warrants at its address appearing on the Warrant Register, at least 20 days
prior to the applicable record date hereinafter specified (or as expeditiously
as possible after the occurrence of any involuntary dissolution, liquidation or
winding up referred to in clause (d) above), by registered mail, postage
prepaid, a written notice stating (i) the date as of which the holders of record
of Common Stock to be entitled to receive any such rights, warrants or
distribution are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective (or has become effective, in the case of any
involuntary dissolution, liquidation or winding up), and the date as of which it
is expected that holders of record of Common Stock shall be entitled to exchange
their shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 12 or any defect therein shall not affect the legality or validity of
any distribution, right, warrant, consolidation, merger, conveyance, transfer,
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<PAGE>
dissolution, liquidation or winding up, or the vote upon any action.
SECTION 13. Restrictions on Transfer. (a) ABC represents that it is
-------------------------
acquiring the Warrants for its own account for investment and not with a view to
any distribution or public offering thereof within the meaning of the Securities
Act, but subject to any Requirement of Law that the disposition of the property
of the holder of a Warrant and/or Warrant Share shall at all times be within its
control. ABC acknowledges that the Warrants and the Nonpublic Warrant Shares
issuable upon exercise thereof have not been registered under the Securities Act
and agrees that it will not (i) during the six month period commencing on the
date of this Agreement and ending September 30, 1996 (the "Retention Period"),
dispose of any of the Warrant Shares, except for transfers to any Affiliate or
wholly owned subsidiary of ABC , or (ii) after the close of the Retention
Period, sell or otherwise transfer any of its Warrants or Nonpublic Warrant
Shares, except upon the terms and conditions specified herein.
(b) (i) ABC agrees, and each subsequent transferee described in paragraph
(ii) below shall agree by written instrument reasonably satisfactory to the
Issuer, that it will not transfer any Warrants or Nonpublic Warrant Shares
except:
(A) pursuant to Rule 144 under the Securities Act;
(B) pursuant to Rule 144A under the Securities Act;
(C) pursuant to Regulation S under the Securities Act;
(D) pursuant to any other exemption from, or otherwise in a transaction not
subject to, the registration requirements of the Securities Act (as
confirmed in an opinion of counsel to the transferor in form and substance
reasonably satisfactory to counsel for the Issuer, to the effect that the
proposed transfer may be effected without registration under the
Securities Act);
(E) a transfer by ABC to any Affiliate; or
(F) pursuant to an effective registration statement under the Securities Act.
(ii) Each Warrant Certificate and each certificate for the Warrant Shares
issued to ABC or to a subsequent transferee pursuant to Section 13(b)(i)(B), (D)
(unless the legal opinion delivered in connection therewith is to the effect
that the first paragraph of such legend is not required in order to ensure
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<PAGE>
compliance with the Securities Act) or (E), shall include a legend in
substantially the following form:
THE [WARRANTS AND UNDERLYING SHARES] [SHARES] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM, OR
OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
SUCH ACT.
IN ADDITION, THE [WARRANTS AND UNDERLYING SHARES] [SHARES] MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE WARRANT
AGREEMENT DATED AS OF APRIL 10, 1996, BETWEEN THE ISSUER AND THE INITIAL
HOLDER OF THE WARRANTS NAMED THEREIN, A COMPLETE AND CORRECT COPY OF WHICH
IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL
BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
(c) The restrictions set forth in Section 13(b) shall terminate and cease to
be effective with respect to any Warrants or Warrant Shares registered under the
Securities Act or transferred pursuant to clause (A) or (C) of Section 13(b)(i)
(subject, in the case of clause (C), to any applicable requirements of
Regulation S). Whenever such restrictions shall so terminate the holder of such
Warrants and/or Warrant Shares shall be entitled to receive from the Issuer,
without expense (other than transfer taxes, if any), Warrant Certificates or
certificates for such Warrant Shares not bearing the legend set forth in Section
13(b), at which time the Issuer will rescind any transfer restrictions relating
thereto.
(d) With a view to making available to ABC and subsequent holders of the
Nonpublic Warrant Shares the benefits of certain rules and regulations of the
Commission (including, without limitation, Rule 144, Rule 144A and Regulation S
under the Securities Act) which may permit the sale of Nonpublic Warrant Shares
without registration, the Issuer agrees to take any and all such actions as may
be reasonably required of it to make available to ABC and such subsequent
holders such benefits, including without limitation, to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act or any
successor provision thereto;
(ii) so long as Rule 144A is available to ABC and such holders, make and
keep available the information specified
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<PAGE>
in Rule 144A(d)(4) under the Securities Act or any successor provision thereto;
(iii) file with the Commission in a timely manner all reports and other
documents required of the Issuer under the Securities Act and the Exchange
Act; and
(iv) so long as ABC or any other holder owns any Warrants or Nonpublic
Warrant Shares, furnish to each such holder forthwith upon request a
written statement listing all reports filed by the Issuer with the
Commission, a copy of the most recent annual or quarterly report of the
Issuer filed with the Commission, and such other reports and documents of
the Issuer and other information in the possession of or reasonably
obtainable by the Issuer as such holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing such holder to
sell any such securities without registration.
SECTION 14. Registration. (a) (i) If, at any time after the date hereof,
-------------
the Issuer proposes to register any shares of its Common Stock or other
securities under the Securities Act (other than a registration statement
effected on Form S-4 or Form S-8 or similar forms), it will at each such time
give written notice to all Holders of Registrable Securities of its intention to
do so and, upon the written request of any holder thereof given within 20 days
after the Issuer's giving of such notice (which request shall state the intended
method of disposition thereof by the prospective sellers), the Issuer will use
its best efforts to effect the registration of the Nonpublic Warrant Shares
which it shall have been so requested to register by including the same in such
registration statement, all to the extent requisite to permit the sale or other
disposition thereof in accordance with the intended method of sale or other
disposition given in each such request; provided, that if, at any time after
--------
giving such written notice of its intention to register Common Stock or other
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Issuer shall determine for any reason
not to register such Common Stock or other securities or to delay registration
of such Common Stock or other securities, the Issuer may, at its election, give
written notice of such determination to the holders of the Nonpublic Warrant
Shares to be included in such registration and thereupon (x) in the case of a
determination not to register, the Issuer shall be relieved of its obligation to
register such Warrant Shares in such proposed registration (but shall not be
relieved of its obligations to pay registration expenses to the extent incurred
in connection therewith as provided below or of its obligations to register such
Warrant Shares pursuant to a subsequent request for
- 19 -
<PAGE>
registration made pursuant to this Section 14(a)) and (y) in the case of a
determination to delay registering, the Issuer shall be permitted to delay
registering any Warrant Shares for the same period as the delay in registering
such Common Stock or other securities. If the registration of which the Issuer
gives notice pursuant to this Section 14(a) is for an underwritten public
offering, the Issuer shall so advise the Holders of Registrable Securities as
part of the written notice of the proposed registration.
(ii) If the Issuer's managing underwriters shall advise the Issuer and the
Holders of Registerable Securities in writing that the inclusion in any
registration pursuant to this Section 14(a) of some or all of the Nonpublic
Warrant Shares sought to be registered by the holders requesting such
registration creates a reasonable likelihood that the proceeds or price per unit
the Issuer will derive from such registration will be materially reduced or that
the number of securities to be registered (including those sought to be
registered at the instance of the Issuer and any other party entitled to
participate in such registration as well as those sought to be registered by the
holders of Nonpublic Warrant Shares) is too large a number (by a material
margin) to be reasonably sold, the Issuer may include in such registration up to
all (but not in excess of the Maximum Number) shares of Common Stock or other
securities sought to be registered at the instance of the Issuer and shall
include in such registration as many shares of Common Stock or other securities
sought to be registered by selling stockholders (which term shall include each
holder, other than the Issuer, of shares of Common Stock or other securities
including, but not limited to, Warrant Shares) as possible (i.e., the Maximum
----
Number, as defined below, minus the number of shares sought to be registered at
the instance of the Issuer), and if any reduction in the number of selling
stockholder shares to be included in such registration is necessary, such
reduction shall be effected, first, by reducing the number of shares of Common
-----
Stock or other securities sought to be registered by Other Securityholders, such
reduction to be effected pro rata among them in proportion to the number of
shares of Common Stock or other securities sought to be registered by each of
them, and, second, but only to the extent that any further reduction in the
------
number of shares of Common Stock or other securities to be included in such
registration is requested by the managing underwriter, by reducing the number of
shares of Common Stock or other securities sought to be registered by the
holders of the Warrants and the Nonpublic Warrant Shares, such reduction to be
effected pro rata among them in proportion to the number of shares of Common
Stock or other securities sought to be registered by each of them. "Other
Securityholders", as used herein, shall mean any holders of Common Stock or of
Options or
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<PAGE>
Convertible Securities which are then exercisable or convertible, as the case
may be, for shares of Common Stock, but only if such Other Securityholders have
been granted registration rights by the Issuer and have agreed to grant the
holders of the Warrants and the Nonpublic Warrant Shares the right to
participate in any demand registration rights of such Other Securityholders on
terms comparable to the terms hereof. "Maximum Number", as used in connection
with the number of shares of Common Stock which can be sold in a registration,
shall mean the maximum number of such shares which the Issuer and the holders of
Warrants and Nonpublic Warrant Shares are advised by the managing underwriters
can be sold in such registration without suffering the material adverse effects
referred to above in this paragraph (ii).
(b) As a condition to the inclusion of Nonpublic Warrant Shares in any
registration statement, each holder of Warrants and Nonpublic Warrant Shares
requesting registration of Nonpublic Warrant Shares will furnish to the Issuer
such information with respect to such holder as is required to be disclosed in
the registration statement (and the prospectus included therein) by the
applicable rules, regulations and guidelines of the Commission. Failure of any
holder to furnish such information shall not affect the obligations of the
Issuer under this Section 14 to the remaining holders who furnish such
information.
(c) In the event that holders of the Warrants or Nonpublic Warrant Shares
elect to participate in an underwritten offering pursuant to Section 14(a), the
Issuer may require that the Nonpublic Warrant Shares requested to be registered
be included in such underwriting and that such Warrant Shares be included
therein on the same terms and conditions as shall be applicable to the other
securities being sold through underwriters under such registration. In such
case, each holder of Nonpublic Warrant Shares to be included in such
registration shall be a party to any underwriting agreement with respect to such
offering. Each holder of such Warrant Shares shall be required to make
representations and warranties to or agreements with the Issuer and the
underwriters regarding such holder, such holder's intended method of
distribution and any other representations as are required by law or are
customary in secondary distributions. In the event that the holders of the
Warrant Shares elect not to participate in any underwritten offering pursuant to
Section 14(a), such holders agree not to effect any public sale or distribution
of any equity securities of the Issuer during the period specified in the
underwriting agreement; provided, that such period does not exceed 180 days
--------
after the effective date of the registration; and provided, further, that all
-------- -------
other holders of Common Stock or other securities of the Issuer not included
therein have agreed not to
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<PAGE>
publicly sell or distribute any of such Common Stock or other securities for the
same period.
(d) Subject to Sections 14 (a)(i), 14(g) and 14(h), if and whenever the
Issuer is required to use its best efforts to effect the registration of Warrant
Shares under the Securities Act, the Issuer shall:
(i) as expeditiously as possible, prepare and file with the Commission a
registration statement on the appropriate form with respect to such
Nonpublic Warrant Shares and use its best efforts to cause such
registration statement to become effective as soon as practicable after
such filing;
(ii) as expeditiously as possible, prepare and file with the Commission
such amendments and supplements (including post-effective amendments and
supplements) to the registration statement covering such Nonpublic Warrant
Shares and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
Nonpublic Warrant Shares covered by such registration statement until 120
days after such registration statement is declared effective (60 days in
the case of a registration pursuant to Section 14(a)), provided, however,
that (A) such 120-day period shall be extended for any period of time equal
to the period that a Designated Holder refrains from selling any Nonpublic
Warrant Shares at the request of an underwriter of Common Stock and (B) in
the case of any registration of Nonpublic Warrant Shares on Form S-3 which
are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the Registration Statement
effective until all such Nonpublic Warrant Shares are sold, provided that
Rule 415 under the Securities Act or any successor rule permits an offering
on a continuous or delayed basis;
(iii) as expeditiously as possible, furnish to each seller of such
Nonpublic Warrant Shares registered, or to be registered, under the
Securities Act and to each underwriter, if any, of such Nonpublic Warrant
Shares such number of copies of a prospectus and preliminary prospectus in
conformity with the requirements of the Securities Act, and such other
documents as such seller or underwriter may reasonably request, in order to
facilitate the public sale or other disposition of such Nonpublic Warrant
Shares;
(iv) as expeditiously as possible, notify each seller of such Nonpublic
Warrant Shares if, at any time when a
- 22 -
<PAGE>
prospectus relating to such Nonpublic Warrant Shares is required to be
delivered under the Securities Act, any event shall have occurred as a
result of which the prospectus then in use with respect to such Nonpublic
Warrant Shares would include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under
which made or for any other reason it shall be necessary to amend or
supplement such prospectus in order to comply with the Securities Act.
Immediately upon receipt of such notice, each holder of Nonpublic Warrant
Shares included in such registration shall cease to offer or sell any
Nonpublic Warrant Shares pursuant to such registration statement and shall
cease to deliver or use such registration statement or any prospectus
included therein and, if so requested by the Issuer, return to the Issuer
all copies (other than permanent file copies) of such registration
statement which are in the actual possession of such holder. Subject to
Section 14(g), the Issuer will, as expeditiously as possible, take such
action as may be reasonably necessary to amend or supplement such
registration statement or prospectus included therein in order to set forth
or reflect such event or state of facts and will, as expeditiously as
possible, furnish to all sellers a reasonable number of copies of a
supplement to or an amendment of such prospectus which will correct such
statement or omission or effect such compliance;
(v) as expeditiously as possible, use its best efforts to register or
qualify such Nonpublic Warrant Shares under such other securities or blue
sky laws of such jurisdictions as such sellers shall reasonably request, to
keep such registrations and qualifications in effect for so long as the
registration statement referred to in paragraph (ii) above remains in
effect, and to do any and all other acts and things which may be necessary
or reasonably desirable to enable such sellers to consummate the public
sale or other disposition in each such jurisdiction of such Nonpublic
Warrant Shares owned by such sellers; provided, however, that the Issuer
-------
will not be required to (A) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph
(v) or where directors or officers of the Issuer would be required to
escrow shares of Common Stock of the Issuer or provide indemnities in their
individual capacity in connection with such qualification or (B) consent to
general service of process in any such jurisdiction or (C) subject itself
to general taxation in any such jurisdiction;
- 23 -
<PAGE>
(vi) keep the holders of such Nonpublic Warrant Shares informed of the
Issuer's best estimate of the earliest date on which such registration
statement or any post-effective amendment or supplement thereto will become
effective and will promptly notify such holders and the managing
underwriters, if any, participating in the distribution pursuant to such
registration statement of the following: (A) when such registration
statement or any post-effective amendment or supplement thereto becomes
effective or is approved, (B) of the issuance by any competent authority of
any stop order suspending the effectiveness or qualification of such
registration statement or the prospectus then in use or the initiation or
threat of any proceeding for that purpose, and (C) of the suspension of the
qualification of any Nonpublic Warrant Shares included in such registration
statement for sale in any jurisdiction. Immediately upon receipt of any
such notice, such holders shall cease to offer or sell any Warrant Shares
pursuant to such registration statement in the jurisdiction to which such
stop order or suspension relates. Subject to Section 14(g), the Issuer
shall use all reasonable efforts to prevent the issuance of any such stop
order or the suspension of any such qualification and, if any such stop
order is issued or any such qualification is suspended, to obtain as soon
as practicable the withdrawal or revocation thereof, and will notify such
holders at the earliest practicable date of the date on which the holders
may offer and sell such Nonpublic Warrant Shares pursuant to the
registration statement;
(vii) furnish to the sellers of such Nonpublic Warrant Shares, on the
date that such Nonpublic Warrant Shares are delivered to the underwriters
for sale in connection with a registration, if such Nonpublic Warrant
Shares are being sold through underwriters or, if such Nonpublic Warrant
Shares are not being sold through underwriters, on the date that the
registration statement with respect to such Nonpublic Warrant Shares
becomes effective, (A) an opinion of the independent counsel representing
the Issuer for the purposes of such registration, dated such date, in form
and substance as is customarily given by counsel to underwriters in an
underwritten public offering, and (B) a "comfort" letter dated such date
from the independent public accountants who have certified the Issuer's
financial statements included in the registration statement, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering;
(viii) make available to its security holders, as soon as practicable,
an earnings statement covering a period of
- 24 -
<PAGE>
at least twelve months which satisfies the provisions of Section 11(a) of
the Securities Act and Rule 155 thereunder;
(ix) cooperate with the sellers of such Nonpublic Warrant Shares and the
underwriters, if any, of such Non-Public Warrant Shares, give each seller
of such Nonpublic Warrant Shares, and the underwriters, if any, of such
Nonpublic Warrant Shares and their respective counsel and accountants, such
access to its books and records and such opportunities to discuss the
business of the Issuer with its officers and independent public accountants
during normal business hours as shall be reasonably necessary to enable
them to conduct a reasonable investigation within the meaning of the
Securities Act and, in the event that such Nonpublic Warrant Shares are to
be sold in an underwritten offering, enter into an underwriting agreement
containing customary representations and warranties, covenants, conditions
and indemnification provisions;
(x) pay all costs and expenses incident to the performance and
compliance by the Issuer with the provisions of this Section 14, including
without limitation (A) all registration and filing fees, (B) all printing
expenses, (C) all fees and disbursements of counsel and independent public
accountants for the Issuer, including without limitation the entire expense
of any special audits required by the rules and regulations of the
Commission, (D) all blue sky fees and expenses (including fees and expenses
of counsel in connection with blue sky surveys), (E) the cost of
distributing prospectuses in preliminary and final form as well as any
supplements thereto, and (F) the fees and expenses of one counsel for the
holders of a majority of the Nonpublic Warrant Shares being registered;
expressly excluding, however, underwriting discounts and commissions
relating to the Nonpublic Warrant Shares sold.
(e)(i) The Issuer will indemnify and hold harmless each seller of Warrant
Shares and each Person, if any, who Controls (as defined below) such seller from
and against any and all losses, claims, damages, liabilities and legal and other
expenses (including costs of investigation) caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Warrant Shares were registered under the Securities
Act, any prospectus or preliminary prospectus contained therein or any amendment
or supplement thereto, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
made, except to the extent that such losses, claims, damages, liabilities or
expenses are caused
- 25 -
<PAGE>
by (x) any such untrue statement or omission or alleged untrue statement or
omission included in reliance upon and in conformity with information furnished
to the Issuer in writing by such seller expressly for use therein, (y) if such
seller participates as an underwriter in an offering, such seller's failure to
send or give (or cause to be sent or given) a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act, to the Person asserting an untrue statement or alleged omission,
or (z) the failure of such seller to comply with its obligations pursuant to the
first full sentence of Section 14 (d) (iv). As used in this paragraph (e)(i) and
in paragraph (e)(ii) below, a Person "Controls" another Person if such first
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such second Person, whether through
the ownership of voting securities, by contract, or otherwise.
(ii) It shall be a condition to the obligations of the Issuer to effect a
registration of Warrant Shares under the Securities Act pursuant hereto, that
each seller, severally and not jointly, indemnify and hold harmless the Issuer
and each Person, if any, who Controls the Issuer to the same extent as the
indemnity from the Issuer in the foregoing paragraph, but only with reference to
(x) information included in reliance upon and in conformity with information
furnished to the Issuer in writing by such seller expressly for use in the
registration statement, any prospectus or preliminary prospectus contained
therein or any amendment or supplement thereto, and (y) failure by such seller
to comply with the provisions of the first full sentence of Section 14 (d) (iv).
(iii) In case any claim shall be made or any proceeding (including any
governmental investigation) shall be instituted involving any indemnified party
in respect of which indemnity may be sought pursuant to this Section 14(e), such
indemnified party shall promptly notify the indemnifying party in writing of the
same; provided, that failure to notify the indemnifying party shall not relieve
--------
it from any liability it may have to an indemnified party otherwise than under
this Section 14(e). The indemnifying party shall be entitled to participate in
and to assume the defense of any claim or proceeding under this Section 14(e)
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In any such claim or proceeding, any indemnified party shall
have
- 26 -
<PAGE>
the right to retain its own counsel, but the fees and disbursements of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to assume the defense of such claim or
proceeding as aforesaid, (ii) the indemnifying party and such indemnified party
shall have mutually agreed to the retention of such counsel or (iii)
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate in the opinion of counsel to such
indemnified party due to actual or potential conflicts of interest between such
indemnified party and any other party represented by such counsel in such
proceeding; provided, that the Issuer shall not be liable for the fees and
--------
disbursements of more than one counsel for all indemnified parties. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final nonappealable judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(f) The provisions of Section 14 (e) to the contrary notwithstanding, the
Issuer may delay the preparation and/or filing of any registration statement or
prospectus or any amendment or supplement to any registration statement or
prospectus in connection with a registration of Nonpublic Warrant Shares
initiated by the Issuer in which Nonpublic Warrant Shares are to be included
pursuant to Section 14(a) for a period not to exceed 90 days in the case of
clause (x) and (y) below or 45 days in the case of clause (z) below (the
"Blackout Period") if (x) the Issuer would, in the reasonable opinion of its
counsel, be required to disclose material information which, in the good faith
judgment of the Board of Directors of the Issuer, would not be in the best
interests of the Issuer and its stockholders to disclose at that time, (y) the
Board of Directors of the Issuer reasonably determines that any such filing
would impede, delay or interfere with any material financing, offer or sale of
securities, acquisition, corporate reorganization or other transaction involving
the Issuer or any of its Affiliates; provided, however, that the Blackout Period
-------- -------
shall earlier terminate upon public disclosure by the Issuer of such material
information or (z) the Issuer does not yet have audited financial statements for
the fiscal year most recently ended prior to such written request (unless the
Designated Holders shall have agreed to pay all costs and expenses incurred by
the Issuer in connection with the preparation of such audited financial
statements); and provided further that, in the case of (x) or (y) above, the
--------------------
Issuer shall promptly deliver a copy of such opinion of counsel (in the case of
(x) above) and evidence of such determination by the Board of Directors of the
Issuer to such Designated Holders and each holder which shall have requested to
- 27 -
<PAGE>
join in such registration pursuant to Section 14(a). Upon notice by the Issuer
to stockholders of such determination, which notice shall specify the date on
which the Blackout Period shall end, such holders covenant to (i) keep the fact
of any such notice confidential, (ii) promptly halt any offer, sale, trading or
transfer by them or any of their Affiliates of any of the Warrant Shares for the
duration of the Blackout Period and (iii) promptly halt any use, publication,
dissemination or distribution of any registration statement, each prospectus
included therein, and any amendment or supplement thereto by it or any of its
Affiliates for the duration of the Blackout Period. In the event the Issuer
shall give such notice, the period mentioned in Section 14(e)(ii) shall be
extended by a number of days equal to the duration of such Blackout Period.
(g) The provisions of Section 14(e) to the contrary notwithstanding, if the
Issuer has previously been required to file a registration statement pursuant to
Section 14(a) and the date when the Issuer would be required to file a second
registration statement pursuant to Section 14(a) would, but for this paragraph
(g), be less than six months after the date when such prior registration
statement became effective, the Issuer may delay the filing of such second
registration statement until the date that is six months after the date when
such prior registration statement became effective.
(h) The holders of Warrants and Nonpublic Warrant Shares shall not have
registration rights with respect to any proposed sales of Nonpublic Warrant
Shares as to which sales (A) a "no action" response has been received from the
Commission confirming the availability of an exemption from the requirements of
the Securities Act with respect to such proposed sales or (B) an opinion of
counsel to the Issuer shall have been rendered to the effect that registration
of such Nonpublic Warrant Shares for such proposed sales is not required and
counsel for the selling holders shall concur in such opinion.
(i) If, with respect to any registration of the shares of Common Stock or
other securities of the Issuer pursuant to paragraph (b) of this Section 14, the
managing underwriters shall request that the holders of the Warrants exercise
such Warrants for shares of Common Stock or of non-voting common stock or other
securities of the Issuer providing identical rights as the shares of Common
Stock except for voting rights, and that cannot be exchanged or converted by the
holders of the Warrants for shares of Common Stock and that can be exchanged or
converted by any transferee of the holder of the Warrants for shares of Common
Stock, such holders shall exercise such Warrants, provided that such exercise
would not violate, or cause such holder of Warrants to be in violation of, any
provision of law applicable to such
- 28 -
<PAGE>
holder.
(j) Notwithstanding anything to the contrary contained in this Section 14,
the Issuer shall not register any shares of its Common Stock or other securities
under the laws of any jurisdiction other than the United States unless (i) each
Designated Holder shall have consented to such registration and (ii) this
Agreement shall have been amended pursuant to an amendment in form and substance
satisfactory to the holders of the Warrants and the Nonpublic Warrant Shares to
give the holders of the Warrants and Nonpublic Warrant Shares identical rights
with respect to such registration as such holders would have hereunder in the
event of a registration of any shares of the Issuer's Common Stock or other
securities under the Securities Act.
SECTION 15. Covenants of Issuer. The Issuer covenants and agrees with the
--------------------
holders of the Warrants that, prior to the date of the first registered public
offering of Common Stock pursuant to which at least 50% of the Warrant Shares
shall have been registered and sold, unless such holder shall otherwise have
previously consented in writing:
(a) Whether or not the Credit Agreement is in effect, the Issuer shall comply
with the provisions of Section 8.6 of the Credit Agreement and such Section 8.6
is hereby incorporated by reference in and made a part of this Warrant Agreement
as if set forth in full herein.
(b) So long as any of the Warrants shall remain outstanding, the Issuer shall
not in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights or warrants to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or securities convertible
into or exchangeable for Common Stock containing provisions designed to protect
against dilution thereof which at such time are or thereafter will become more
advantageous to the holders thereof than the provisions contained in Section 11
protecting the holders of the Warrants from dilution thereof.
(c) From and after the date of this Agreement, the Issuer shall not, without
the prior written consent of the holders of a majority of the outstanding
Warrants and Nonpublic Warrant Shares, enter into any agreement with any holder
or prospective holder of any securities of the Issuer which would allow such
holder or prospective holder to include such securities in any registration
filed under Section 14(a) hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his
- 29 -
<PAGE>
securities will not reduce the number of Nonpublic Warrant Shares which is
included.
(d) Notwithstanding anything to the contrary contained herein (including,
without limitation, the adjustments of the Warrants contemplated by Section 11
hereof), the Issuer shall not take, or omit to take, any action which would
result in an adjustment of the Warrants pursuant to Section 11 or in any shares
of Common Stock being issued or issuable to any holder of the Warrants or the
Warrant Shares other than the issuance and sale by the Issuer of shares of
Common Stock or Options to purchase, or Convertible Securities convertible or
exchangeable for, shares of Common Stock.
SECTION 16. Change of Control. In the event that, as a result of (a) a
-----------------
public offering of securities of the Issuer by the Issuer or any direct or
indirect Parent of the Issuer, (b) a business combination transaction in which
voting securities of the Issuer are issued, or (c) the exercise of any Options
or the conversion of any Convertible Securities, the Issuer becomes a Subsidiary
of any Person, or a Person (or such Person and such Person's Affiliates or
Associates) becomes a Parent of the Issuer) (any of such events being called a
"Change in Control"), then the Issuer and the holders of the Warrants and
Warrant Shares will negotiate in good faith such arrangements as are reasonably
required to reflect substantially the same rights and restrictions with respect
to any new Parent resulting from such Change in Control as the Issuer and the
holders of the Warrants and Warrant Shares have pursuant to this Warrant
Agreement.
SECTION 17. Amendments and Waivers. Any provision of this Warrant Agreement
-----------------------
may be amended, supplemented, waived, discharged or terminated by a written
instrument signed by the Issuer and the holders of a majority of the outstanding
Warrants (or in the case of Sections 13 through 16, the holders of a majority of
the outstanding Warrants and Nonpublic Warrant Shares); provided, that the
--------
Exercise Price may not be increased, the number of Warrant Shares issuable upon
exercise of the Warrants may not be reduced (except pursuant to Section 11
hereof), the Expiration Date may not be changed to an earlier date and this
Section 17 may not be amended except with the consent of the holders of all
outstanding Warrants and/or Nonpublic Warrant Shares, as the case may be.
SECTION 18. Specific Performance. The holders of the Warrants and/or
---------------------
Nonpublic Warrant Shares shall have the right to specific performance by the
Issuer of the provisions of this Warrant Agreement. The Issuer hereby
irrevocably waives, to the extent that it may do so under applicable law, any
defense based on the adequacy of a remedy at law which may be asserted as a bar
- 30 -
<PAGE>
to the remedy of specific performance in any action brought against the Issuer
for specific performance of this Warrant Agreement by the holders of the
Warrants and/or Nonpublic Warrant Shares.
SECTION 19. Notices. (a) Any notice or demand to be given or made by the
--------
holders to or on the Issuer pursuant to this Warrant Agreement shall be
sufficiently given or made if sent by mail, first-class or registered, postage
prepaid, addressed to the Issuer at the Warrant Office.
(b) Any notice to be given by the Issuer to the holders of the Warrants or
the Warrant Shares shall be sufficiently given if sent by first-class mail,
postage prepaid, addressed to such holder as such holder's name and address
shall appear on the Warrant Register or the Common Stock registry of the Issuer,
as the case may be.
SECTION 20. Binding Effect. This Warrant Agreement shall be binding upon and
---------------
inure to the sole and exclusive benefit of the Issuer, its successors and
assigns, ABC and the registered holders from time to time of the Warrants and
the Warrant Shares.
SECTION 21. Termination. Except as otherwise provided herein, this Warrant
------------
Agreement shall terminate and be of no further force and effect at the close of
business on the Expiration Date or on the date on which none of the Warrants
shall be outstanding (whether by reason of the exercise thereof or the
redemption thereof by the Issuer), except that the provisions of Section 14
shall continue in full force and effect after such termination.
SECTION 22. Counterparts. This Warrant Agreement may be executed in
-------------
counterparts, and by the different parties hereto on separate counterparts, but
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
SECTION 23. New York Law. This Warrant Agreement and each Warrant
-------------
Certificate shall be governed by and construed in accordance with the laws of
the State of New York (without giving effect to principles of conflicts of
laws).
SECTION 24. Benefits of this Warrant Agreement. Nothing in this Warrant
-----------------------------------
Agreement shall be construed to give to any Person other than the Issuer and the
registered holders of the Warrants and the Warrant Shares any legal or equitable
right, remedy or claim under this Warrant Agreement.
- 31 -
<PAGE>
SECTION 25. Language. The parties hereto expressly request and require that
----------
this Warrant Agreement and all related documents be drafted in English. Les
parties aux presentes conviennent et exigent que cettes Convention et tous les
documents qui s'y rattachent soient redige en Anglais.
- 32 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
GRAND TOYS INTERNATIONAL, INC.
By: /s/ Stephen Altro
Name:
Title:
ATTEST:
[CORPORATE SEAL]
/s/ Ron Goldenberg
(Assistant) Secretary
AKIN BAY COMPANY
By: /s/ James B. Rybakoff
James B. Rybakoff,
President
- 33 -
<PAGE>
EXHIBIT A
TO WARRANT AGREEMENT
(FORM OF WARRANT CERTIFICATE)
THE WARRANTS AND UNDERLYING SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF SUCH ACT. IN ADDITION, THE WARRANTS AND
UNDERLYING SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE WARRANT AGREEMENT DATED AS OF APRIL 10 1996 BETWEEN THE ISSUER
AND THE INITIAL HOLDER OF THE WARRANTS NAMED THEREIN, A COMPLETE AND CORRECT
COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER
AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
WARRANT CERTIFICATE
evidencing Warrants to purchase
Common Shares in
GRAND TOYS INTERNATIONAL, INC.
No. W-__ 275,000 Warrants
This Warrant Certificate certifies that , or registered
assigns, is the registered holder of Two Hundred Seventy Five Thousand (275,000)
Warrants (the "Warrants") to purchase Common Shares, US$.001 par value, in GRAND
TOYS INTERNATIONAL, INC., a Nevada corporation (the "Issuer"). Each Warrant
entitles the holder, but only subject to the conditions set forth herein and in
the Warrant Agreement referred to below, to purchase from the Issuer at any time
prior to 5:00 P.M., local time of the Warrant Office, on April 1, 2006 or, if
such day is not a Business Day, the next succeeding Business Day (the
"Expiration Date"), one fully paid and nonassessable Common Share, US$.001 par
value, of the Issuer (the "Warrant Shares") at a price (the "Exercise Price") of
US $ ____ per Warrant Share payable in lawful money of the United States of
America, upon surrender of this Warrant Certificate, execution of the annexed
Form of Election to Purchase and payment of the Exercise Price at the office of
the Issuer at 1710 TransCanada Highway, Dorval, Quebec, H9P 1H7 or such other
address as the Issuer may specify in writing to the registered holder of the
Warrants evidenced hereby (the "Warrant Office"). The Exercise Price and number
of Warrant Shares purchasable upon exercise of the Warrants are subject to
- 34 -
<PAGE>
adjustment upon the occurrence of certain events as set forth in the Warrant
Agreement referred to below.
The Issuer may deem and treat the registered holder(s) of the Warrants
evidenced hereby as the absolute owner(s) thereof (notwithstanding any notation
of ownership or other writing thereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holder(s) hereof, and for all
other purposes, and the Issuer shall not be affected by any notice to the
contrary.
Warrant Certificates, when surrendered at the Warrant office by the registered
holder hereof in person or by a legal representative duly authorized in writing,
may be exchanged, in the manner and subject to the limitations provided in the
Warrant Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this Warrant Certificate
at the Warrant Office, a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
in exchange for this Warrant Certificate to the transferee(s) and, if less than
all the Warrants evidenced hereby are to be transferred, to the registered
holder hereof, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
This Warrant Certificate is one of the Warrant Certificates referred to in the
Warrant Agreement dated as of April 10, 1996 between the Issuer and Akin Bay
Company (the "Warrant Agreement"). Said Warrant Agreement is hereby
incorporated by reference in and made a part of this Warrant Certificate and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Issuer and the holders.
IN WITNESS WHEREOF, the Issuer has caused this Warrant Certificate to be signed
by its duly authorized officers.
GRAND TOYS INTERNATIONAL, INC.
By:/s/ Stephen Altro
Name:
Title:
(CORPORATE SEAL)
ATTEST:
________________________
(Assistant) Secretary
- 35 -
<PAGE>
ANNEX
TO FORM OF
WARRANT CERTIFICATE
[FORM OF ELECTION TO PURCHASE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented
by Warrant Certificate W-___________, to purchase Warrant Shares and herewith
tenders payment for such Warrant Shares to the order of the Issuer in the amount
of US $ in accordance with the terms hereof. The undersigned requests
that a certificate for such Warrant Shares be registered in the name of
_____________whose address is _______________ and that such certificate be
delivered to ______________ whose address is ____________. If said number of
Warrant Shares is less than all of the Warrant Shares purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of the Warrant Shares be registered in the name of______________ whose
address is _______________ and that such Warrant Certificate be delivered to
_______________ whose address is________________.
Signature:______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Date:
- 36 -
<PAGE>
EXHIBIT B
TO WARRANT AGREEMENT
WARRANT REGISTER
----------------
<TABLE>
<CAPTION>
================================================================================================
Original Number
Warrant of Warrants and Names and Address
Certificate No. Warrant Shares of Warrant Holder
- ---------------------------- ---------------------------- ------------------------------------
<S> <C> <C>
W-___ Akin Bay Company
141 East 44th Street
New York, NY 10017
Attn: Chairman
================================================================================================
</TABLE>
- 37 -
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
Original Number
Warrant of Warrants and Names and Address
Certificate No. Warrant Shares of Warrant Holder
- ---------------------------- ---------------------------- ------------------------------------
<S> <C> <C>
W-1 275,000 Warrants to Akin Bay Company
purchase 275,000 Shares 141 East 44th Street
New York, NY 10017
Attn: Chairman
================================================================================================
</TABLE>
- 38 -
<PAGE>
Exhibit 4.3
UNDERWRITER'S WARRANT AGREEMENT
UNDERWRITER'S WARRANT AGREEMENT dated as of May 10, 1994 among GRAND TOYS
INTERNATIONAL, INC., a Nevada corporation (the "company") and BERKELEY
SECURITIES CORPORATION, a Delaware corporation (hereinafter referred to
variously as the "Holder" or the "Underwriter").
W I T N E S S E T H
-------------------
WHEREAS, the Company proposes to issue to the Underwriter warrants ("Warrants")
to purchase up to an aggregate 100,000 shares of common stock, par value $.00l
per share, of the Company ("Common Stock"); and
WHEREAS, the Underwriter has agreed pursuant to the underwriting agreement (the
"Underwriting Agreement") dated as of the date hereof between the Underwriter
and the Company, to underwrite the Company's proposed public offering of up to
1,000,000 shares of Common Stock (the "Shares") at a public offering price of
$6.00 per share of Common Stock and 1,000,000 Redeemable Common Stock Purchase
Warrants (the "Public Warrants") at a public offering price of $.l0 per warrant
(the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be issued on
the Closing Date (as such term is defined in the Underwriting Agreement) by the
Company to the
<PAGE>
Underwriter in consideration for, and as part of the compensation in connection
with the public offering;
NOW, THEREFORE, in consideration of the premises, the payment by the Underwriter
to the Company of an aggregate of one hundred dollars ($100.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Holder is hereby granted the right to purchase, at any time
-----
from May 10, 1995 until 5:30 P.M., New York time, on May 9, 1999, up to an
aggregate 100,000 Shares at an initial exercise price (subject to adjustment as
provided in Section 8 hereof) of $9.00 per Share, subject to the terms and
-------
conditions of this Agreement. Except as set forth herein, the Shares issuable
upon exercise of the Warrants are in all respects identical to the Shares being
purchased by the Underwriter for resale to the public pursuant to the terms and
provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the ``Warrant
------- ------------
Certificates'') delivered and to be delivered pursuant to this Agreement shall
be in the form set forth in Exhibit A, attached hereto and made a part hereof,
with such appropriate insertions, omissions, substitutions, and other variations
as required or permitted by this Agreement.
3. Exercise of Warrant. The Warrants initially are exercisable at an
-------- -- -------
aggregate initial exercise price (subject to adjustment as provided in Section 8
-------
hereof) per Share set forth in Section 6 hereof payable by certified or official
-------
bank check in New York Clearing House funds, subject to adjustment as provided
in Section 8 hereof. Upon surrender of a Warrant Certificate with the annexed
-------
Form of Election to Purchase duly executed, together with payment of the
purchase Price (as hereinafter defined) for the Shares purchased at the
Company's principal
-2-
<PAGE>
offices. The registered holder of a Warrant Certificate ("Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Warrant certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock underlying the Warrants). In the case
of the purchase of less than all the Shares purchasable under any Warrant
Certificate, the company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Shares purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
-------- -- ------------
issuance of certificates for Shares or other securities, properties or rights
underlying such Warrants, shall be made forthwith (and in any event within three
(3) business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Sections 5
--------
and 7 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder and the Company shall not be required to issue or deliver such
certificates unless to or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares
(and/or other securities, property or rights issuable upon the exercise of the
Warrants) shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or
-3-
<PAGE>
Vice Chairman of the Board of Directors or President or Vice president of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or Assistant Secretary of
the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
----------- -- -------- -- --------
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, for a period of one (1) year from
the date hereof, except to officers and employees of the Underwriter.
6. Exercise Price.
-------- -----
(S)6.1 Initial and Adjusted Exercise Price. Except as otherwise
------- --- -------- -------- -----
provided in Section 8 hereof, the initial exercise price of each Warrant shall
-------
be $9.00 for each share purchased. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Section 8 hereof.
-------
(S)6.2 Exercise Price. The term "Exercise Price" herein shall mean
-------- -----
the initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
------------ ------
(S)7.1 Registration Under the Securities Act of 1933. The Warrants,
------------ ----- --- ---------- --- -- ----
the Shares and any of the other securities issuable upon exercise of the
Warrants have not been registered under the Securities Act of 1933, as amended
(the "Act"). Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares underlying the Warrants and any of the other
-4-
<PAGE>
securities issuable upon exercise of the Warrants (collectively, the "Warrant
securities") shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable,
Rule 144 under the Act (or any similar rule under such Act relating
to the disposition of securities), or (iii) an opinion of counsel,
if such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act is
available.
(S)7.2 Piggyback Registration. If, at any time commencing after May
--------- ------------
10, 1995, through and including May 9, 2001, the Company proposes to register
any of its securities under the Act (other than in connection with a merger or
pursuant to Form S-8 or any similar or successor form) it will give written
notice by registered mail, at least thirty (30) days prior to the filing of each
such registration statement, to each of the Underwriter and to all other Holders
of the Warrants and/or the Warrant Securities of its intention to do so. If any
of the Underwriter or other Holders of the Warrants and/or Warrant Securities
notify the Company within twenty (20) days after receipt of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford each of the Underwriter and such Holders of
the Warrants and/or Warrant Securities the opportunity to have any such Warrants
and/or Warrant Securities registered under such registration statement. The
Holder shall have no say in the choice of underwriter or terms or conditions of
an offering pursuant to this section 7.2.
Notwithstanding the provisions of this Section 7.2, the Company shall have
-------
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
- -------
securities shall have been made) to elect not
-5-
<PAGE>
to file any such proposed registration statement, or to withdraw the same after
the filing but prior to the effective date thereof.
(S)7.3 Demand Registration.
(a) At any time commencing after May 10, 1995, through and including
May 9, 1999, the Holders of the Warrants and/or Warrant Securities representing
a "Majority" (as defined in Section 7(k)(l)) of such securities (assuming the
exercise of all of the warrants) shall have the right (which right is in
addition to the registration rights under Section 7.2 hereof), exercisable by
-------
written notice to the Company, to have the Company prepare and file with the
Commission, on one occasion, a registration statement and such other documents,
including a prospectus, as may be necessary in the opinion of both counsel for
the Company and counsel for the Underwriter and such Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale of
their respective Warrant Securities for nine (9) consecutive months by such
Holders and any other Holders of the Warrants and/or warrant Securities who
notify the Company within ten (10) days after receiving notice from the Company
of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
-------
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
-------
subsection (a) of this Section 7.3, at any time commencing after May 10, 1995
-------
through and including May 9, 1999, Holders of the Warrants and/or Warrant
Securities representing a Majority shall have the right, exercisable by written
request to the Company, to have the
-6-
<PAGE>
Company prepare and file, on one occasion, with the Commission a registration
statement so as to permit a public offering and sale for nine (9) consecutive
months by any such Holder of its Warrant Securities provided, however, that the
provisions of Section 7.4(b) hereof shall not apply to any such registration
-------
request and registration and all costs incident thereto shall be at the expense
of the Holder or Holders making such request.
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Securities
within the time period specified in Section 7.4(a) hereof pursuant to the
-------
written notice specified in Section 7.3(a) of a Majority of the Holders of the
-------
Warrants and/or Warrant Securities, unless the Holders fail to comply with their
obligation hereunder, the Company agrees that upon the written notice of
election of a Majority of the Holders of the Warrants and/or Warrant Securities
it shall repurchase (i) any and all Warrant Securities at the higher of the
Market Price (as defined in Section 8.1(a)) per share of Common Stock on (x) the
-------
date of the notice sent pursuant to Section 7.3(a) or (y) the expiration of the
-------
period specified in Section 7.4(a) and (ii) any and all Warrants at such Market
-------
Price less the exercise prices of such Warrant. Such repurchase shall be in
immediately available funds and shall close within two (2) days after the later
of (i) the expiration of the period specified in Section 7.4(a) or (ii) the
-------
delivery of the written notice of election specified in this Section 7.3(d).
-------
(S)7.4 Covenants of the Company With Respect to Registration. In
--------- -- --- ------- ---- ------- -- ------------
connection with any registration under Section 7.2 or 7.3 hereof, the Company
-------
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within thirty (30) days of receipt of any demand therefor under
Section 7.3, shall use
- -------
-7-
<PAGE>
its best efforts to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell -warrant
Securities such number of prospectuses as shall reasonably be requested.
b) The Company shall pay all costs (excluding fees and expenses of
any and all Holder(s) counsel and any underwriting or selling commissions), fees
and expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
- --------
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c). If the company shall
-------
fail to comply with the provisions of Section 7.4(a), the Company shall, in
-------
addition to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental, special and consequential damages and damages
due to loss of profit sustained by the Holder(s) requesting registration of
their Warrant Securities.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities-included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense
-8-
<PAGE>
or liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from such
registration statement but only to the same extent and with the same effect as
the provisions pursuant to which the Company has agreed to indemnify the
Underwriter contained in Section 7 of the Underwriting Agreement.
-------
(e) The Holder(s) of the Warrant Securities to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
-------
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
- -------
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
Specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the Underwriting
-------
Agreement pursuant to which the Underwriter have agreed to indemnify the
Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Warrants and Warrant Securities to be included in any registration
statement filed pursuant to Section 7.3 hereof, or permit any other registration
-------
statement to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 7.3 hereof,
-------
-9-
<PAGE>
without the prior written consent of the Holders of the Warrants and Warrant
Securities representing a majority of such securities.
(h) The Company shall furnish to each Holder Participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement) , and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company as soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), shall make generally available
to its security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Underwriter, an earnings statement which will be in the
detail required by, and will otherwise comply with, the provisions of Section
11(a) of the Act and Rule
-10-
<PAGE>
158(a) of the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least 12 consecutive months after
the effective date of the Registration Statement.
j) The Company shall deliver promptly to each Holder participating in
the offering requesting the correspondence and memoranda described below and the
managing underwriters copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriters to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Securities requested to be included in such
underwriting. Such agreement shall be satisfactory in form and substance to the
Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter.
-11-
<PAGE>
The Holders shall be parties to any underwriting agreement relating to
an underwritten sale of their Warrant Securities and say, at their option,
require that any or all the representations, warranties and covenants of the
Company to or for the benefit of such Underwriters shall also be made to and for
the benefit of such Holders. Such Holders shall not be required to make any
presentations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(1) For purposes of this Agreement, the term "Majority" in reference
to the Holders of Warrants and Warrant Securities, shall mean in excess of fifty
percent (50%) of the then outstanding warrants and Warrant Securities that (i)
are not held by the company, an affiliate, officer, creditor, employee or agent
thereof or any of their respective affiliates, members of their family,-persons
acting as nominees or in conjunction therewith or (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
8. Adjustments to Exercise Price and Number of Securities.
----------- -- -------- ----- --- ------ -- ----------
(S)8.1 Computation of Adjusted Exercise Price. Except as hereinafter
----------- -- -------- -------- -----
provided, in case the Company shall at any time after the date hereof issue or
sell any shares of Common Stock (other than the issuances or sales referred to
in Section 8.7 hereof), including shares held in the Company's treasury and
-------
shares of Common Stock issued upon the exercise of any options, rights or
warrants, to subscribe for shares of Common Stock and shares of common stock
issued upon the direct or indirect conversion or exchange of securities for
shares of Common Stock, for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance or sale of such shares or the
Market Price" (as defined in Section 8.l(vi) hereof) per share of
-------
-12-
<PAGE>
Common stock on the date immediately prior to the issuance or sale of such
shares or without consideration, then forthwith upon such jssuance or sale, the
Exercise Price shall (until another such issuance or sale) be reduced to the
price (calculated to the nearest full cent) equal to the quotient derived by
dividing (A) an amount equal to the sum of (X) the product of (a) the lower of
(i) the Exercise Price in effect immediately prior to such issuance or sale and
(ii) the Market Price per share of Common Stock on the date immediately prior to
the issuance or sale of such shares, in either event, reduced, but not below
.001, by the positive difference between the (u) "Market Price" per share of
Common Stock on the date immediately prior to the issuance or sale and (v) the
amount per share received in connection with such issuance or sale, multiplied
by (b) the total number of shares of Common Stock outstanding immediately prior
to such issuance or sale plus, (Y) the aggregate of the amount of all
consideration, if any, received by the Company upon such issuance or sale, by
(B) the total number of shares of Common Stock outstanding immediately after
such issuance or sale, provided, however, that in no event shall the Exercise
Price be adjusted pursuant to this computation to an amount in excess of the
Exercise Price in effect immediately prior to such computation, except in the
case of a combination of to outstanding shares of Common Stock, as provided by
Section 8.3 hereof. Such adjustment shall become effective at the close of
- -------
business on such record date; provided, however, that, to the extent the shares
of Common Stock (or securities convertible to or exchangeable for shares of
Common Stock) are not delivered, the warrant Price shall be readjusted after the
expiration of such rights, options, or warrants (but only with respect to
Warrants exercised after such expiration), to the Warrant Price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number
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<PAGE>
of shares of Common Stock or securities convertible into or exchangeable for
shares of Common Stock) actually issued.
For the purposes of this Section 8 the term Exercise Price shall mean the
-------
Exercise Price per share of Common Stock set forth in Section 6 hereof, as
-------
adjusted from time to time pursuant to the provisions of this Section 8.
-------
For the purposes of any computation to be made in accordance with this
Section 8.1, the following provisions shall be applicable:
- -------
(i) In case of the issuance or sale of shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as dividend or
other distribution on any stock of the Company) of shares of Common Stock for a
consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after
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<PAGE>
the opening of business on the day following the record date for the
determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (ii) of this Section 8.1.
(v) The number of shares of Common Stock at any one time outstanding
shall include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights, warrants and upon the version or exchange of convertible or exchangeable
securities.
(vi) As used herein, the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq Stock Market, National Market ("NASDAQ"), or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted by NASDAQ, the average closing bid price as furnished by the
NASD through NASDAQ or similar organization if NASDAQ is no longer reporting
such information, or if the Common Stock is not quoted on NASDAQ, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it.
-15-
<PAGE>
(S)8.2 Options. Rights Warrants and Convertible and Exchangeable
-------- ------ -------- --- ----------- --- ------------
Securities. In case the Company shall at any time after the date hereof issue
- ----------
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share less than the Exercise Price in effect or the Market
Price immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 8.1 hereof, provided that
-------
(a) The aggregate maximum number of shares of Common Stock, as the
case may be, issuable under such options, rights or warrants shall be deemed to
be issued and outstanding at the time such Options, rights or warrants were
issued, and for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration (determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of the Warrants), if
any, received by the Company for such options, rights or warrants.
(b) The aggregate maximum number of shares of Common Stock issuable
upon conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined in
the same manner as consideration received on the issue or sale of shares of
Common Stock in accordance with the terms of the
-16-
<PAGE>
Warrants) received by the Company for such securities, plus the minimum
consideration, if any, receivable by the Company upon the conversion or exchange
thereof.
(c) If any change shall occur in the price per share provided for in
any of the options rights or warrants referred to in subsection (a) of this
Section 8.2 other than the Warrants, or in the price per share at which the
- -------
securities referred to in subsection (b) of this Section 8.2 are convertible or
-------
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, shall be deemed to have expired or terminated on the date
when such price change became effective in respect of shares not theretofore
issued pursuant to the exercise or conversion or exchange thereof, and the
Company shall be deemed to have issued upon such date new options, rights or
warrants or convertible or exchangeable securities at the new price in respect
of the number of shares issuable upon the exercise of such options, rights or
warrants or the conversion or exchange of such convertible or exchangeable
securities.
(S)8.3 Subdivision and Combination. In case the Company shall at any
----------- --- -----------
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
(S)8.4 Adjustment in Number of Securities. Upon each adjustment of
---------- -- ------ -- ----------
the Exercise Price pursuant to the provisions of this Section 8, the number of
-------
Warrant Securities issuable upon the exercise of each warrant shall be adjusted
to the nearest full amount by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of Warrant
Securities issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
-17-
<PAGE>
(S)8.5 Definition of Common Stock. For the purpose of this
---------- -- ------ -----
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock, consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event that the Company shall after the date hereof issue
securities with greater or superior voting rights than the shares of Common
Stock outstanding as of the date hereof, the Holder, at its option, may receive
upon exercise of any Warrant either shares of Common Stock or a like number of
such securities with greater or superior voting rights.
(S)8.6 Merger or Consolidation. In case of any consolidation of the
------ -- -------------
Company with, or merger of the Company with, or merger of the any into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be Outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation or merger, by a holder of the number of shares of common
Stock of the Company for which such warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
-------
subsection shall Similarly apply to successive consolidations or mergers.
-18-
<PAGE>
(S)8.7 No Adjustment of Exercise Price in Certain Cases. No
-- ---------- -- -------- ----- -- ------- -----
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares of Common
Stock issuable upon the exercise of (i) the warrants or (ii) the Options or
warrants outstanding on the date hereof and described in the prospectus; or
(b) If the amount of said adjustment shall be less than two cents
($.02) per Security, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least two
cents ($.02) per Security.
(S)8.9 Dividends and Other Distributions. In the event that the
--------- --- ----- -------------
company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this subsection 8.9.
-19-
<PAGE>
9. Exchange and Replacement of Warrant Certificates. Each Warrant
-------- --- ----------- -- ------- ------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
----------- -- ---------- ---------
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all times
----------- --- ------- -- ----------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As
-20-
<PAGE>
long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common stock issuable upon the exercise of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock issued to the public in connection herewith
may then be listed and/or quoted on the Nasdaq Stock Market.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall
------- -- ------- -------
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property assets and business as an entirety shall be
proposed; then, in any one or more of said events the Company shall give written
notice of such event at least fifteen (15) days prior to the date fixed
-21-
<PAGE>
as a record date or the date of closing the transfer books for the determination
of the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices. All notices requests, consents and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof or
-------
to such other address as the Company may designate by notice to the Holders.
14. Supplements and Amendments. The Company and the Underwriter may from
----------- --- ----------
time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates (other than the Underwriter) in order to cure
any ambiguity, to correct or supplement any provision contained herein which may
be defective or inconsistent with any provisions herein k or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Underwriter may deem necessary or desirable and which the Company and
the Underwriter deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
-22-
<PAGE>
15. Successors. All the covenants and provisions of this Agreement shall
----------
be binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of business
-----------
on May 9, 2001. Notwithstanding the foregoing, the indemnification provisions
of Section 7 shall survive such termination until the close of business on May
-------
9, 2006.
17. Governing Law: Submission to Jurisdiction. This Agreement and each
--------- ---- ---------- -- ------------
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that any action,
proceeding or claim against it arising out of, or relating in any way to, this
Agreement shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, the Underwriter and the Holders hereby irrevocably waive any
objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Underwriter and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 13 hereof. Such mailing shall be deemed personal service and
-------
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal
-23-
<PAGE>
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
18. Entire Agreement: Modification. This Agreement (including
------ ---------- ------------
underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. Severability. If any provision of this Agreement shall be held to be
------------
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement are
--------
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits or this Agreement. Nothing in this Agreement shall be
-------- -- ---- ---------
construed to give to any person or corporation other than the Company and the
Underwriter and any other registered Holder(s) of the Warrant Certificates or
Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and the Underwriter and any other Holder(s) of the Warrant Certificates
or Warrant Securities.
22. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes are deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
[SEAL] GRAND TOYS INTERNATIONAL, INC.
By: /s/ Stephen Altro
Stephen Altro
President
Attest:
/s/ Ron Goldenberg
Secretary
BERKELEY SECURITIES CORPORATION
By: /s/ William Baquet
Name:
Title:
-25-
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, May 9, 1999
No. W- 100,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Berkeley Securities Corporation, or
registered assigns, is the registered holder of 100,000 Warrants to purchase
initially, at any time from May 10, 1995 until 5:30 p.m. New York time on May 9,
1999 ("Expiration Date"), up to 100,000 fully paid and non-assessable shares of
common stock, par value $.001 per share ("Common Stock") of GRAND TOYS
INTERNATIONAL, INC., a Nevada corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $9.00 per share of Common Stock upon surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the warrant agreement dated as
of May 3, 1994 between the Company and BERKELEY SECURITIES CORPORATION, (the
"Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Underwriter's Warrants evidenced hereby,
unless exercised prior thereto, hereby shall thereafter be void.
-26-
<PAGE>
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants pursuant to the Underwriter's Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant certificates
shall not in any way change, alter or otherwise impair, the rights of the holder
as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this warrant
Certificate at an office or agency of the Company, a new warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
certificate, subject to the limitations provided herein and in the Underwriter's
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
-27-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant certificate to be
duly executed under its corporate seal.
Dated as of May 10, 1994
GRAND TOYS INTERNATIONAL, INC.
By: _________________________________
Name: Stephen Altro
Title: President
[SEAL]
Attest:
- ------------------------------
Secretary
-28-
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase _________ shares of Common Stock and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of GRAND TOYS
INTERNATIONAL, INC. in the amount of $____________, all in accordance with the
terms hereof. The undersigned requests that a certificate for such securities
be registered in the name of ______________________________ whose address is
_______________________________________________ and that such certificate be
delivered to _____________________________ whose address is
__________________________________.
Dated
Signature ____________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
------------------------------------------
Insert Social Security or Other
Identifying Number of Holder)
-29-
<PAGE>
ASSIGNMENT FORM
---------------
The Holder hereby assigns and transfers unto
Name
----------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
the right to purchase Common Stock of ______________ represented by this Warrant
to the extent of ________________ shares of Common Stock as to which such right
is exercisable and does hereby irrevocably constitute and appoint
___________________________________
Attorney to transfer the same on the books of _____________ with full power of
substitution in the premises.
Date: ________________, 199_
----------------------------------------
Name of Registered Holder
----------------------------------------
Signature
----------------------------------------
Signature, if held jointly
-30-
<PAGE>
EXHIBIT 4.4
EXHIBIT B
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1932, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, MAY 9, 1999
NO. WW-2 10,000 Warrants
WARRANT CERTIFICATE
This Warrant certificate certifies that Berkeley Securities Corporation, or
registered assigns, is the registered holder of 10,000 Warrants to purchase
initially, at any time from May 10, 1995 until 5:30 p.m. New York time on May 9,
1999 ("Expiration Date"), up to 10,000 fully paid and non-assessable Public
Warrants, as defined in the Warrant Agreement referred to herein, of GRAND TOYS
INTERNATIONAL, INC., a Nevada corporation (the "Company"), at exercise price
(the "Exercise Price"), of $.15 per Public Warrant upon surrender of this
Warrant Certificate payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of May 10, 1994 between the Company and Berkeley Securities
Corporation, (the "Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Underwriter's Warrants evidenced hereby,
unless exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants pursuant to the Underwriter's Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a
-31-
<PAGE>
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter or otherwise impair, the rights of the holder
as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and. evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Underwriter's Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
-32-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of May 10, 1994
GRAND TOYS INTERNATIONAL, INC.
[SEAL] By /s/ Stephen Altro
Name: Stephen Altro
Title: President
Attest:
/s/ Ron Goldenberg
Secretary
-33-
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION THEREFROM
IS AVAILABLE.
WARRANT TO PURCHASE
COMMON STOCK OF GRAND TOYS INTERNATIONAL, INC.
This certifies that AKIN BAY COMPANY LLC (the "Holder"), or its registered
assigns, for value received, is entitled to purchase from GRAND TOYS
INTERNATIONAL, INC. (the "Company") Fifty-five Thousand (55,000) shares of the
Company's Common Stock (the "Common Stock") for a per share exercise price equal
to $ 6.375 (the "Per Share Exercise Price"). This right may be exercised at any
time from the date hereof up to and including 5:00 p.m. (New York City time) on
August 13, 2009 (the "Expiration Date"), upon surrender to the Company at its
principal office (or at such other location as the Company may advise the Holder
in writing) of this warrant, properly endorsed, with the Subscription Form
attached hereto duly filled in and signed, if applicable, and upon payment in
cash or by check of the aggregate Per Share Exercise Price for the number of
shares for which this warrant is being exercised determined in accordance with
the provisions hereof.
1. ISSUANCE OF CERTIFICATES.
Certificates for the shares of Common Stock acquired upon exercise of this
warrant, together with any other securities or property to which the Holder is
entitled upon such exercise, will be delivered to the Holder by the Company at
the Company's expense within a reasonable time after this warrant has been so
exercised. If the Company does not deliver certificates for the shares of
Common Stock to be issued upon exercise of this warrant within five (5) business
days after receipt by the Company from the Holder of (i) this warrant, properly
endorsed, (ii) the Subscription Form duly filled in and signed, and (iii)
payment in check or cash of the aggregate Per Share Exercise Price for the
number of shares for which this warrant is being exercised, then in addition to
any other remedies which the Holder may have, the Company shall immediately pay
to said Holder a late fee in cash equal to two percent (2%) of the value of the
Common Stock to be issued to Holder, per month or pro rata portion thereof that
the delivery of said certificates is late.
Each stock certificate so delivered will be in such denominations of Common
Stock as may be requested by the Holder and will be registered in the name of
the Holder. In case of a purchase of less than all the shares that may be
purchased under this warrant, the Company will
<PAGE>
cancel this warrant and execute and deliver a new warrant or warrants of like
tenor for the balance of the shares purchasable under this warrant to the Holder
within a reasonable time after surrender of this warrant.
2. SHARES FULLY-PAID, NONASSESSABLE, ETC.
All shares of Common Stock issued upon exercise of this warrant will, upon
issuance, be duly authorized, validly issued, fully-paid and nonassessable and
free from all preemptive rights of any shareholder and free of all taxes, liens
and charges with respect to the issue thereof. The Company will at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the exercise of this warrant, such
number of its shares of Common Stock as from time to time are sufficient to
effect the full exercise of this warrant. If at any time the number of
authorized but unissued shares of Common Stock are not sufficient to effect the
full exercise of this warrant, the Company will use its best efforts to take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as are sufficient for such purpose. The Company will take all such
action as may be necessary to assure that such securities may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed; provided, however, that the Company will not be required to effect a
registration under Federal or state securities laws with respect to such
exercise (except as may be set forth in Section 5).
3. NET ISSUE EXERCISE.
Notwithstanding any provisions herein to the contrary, if the fair market
value of one share of the Company's Common Stock is greater than the Per Share
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this warrant (or the portion thereof being
canceled) by surrender of this warrant at the principal office of the Company,
together with the properly endorsed Subscription Form and notice of such
election, in which event the Company will issue to the Holder a number of shares
of Common Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
-2-
<PAGE>
Y = the number of shares of Common Stock purchasable under this
warrant or, if only a portion of this warrant is being exercised, the portion of
this warrant being canceled (at the date of such calculation)
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation)
B = Per Share Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock will be the average of the closing bid prices of the Company's shares of
Common Stock as quoted on the Nasdaq SmallCap Market ("Nasdaq") (or on such
other United States stock exchange or public trading market on which the shares
of the Company trade if, at the time of the election, they are not trading on
the Nasdaq), for the five (5) consecutive trading days immediately preceding the
date the completed, executed Subscription Form is received.
4. ADJUSTMENTS.
4.1 Adjustment for Stock Splits and Combinations. If the Company at any
time or from time to time during the term of this warrant effects a subdivision
of the outstanding Common Stock, the Per Share Exercise Price in effect
immediately before that subdivision will be proportionately decreased.
Conversely, if the Company at any time or from time to time during the term of
this warrant combines the outstanding shares of Common Stock into a smaller
number of shares, the Per Share Exercise Price in effect immediately before the
combination will be proportionately increased. Any adjustment under this Section
4.1 will become effective at the close of business on the date the subdivision
or combination becomes effective.
4.2 Adjustment for Common Stock Dividends and Distributions. If the Company
at any time or from time to time during the term of this warrant makes, or
fixes, a record date for the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock, in each such event the Per Share Exercise Price that is then in
effect will be decreased as of the time of such issuance or, in the event such
record date is fixed, as of the close of business on such record date, by
multiplying the Per Share Exercise Price then in effect by a fraction (a) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance on the close of
business on such record date, and (b) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance on the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed thereof, the Per Share Exercise Price will be recomputed accordingly as of
the
-3-
<PAGE>
close of business on such record date and thereafter the Per Share Exercise
Price will be adjusted pursuant to this Section 4.2 to reflect the actual
payment of such dividend or distribution.
4.3 Adjustments for Other Dividends and Distributions. If the Company at
any time or from time to time during the term of this warrant makes, or fixes, a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in securities of the Company other than
shares of Common Stock, in each such event provision will be made so that the
Holder will receive upon exercise of this warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount of other securities of
the Company that it would have received had this warrant been exercised on the
date of such event and had it thereafter, during the period from the date of
such event to and including the exercise date, retained such securities
receivable by Holder as aforesaid, subject to all other adjustments called for
during such period under this Section 4 with respect to the rights of the Holder
hereunder or with respect to such other securities by their terms.
4.4 Adjustment for Reclassification, Exchange and Substitution. If at any
time or from time to time during the term of this warrant the Common Stock
issuable upon the exercise of this warrant is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a recapitalization,
subdivision, combination, reclassification or exchange provided for elsewhere in
this Section 4), the Holder will have the right thereafter to exercise this
warrant for the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change into
which the shares of Common Stock issuable upon exercise of this warrant
immediately prior to such recapitalization, reclassification or change could
have been converted, all subject to further adjustment as provided herein or
with respect to such other securities or property by the terms thereof.
4.5 Reorganizations. If at any time or from time to time during the term
of this warrant there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination, reclassification or exchange
provided for elsewhere in this Section 4), as a part of such capital
reorganization, the Holder will thereafter be entitled to receive upon exercise
of this warrant the number of shares of stock or other securities or property of
the Company to which a holder of the number of shares of Common Stock
deliverable upon exercise of this warrant would have been entitled on such
capital reorganization, and thereafter subject to the terms and conditions of
such stock or securities.
-4-
<PAGE>
4.6 Certificate of Adjustment. In each case of an adjustment or
readjustment of the number of shares issuable upon exercise of this warrant or
the Per Share Exercise Price, the Company, at its expense, will compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and will mail such
certificate, by first class mail, postage prepaid, to the Holder at the Holder's
address as shown in the Company's books. The certificate will set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the Per Share
Exercise Price at the time in effect, and (b) the type and amount, if any, of
other property that at the time would be received upon exercise of this warrant.
4.7 Notices of Record Date. Upon (a) any taking by the Company of a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution,
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any sale of all or
substantially all of the assets of the Company or any voluntary or involuntary
dissolution, liquidation or winding up of the Company (each individually a "Sale
Event") or (c) a proposed Sale Event, the Company will mail to the Holder at
least twenty (20) days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification,
recapitalization, asset sale, dissolution, liquidation or winding up is
expecting to become effective, and (3) the date, if any, that is to be fixed as
to when the holders of record of Common Stock (or other securities) will be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, asset sale, dissolution, liquidation or
winding up.
5. REGISTRATION.
5.1 Piggy-Back Registrations. If, at any time, the Company shall
------------------------
determine to register for its own account or the account of others under the
Securities Act (including pursuant to a demand for registration of any
stockholder of the Company) any of its equity securities, other than on Form S-4
or Form S-8 or their then equivalents relating to shares of Common Stock to be
issued solely in connection with any acquisition of any entity or business or
shares of Common Stock issuable in connection with stock option or other
employee benefit plans, it shall send to each holder of the Registrable Shares
issued or issuable written notice of such determination and, if within fifteen
(15) days after receipt of such notice, such Holder of the Registrable Shares
shall so request in writing, the Company shall use its best efforts to include
in such registration statement all or any part of the Registrable Shares such
holder requests to be registered, except that if, in connection with a primary
public offering of the Company, the managing underwriter shall impose a
limitation on the number of shares of such Common Stock which may be included in
the registration statement because, in its judgment, such limitation is
necessary to effect an
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orderly public distribution, then the Company shall be obligated to include in
such registration statement only such limited portion of the Registrable Shares
with respect to which such holder has requested inclusion hereunder. Any
exclusion of Registrable Shares shall be made pro rata among the Holders of the
Registrable Shares (or their assigns who are entitled to and have requested
registration under this Section 5.1) seeking to include Registrable Shares, in
proportion to the number of Registrable Shares sought to be included by such
Holders of the Registrable Shares (or their assigns who are entitled to and have
requested registration under this Section 5.1); provided, however, that the
-------- -------
Company shall not exclude any Registrable Shares unless the Company has first
excluded all outstanding securities the holders of which are not entitled by
right to inclusion of securities in such registration statement; and provided
further, however, that any exclusion of Registrable Shares shall be made pro
- ------- -------
rata with holders of other securities having the right to include such
securities in the registration statement. The obligations of the Company to
Holders of the Registrable Shares under this Section 5 may be waived by Holders
of the Registrable Shares at any time. For purposes of this warrant,
"Registrable Shares" shall mean such number of shares of common stock issued or
issuable upon exercise of this warrant or any other shares of Common Stock
acquired by the Holders of this warrant by virtue of ownership of this warrant.
5.2 Provisions Applicable to Registration. The following provisions shall
-------------------------------------
apply, as applicable, in connection with the Holders of the Registrable Shares
to be included in the registration statement pursuant to this Section 5:
(a) The holders of the Registrable Shares, if reasonably requested by
the Company or by the underwriter with respect to any public offering, shall
agree not to sell, make any short sale of, loan, grant any options for the
purchase of, or otherwise dispose of any Registrable Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
one hundred eighty (180) days), from the effective date of such registration
statement, or the commencement of the offering, as applicable, as may be
requested by the underwriters, provided that all other holders of the class of
securities being registered shall make the same agreements as those required to
be made by the holders of the Registrable Shares under this Section 5.2(a).
(b) The holders of the Registrable Shares shall promptly provide the
Company with such non-confidential and non-proprietary information as it shall
reasonably request and that is available to the holders of the Registrable
Shares in order to prepare the registration statement.
(c) All reasonable and necessary expenses in connection with the
preparation of the registration statement, including, without limitation, any
and all legal, accounting and filing fees, but not including fees and
disbursements of experts and counsel retained by the holders of
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the Registrable Shares or underwriting discounts and commissions to be paid by
the holders of the Registrable Shares, shall be borne by the Company.
(d) The Company shall use its best efforts to effect such registration
permitting the sale of such Registrable Shares in accordance with the intended
method or methods of distribution thereof, and pursuant thereto, the Company
shall as expeditiously as possible:
(1) prepare and file with the SEC a registration statement
relating to the applicable registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the
Registrable Shares in accordance with the intended method or methods of
distribution thereof and use its best efforts to cause such registration
statement to become effective and keep such registration statement
effective in accordance with this Section 5.2;
(2) prepare and file with the SEC such amendments and post-
effective amendments to the registration statement as may be necessary to
keep the registration effective until all such Registrable Shares are sold;
cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof as set
forth in such registration statement or supplement to the prospectus;
provided, however that the Company may, from time to time, request that the
holders of the Registrable Shares immediately discontinue the disposition
of the Registrable Shares if the Company determines, in the good faith
exercise of its reasonable business judgment, that the offering and
disposition of the Registrable Shares could materially interfere with bona
fide financing, acquisition or other material business plans of the Company
or would require disclosure of non-public information, the premature
disclosure of which could materially adversely affect the Company (it being
acknowledged that the Company is not required to disclose in such request
any such transaction, plan or non-public information), so long as the
Company after the disclosure of such transaction, plan or non-public
information promptly resumes compliance with this section (d)(2);
(3) notify the holders of the Registrable Shares and the
underwriter, if any, promptly, and (if requested by any such person)
confirm such advice in writing, (A) when the prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to
the registration statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the SEC for amendments
or supplements to the registration statement or the prospectus or for
additional information, (C) of the issuance by the SEC of any stop order
suspending the
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<PAGE>
effectiveness of the registration statement or the initiation of any
proceedings for that purpose, (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Shares for sale in any jurisdiction or the initiation of any
proceedings for such purpose and (E) subject to the proviso below, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing and, subject to section (d)(2) above, at
the request of any such person, prepare and furnish to such person a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; provided, however,
the Company need not disclose the event if it otherwise has not disclosed
such event to the public;
(4) if requested by the underwriter or the holders of the
Registrable Shares, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the underwriter and the
holders of the Registrable Shares agree should be included therein relating
to the plan of distribution with respect to such Registrable Shares,
including, without limitation, the purchase price being paid therefor by
such underwriters and with respect to any other terms of the underwritten
offering of the Registrable Shares to be sold in such offering; and make
all required filings of such prospectus supplements or post-effective
amendments as soon as notified of the matters to be incorporated in such
prospectus supplements or post-effective amendments;
(5) deliver to the holders of the Registrable Shares and the
underwriters, if any, without charge, as many copies of the prospectus
(including each preliminary prospectus) in conformity with the requirement
of the Securities Act and any amendments or supplements thereto as such
persons may reasonably request and such other documents as they may
reasonably request to facilitate the prior sale or other disposition of
such Registrable Shares;
(6) prior to any public offering of Registrable Shares, register
or qualify or cooperate with the holders of the Registrable Shares, or the
underwriters, if any, in connection with the registration or qualification
of such Registrable Shares for offer and sale under the securities or blue
sky laws of such jurisdictions as the holders of the Registrable Shares or
underwriters, if any, reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Shares covered by the registration
statement; provided, however, that the Company shall not be required to
qualify to do business in any
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<PAGE>
jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction
where it is not then so subject or would subject the Company to any tax in
any such jurisdiction where it is not then so subject; and
(7) with a view to making available the benefits of certain rules
and regulations of the SEC which may at any time permit the sale of
Registrable Shares to the public without registration, during such time as
a public market exists for its equity securities, the Company agrees to:
(A) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date of the first registration under
the Securities Act filed by the Company for an offering of its equity
securities to the general public;
(B) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act")(at any time after it has become subject to such
reporting requirements); and
(C) furnish to the holders of the Registrable Shares
forthwith upon the holders of the Registrable Shares' request a
written statement by the Company as to the Company's compliance with
the reporting requirements of said Rule 144, and of the Securities Act
and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents of the
Company as the holders of the Registrable Shares may reasonably
request in availing itself of any rule or regulation of the SEC
allowing a holder to sell any such securities without registration.
(e) Notwithstanding the provisions of this Section 5 to the contrary
the Company:
(i) may require the holders of the Registrable Shares to
furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing,
and the Company may limit such registration rights to situations where a
proposed distribution of Registrable Shares is to be effected forthwith upon the
effectiveness of the registration statement; and
(ii) The undersigned will covenant that the holders of the
Registrable Shares has not taken, and will not take, directly, or indirectly,
any action designed, or which might reasonably be expected, to cause or result
in, under the Securities Exchange Act or
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<PAGE>
otherwise, or which has caused or resulted in, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Registrable Shares.
(f) Indemnification.
---------------
(i) In the event of a registration or qualification of any
Registrable Shares under the Securities Act pursuant to the provisions of this
Section 5, the Company shall indemnify and hold harmless the holders of the
Registrable Shares, the officers and directors of the holders of the Registrable
Shares and each director or officer of any person or entity who controls the
holders of the Registrable Shares, each underwriter of such Registrable Shares
and each other person or entity who controls the holders of the Registrable
Shares or such underwriter within the meaning of the Securities Act
(collectively, the "Indemnitees"), from and against any and all losses, claims,
damages or liabilities, joint or several, to which any of the Indemnitees, joint
or several, may become subject under the Securities Act or the applicable
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Registrable Shares were
registered or qualified under the Securities Act, or any amendment or supplement
thereto, any preliminary prospectus or final prospectus contained therein, or
any supplement thereto, or any document prepared and/or furnished to the holders
of the Registrable Shares incident to the registration or qualification on any
Registrable Shares, or (y) the omission or alleged omission to state in any
registration statement a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (z) any violation
by the Company of the Securities Act or state securities or "blue sky" laws
applicable to the Company and relating to action or inaction required of the
Company, in connection with such registration or qualification under such state
securities or "blue sky" laws, and in each case shall reimburse the Indemnitees
for any legal or other expenses reasonably incurred by such Indemnitees in
connection with investigating or defending any such loss, claim, damage or
liability (or action in respect thereof); provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability (or action in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement in reliance upon and in conformity
with information furnished to the Company through an instrument duly executed by
such Indemnitees; and provided further, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in such registration
statement, which untrue statement or alleged untrue statement or omission or
alleged omission is completely corrected in an amendment or supplement to the
registration statement and such Indemnitee thereafter fails
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<PAGE>
to deliver or cause to be delivered such registration statement as so amended or
supplemented prior to or concurrently with the sale of the Registrable Shares to
the person asserting such loss, claim, damage or liability (or actions in
respect thereof) or expense after the Company has furnished the holders of the
Registrable Shares with the same.
(ii) In the event of the registration or qualification of any
Registrable Shares under the Securities Act pursuant to the provisions of this
Section 5, the holders of the Registrable Shares severally and not jointly shall
indemnify and hold harmless the Company, each person who controls the Company
within the meaning of the Securities Act, each officer and director of the
Company and any other selling holder from and against any losses, claims,
damages or liabilities to which the Company, such controlling person, any such
officer or director or any other selling holder may become subject under the
Securities Act or the applicable securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (x) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Shares were registered or qualified under the Securities Act, or any
amendment or supplement thereto, or (y) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, which untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by the holders of the Registrable Shares specifically
for use in preparation thereof, and in each case shall reimburse the Company,
such controlling person, each such officer or director and any other selling
holder for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage or liability (or
action in respect thereof).
(iii) Promptly after receipt by a person entitled to indemnification
under this section (g) (an "Indemnified Party") of notice of the commencement of
any action or claim relating to any registration statement filed under the
provisions of this Section 5 or as to which indemnity may be sought hereunder,
such Indemnified Party shall, if a claim for indemnification hereunder in
respect thereof is to be made against any other party hereto (an "Indemnifying
Party"), give written notice to such Indemnifying Party of the commencement of
such action or claim, but the omission so to notify the Indemnifying Party will
not relieve such person from any liability that such person may have to any
Indemnified Party otherwise than pursuant to the provisions of this section (f)
and shall also not relieve the Indemnifying Party of such party's obligations
under this section (f), except to the extent that the omission so to notify
results in the Indemnifying Party being damaged solely as a result of the
failure to give timely notice. In case any such action is brought against an
Indemnified Party, and such party notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled (at such party's
own expense) to participate in and, to the extent that the Indemnifying Party
may wish, jointly with any other Indemnifying Party similarly notified, to
assume the defense, with counsel satisfactory
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<PAGE>
to such Indemnified Party, of such action and/or to settle such action and,
after notice from the Indemnifying Party to such Indemnified Party of its
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to such Indemnified Party for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof, other
than the reasonable cost of investigation; provided, however, that no
Indemnifying Party and no Indemnified Party shall enter into any settlement
agreement that would impose any liability on such other party or parties without
the prior written consent of such other party or parties, unless such other
party or parties are fully indemnified to such party's satisfaction, as the case
may be, against any such liability.
(iv) If for any reason the indemnification provided for in this
Section 5 is unavailable to an Indemnified Party or is insufficient to hold it
harmless as contemplated by this Section 5, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party and the Indemnifying Party, but also the relative fault of the
Indemnified Party and the Indemnifying Party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
6. TAXES.
The Company will pay all taxes (other than taxes based upon income) and
other governmental charges that may be imposed with respect to the issue or
delivery of shares of Common Stock upon exercise of this warrant, excluding any
tax or other charge imposed in connection with any transfer involved in the
issue and delivery of shares of Common Stock in a name other that in which this
warrant was registered.
7. CLOSING OF BOOKS.
The Company will at no time close its transfer books against the transfer of
any warrant or of any shares of Common Stock issued or issuable upon the
exercise of any warrant in any manner that interferes with the timely exercise
of this warrant.
8. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Nothing contained in this warrant will be construed as conferring upon the
Holder the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest will
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<PAGE>
be payable or accrued in respect of this warrant or the interest represented
hereby or the shares purchasable hereunder until, and only to the extent that,
this warrant has been exercised.
9. WARRANTS TRANSFERABLE.
Subject to compliance with applicable Federal and state securities laws and
the restrictions imposed by any other written agreement between the Holder and
the Company, this warrant and all rights hereunder are transferable, in whole or
in part, without charge to the Holder (except for transfer taxes), upon
surrender of this warrant properly endorsed and in compliance with the
provisions of this warrant.
10. MODIFICATION AND WAIVER.
This warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of the same is sought.
11. NOTICES.
Any notice required by the provisions of this warrant will be in writing and
will be deemed effectively given: (a) upon personal delivery to the party to be
notified; (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient; if not, then on the next business day; (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All notices will be addressed to the Holder at the
address of the Holder appearing on the books of the Company.
12. LOST WARRANTS.
The Company represents and warrants to the Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this warrant and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such warrant, the Company, at its expense, will make and deliver a new
warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
warrant.
13. FRACTIONAL SHARES.
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No fractional shares of Common Stock will be issued upon exercise of this
warrant. If the conversion would result in the issuance of any fractional
share, the Company will, in lieu of issuing any fractional share, pay cash equal
to the product of such fraction multiplied by the closing bid price of the
Company's Common Stock on the date of conversion.
14. GOVERNING LAW.
This warrant will be construed and enforced in accordance with, and the
rights of the parties will be governed by, the laws of the State of New York
without regard to conflict of laws principles.
The Company has executed this warrant as of this 13th day of August, 1999.
GRAND TOYS INTERNATIONAL, INC.
/s/ Stephen Altro
By: Stephen Altro
Title: Chairman and President
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<PAGE>
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
Date: _________________
Grand Toys International, Inc.
Attn: President
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by
Accesspoint Corporation (the "Company") dated as of ___________________ and to
purchase thereunder ____________________ (_________) shares of the Common Stock
of the Company at a purchase price of _________________ ($_________) per Share,
for an aggregate purchase price of _____________________ ($___________) (the
"Purchase Price").
Pursuant to the terms of the warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
Very truly yours,
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<PAGE>
EXHIBIT 5.1
PIPER & MARBURY
L.L.P.
1251 AVENUE OF THE AMERICAS
New York, New York 10020-1104
212-835-6000
FAX: 212-835-6001 BALTIMORE
WASHINGTON
PHILADELPHIA
EASTON
September 14, 1999
Grand Toys International, Inc.
1710 Route Transcandienne
Dorval, Quebec, Canada H9P 1H7
Gentlemen:
We have acted as counsel to Grand Toys International, Inc., a Nevada
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 of the Company (the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission") on September 14, 1999, pursuant to the Securities Act of 1933, as
amended. The Registration Statement covers the sale of 60,000 shares of the
Company's Common Stock, $.001 par value (the "Common Stock"), 57,000 shares of
Common Stock issuable upon exercise of certain warrants and 8,478 shares of
Common Stock issuable upon exercise of certain options (collectively, the
"Shares").
In this capacity, we have examined the Registration Statement, the Articles
of Incorporation, as amended, and Amended and Restated Bylaws of the Company,
the records of corporate proceedings of the Company and such other statutes,
certificates, instruments and documents relating to the Company and matters of
law as we have deemed necessary to the issuance of this opinion. In such
examination, we have assumed, without independent investigation, the genuineness
of all signatures, the legal capacity of all individuals who have executed any
of the aforesaid documents, the authenticity of all documents submitted to us as
originals, the conformity with originals of all documents submitted to us as
copies (and the authenticity of the originals of such copies), and all public
records reviewed are accurate and complete. As to factual matters, we have
relied upon statements or representations of officers and other representatives
of the Company, public officials or others and have not independently verified
the matters stated therein.
Based upon the foregoing, we are of the opinion that the sale and issuance
of the Shares have been duly authorized by the Board of Directors of the
Company, and the Shares when issued and paid for, as contemplated by the
Registration Statement and as provided for in the warrant agreements, will be
validly issued, fully paid and non-assessable.
<PAGE>
PIPER & MARBURY
L.L.P.
Grand Toys International, Inc.
September 14, 1999
Page 2
We call your attention to the fact that the members of this firm who worked
on the transactions contemplated herein are not licensed to practice law in any
jurisdiction other than the State of New York. To the extent the laws of Nevada
are or may be applicable in rendering the foregoing opinion, our opinion is
based solely upon a review of the General Corporation Law of the State of
Nevada. Accordingly, except as provided in the preceding sentence, we express
no opinion with respect to the laws of any jurisdiction other than the State of
New York and the federal laws of the United States typically applicable to
transactions of the type contemplated by the Registration Statement. Without
limiting the generality of the foregoing, we also express no opinion concerning
compliance with the laws or regulations of any other jurisdiction or
jurisdictions. We assume no obligation to supplement this opinion if any
applicable laws change after the date hereof or if we become aware of any facts
that might change the opinions expressed herein after the date hereof.
The opinion expressed in this letter is solely for the use of the Company
in connection with the Registration Statement. This opinion may not be relied
on by any other person or in any other connection without our prior written
approval. The opinion expressed in this letter is limited to the matters set
forth herein, and no other opinion should be inferred beyond the matters
expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Registration Statement and in the Prospectus included in the
Registration Statement.
Very truly yours,
/s/ Piper & Marbury L.L.P.
Piper & Marbury L.L.P.
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<PAGE>
EXHIBIT 23.2
The Board of Directors
Grand Toys International, Inc.
1710 Trans Canada Highway
Dorval, Quebec
H9P 1H7
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Chartered Accountants
Montreal, Canada
September 1, 1999
